[Yortyob]

I recently moved to Chicago from St. Louis, and one of the things that I've observed that I didn't in St. Louis is the large number of restaurants that are BYOB. I'm planning on opening a restaurant in 6 months to a year and am curious as to why many places do not serve alcohol. From what I understand a city of Chicago liquor license is $2200. I would think sales would more than make up for this cost. The only reasons I have come up with for places not serving alcohol is: 1. Not enough space for storing. 2. Not enough cash to afford the license and/or liquor stock. 3. Zoning restrictions.

Is there something more obvious that I'm missing? Off the top of my head I can't think of one restaurant in St. Louis that is BYOB. In any case, insight on this would be most appreciated. Thanks!

Troy

[Jim]

I'm thinking insurance, perhaps? Liability insurance for an alcohol vendor is HUGE!

I also know in some places, there are a limited number of licenses... once they are issued, there are no more, until somebody sells.

[Yortyob]

My business partner brought up insurance this evening as well. Does a restaurant require any type of license for allowing people to BYOB?

[Pete]

I don't know that insurance is any higher for a BYOB place than what it is for your standard liability insurance that you must carry. If it is, I assume it would not be much more. The other consideration is going with a beer and wine license only. Insurance is usually less than for full liquor license's and these types of licenses can be easier to come by.

The other issue, as Jim said, is the availability of liquor licenses. Most neighborhoods, in Chicago (and in many other places) set the max number of licenses they will allow. The only way to get one, in a neighborhood that is full, is to wait until someone goes belly-up or gets their license pulled permanently, which is a rare occasion.

[even stephen]

Liquor is where the money is. Insurance is high, but, not unmanageable.
You want to carry about 1.5 million in liability. If there is a zoning issue,
for example, church or school, then byob is out of the question as well.
Don't make the same mistake I made, get a loaded license, beer, wine,
and most importantly liquor. Also have a patio where people can smoke
cigars or cigarettes. As unpopular as smoking is, not catering to the smoker
will lose you business as well. To me the best combination is a successful
restaurant and bar or lounge all in one. Good luck!!!

[David Jones]

Okay, are you guys ready for me to pontificate once again......

I've opened or planned over twenty restaurants in Chicago, and I've been on three Chicago liquor licenses myself. Here's how it goes:

First, if you think that you're going to do it without a lawyer, you're crazy. It's way to complicated.

The first thing that the lawyer will ask you is about the location. They will check for zoning and if the area is in a moratorium district. Then they will be able to tell you if there is an existing license and if that license has any "marks" against it.

In a general way, you will need to provide the following information to the city:

* a lease or deed showing your or your corporate entity control the real estate
* proof of liquor liabililty insurance with a total of $3MM in coverage
* six months bank statements showing the source of funds
* corporate documents or an LLC opertaing agreement and a disclosure of all investors
* a loan agreement if from a bank or traditional lending source
* a note and the corporate and investor information (or personal info) and six months bank statements if from a non-traditional lending source (e.g. my dad's landscaping business is loaning me the money, my mom's cousin is loaning me the money).
* menus, floorplans, etc.
* BASSETT or ServeSafe certificates for owner
* health certificates for chef, manager
* no debt to the city - parking tickets, water bills, etc

In addition, certain shareholders and the designated manager must be "processed" which is a full background check. If you have a criminal record, especially one related to alcohol (DUI) you can pretty much forget it. The background check includes fingerprinting, ten years of employment and residences, etc.

The bad part is that any investor and their spouse must be processed if they own more than 3% of the business, OR if they are one of the top three shareholders. The top three shareholders could be 90%, 5% and five at 1% each - in that case, seven parties and spouses must produce bank statements, etc. It's annoying but it's reality. Make sure your corporate lawyer is talking to your licensing lawyer.

The Licensing Commission will not accept your application until it is complete. At that time they will accept your check for $2200. (Remember that the Illinois license is about $275 and the US license is about $150.) Then, under the law, the MLC has 45 days in which to respond to your application. They can give you one of three answers - yes, no, and we need more time. The Commission is granted one automatic 35 day extension when they need more information.

The final part of the process is a multi-department inspection by the city called Task Force. Inspectors from Health, Electric, Plumbing, Buildings, HVAC, Fire and Police will need to inspect and pass your facility to license it. Almost no one passes first time, so you fix the errors and get reinspected.

NOW, the upside is that your licenses, lawyers and insurance for the first year will total about $9000, or $750 per month. When liquor gross profit is about 75-80% and alcohol revenue can be up too or more than half of food revenue..... It's obvious that this is worth the investment. The funny part is that BYOB operators are probably assuming as much (liability) risk, without the coverage or the upside.

DJ