In the United States, liquor is a heavily regulated industry. The policies for liquor store owners are different in each state and could vary even more at the local level. But if you don’t mind following the rules, owning a liquor store could present an opportunity to connect with your community while making good revenue.
However, the needed capital to start a liquor store in the united states tends to vary depending upon a number of factors. Location, staffing costs, beginning inventory, and licensing fees are all crucial factors in how much you will need for your initial investment.
Popular franchises like BevMax, require that their investors have a minimum of $150,000 in liquid capital to open a franchise location. Entrepreneurs have reported startup costs as high as $1 million for opening larger establishments.
In this store business, a good amount of your earnings will go back into re-stocking the store’s shelves. Investing in accounting software will help you in developing an efficient system for keeping up with your inventory. Your second biggest ongoing expense is payroll costs. You will also have annual licenses to renew, as well as insurance costs, which can be high in this line of work.
In the United States, your ideal customer will be anyone over the age of 21, who enjoys a tasty beverage and prefers to do business with smaller, local establishments over the large retailer. Nonetheless, before investing in your retail space, conduct a detailed feasibility research to determine the competition in the areas you are considering.
According to industry reports, liquor stores make money through the sale of each beverage. Some are sold by the bottle, while others are sold in greater quantity, as determined by the distributors. The prices tend to vary from product to product and are defined by the size, type of alcohol, and distributor prices.
Liquor stores are among the top five least profitable businesses, taking home a profit of 1.7%. Owners who are able to run their own business take home an average salary of $21,000 – $51,000, depending upon size, location, and sales. At 1.7%, a store that has total sales of $500,000 realizes an annual profit of $8,500.
Table of Content
- 5 Pros of Owning a Liquor Store in the United States
- 1. Networking
- 2. Your Own Boss
- 3. Build your Own Vision
- 4. Helping People and Your Community
- 5. Profit margins
- 1. Cost of Inventory
- 2. Rigorous licensing requirements and costs
- 3. Location constraint
- 4. Management Stress
- 5. Liquor stores require owner involvement
5 Pros of Owning a Liquor Store in the United States
There has to be a reason why starting a liquor store appeals to you. It might be one of these reasons, or it might be something unique to you. Either way, it’s important to consider how some of these positives may impact your decision moving forward:
If as a person you enjoy networking, or you need to network, owning a liquor store can provide you with as much networking opportunities as you could ever want. The networking activities can be for business or pleasure.
2. Your Own Boss
Far and near, the revenue and expenses stops with you, the store owner. As a liquor store owner, you get to set the rules, hire the employees and eventually reap the profits. If you are the sort of person who has her own ideas about how to do things and are confident you can be successful doing it, being in charge is a good fit. This business best suits an individual who enjoys the subtle differences between beverages.
3. Build your Own Vision
Indeed it is a great feeling to be able to make a living from a company or concept you believe in. Due to the competitive nature of the liquor industry, owners must possess a deep understanding of the mechanics of running a business and be prepared to be an integral part of the day – to – day activities of running the establishment. You can create the atmosphere and a business culture that you want to work and shop within. This includes everything from the liquor you are selling, additional services you hope to render, how you manage your employees, and more.
4. Helping People and Your Community
As a liquor store owner, you get to help people in a real, tangible way. Whether you are providing just liquor or other services, you can make a difference in the lives of your customers. You also provide jobs and help others realize their dreams in life as well. You can become a part of the fabric of your local community by supporting broader visions within the civic sector, and you can serve as a mentor to your employees.
5. Profit margins
On drinks in the U.S. the profit margins are high, but particularly so on alcoholic beverages. In this store business, you can expect to enjoy a profit margin of anything between 200 and 400 percent on the drinks that you sell.
5 Cons of Owning a Liquor Store in the United States
Coupled with the pros of owning a liquor store, there are many challenges that come with owning one too. With this, you can be sure whether or not you are equipped and prepared to handle them:
1. Cost of Inventory
In this business, stocking up on inventory requires substantial upfront investment. This is one of the aspects of liquor store ownership that most often sweeps new owners off the ground. Some liquor stores include inventory in the sales price—but this isn’t always a good thing. Always ensure you check out the inventory age to determine if there’s a reason it’s still on the shelves, and if you will have trouble selling it yourself once you take over ownership.
2. Rigorous licensing requirements and costs
Acquiring the necessary licenses to run a liquor store has become increasingly daunting and expensive in recent times. The price and stress have escalated so much that these issues often become the catalyst for store failure. You will need to understand your location’s laws inside and out.
Before you get too far into the process of buying a particular liquor store, make sure you understand the specifics—including costs—related to licensing for that particular location.
3. Location constraint
Have it in mind that the location of your liquor store will determine its fate, not only because of potential licensing issues, but for obvious reasons related to traffic and competition. For instance, if your liquor store is one of five in a three – mile radius, then you may be forced to compete solely on price.
Note that doing so makes reaching profitability more difficult. However, provided your store offers a wide selection of products and offers extras like lottery and tobacco, location will matter a bit less. The better and wider your selection, the more edge you will have over even some of the lower – priced competition.
4. Management Stress
Note that the front-end operations of a liquor store—the human interaction, building supplier relationships, setting up of wine displays, etc.—are often the appealing things that draw people to this business. It’s important to remember also that a lot is required on the back-end to keep your operation running smoothly.
There is very little ability to negotiate with distributors over pricing, as they have the monopoly on their alcohol brand. This makes competitive pricing between retailers difficult and results in a fairly low profit margin. The only way to secure significant price cuts is by investing in the purchase of large bulk orders, which presents its own set of challenges. It requires deeper pockets and additional space for storage.
5. Liquor stores require owner involvement
If you are seeking for a business venture that can flourish with absentee ownership, then liquor store ownership probably isn’t right for you. These stores deal with lots of cash sales, expensive and in – demand merchandise, and typically require long working hours.
Those long hours can make it tempting to entrust an employee with more of the integral operations, but this can pose a big risk to your business. As the owner, you will want to be a visible part of the establishment at all times. Patrons will look to you for advice on a specific beverage, based on their personal preferences and/or event needs.
Additionally, you will be creating ongoing relationships with your various vendors and sales reps. As the face of the business, there are a number of behind-the-scene tasks you will need to accomplish daily.
Maintaining accurate inventory, protecting your cash flow, and predicting SKU level/product demand requires careful and constant attention. Privately owned liquor stores typically realize a greater profit when structured as an owner – operator establishment.
Just like every other business, owning a liquor store comes with its own benefits and disadvantages. However, to combat some of these issues, owners with a significant amount of cash flow find success by either opening a large warehouse store, or by investing in more than one location.