17 Apr Quantifying Intangible Assets: The Impact of Liquor License Appraisals on Business Valuations
Written by: Michael Schykerynec, ASA
(4-5 minute read)
Certain businesses within the food, beverage, and hospitality industries such as bars, restaurants, and liquor stores, require a license to sell beer, wine, or liquor. These liquor licenses can be a factor in the intangible asset value of the business, and as such, liquor license appraisals can play an important role in valuing these businesses. Liquor license values can be significant in “quota states,” where the number of licenses is legally capped based on population, creating scarcity and driving up the market value of these licenses. These licenses need to be purchased on the open market, often attached to an operating business, as new licenses cannot be applied for. The limited availability of licenses in quota states means that their market value can be substantial, sometimes ranging from tens of thousands to several hundred thousand dollars. There are 19 states (or federal districts) that have quotas on all or certain types of liquor licenses. The quota states include Alaska, Arizona, California, Florida, Idaho, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Montana, New Jersey, New Mexico, Ohio, Pennsylvania, South Dakota, Utah, Washington, and Washington, DC. In non-quota states, where liquor licenses are generally issued without a rigid limit, they tend to have little to no standalone market value because licenses are more readily available and less scarce. Therefore, liquor licenses in these states do not add significant value to a business beyond their operational utility.
State regulations differ widely when it comes to the number of available licenses per capita, the types of licenses subject to quotas, and the specific requirements tied to their availability. This results in complex local marketplace dynamics that impact both value and accessibility. For example, Florida and Pennsylvania liquor licenses are based on population quotas by county, and these licenses can be transferred to any municipality within the county, whereas New Jersey is based on population quotas by municipality, and the license must remain within the municipality. Therefore, it is important for an appraiser (of the business and/or the liquor license) to understand the rules surrounding liquor licenses for that specific location as they enter into an engagement.
When appraising a liquor license in a quota state, appraisers heavily rely on comparable transactions—recent sales or transfers of similar liquor licenses in the local market—to determine the license’s current fair market value. These comparable transactions provide a basis for understanding how much buyers are willing to pay and how scarce the licenses truly are. Factors influencing the appraisal include the license’s type and restrictiveness, its transferability, regulatory compliance, and local demand.
To use New Jersey as an example, typically high population, low income areas see some of New Jersey’s lower valued liquor licenses. For example, in Newark, as of March 2025, there were over 200 active “33” liquor licenses, which are used for bars and restaurants. With this large amount of issued licenses, sales and transfers are common, resulting in values well below the average liquor license value in the state. Areas with lower populations and higher incomes tend to command some of the most valuable liquor licenses in the state, where licenses are desired and are rarely listed on the market. Additional metrics to consider when looking at license values in New Jersey include towns with high rates of tourism, such as a town on the Jersey Shore, and the amount of pocket licenses available. “Pocket” refers to an inactive license that is not tied to a specific license’s premises. Due to these kinds of complexities and the potential lack of comparable transactions, a separate liquor license appraisal report may be recommended in certain situations.
The presence of a liquor license in a quota state can significantly increase a business’s valuation, as the license often enables revenue generation beyond what would be possible otherwise. It limits the prospect of new competition, barring a new license being issued, and reduces the collateral risk of the business as the license can be sold on the open market if the business were to cease to exist. This typically leads to higher business valuation multiples, all else considered equal. For business owners, buyers, and even lenders in these states, understanding the quota system and securing an accurate liquor license appraisal are essential steps to accurately reflect the true worth of their business in any sale, financing, or valuation process.