One hell of a bar bill

Because of limited quantity, Boston liquor licenses, which officially cost only $2000, may sell for as much as $300,000 -- a cost that is recouped in the high prices you pay for your drink

by Stephen Heuser

When Joe Quattrocchi, owner of the Back Bay Brewing Company, renovated his bar this past summer, he ripped out the steel brewing tanks, replaced all the furniture, and installed woodwork reminiscent of New York's Gramercy Tavern. The result is a flashy restaurant with a new name, Vox Populi -- and, for the first time, a full bar.

It's a big renovation, with an estimated cost to Quattrocchi's company of around $600,000. But only half that money went toward construction. The other half covered a single expense: the liquor license.

Officially the city charges only $2000 to issue an all-
alcohol license to a restaurant. But because of a firm limit on the total number of licenses in Boston -- and because of tight neighborhood restrictions -- restaurateurs here are forced to wheel and deal for existing licenses in the city's hottest neighborhoods. This has driven prices, at least in the Back Bay, well past the quarter-million mark. As goes the Back Bay, so goes the rest of central Boston: insiders estimate that a Beacon Hill license, if one ever became available, would be worth about the same as a Back Bay license; a South End license might change hands for $150,000; and an all-alc license recently sold in Bay Village for $160,000.

For restaurateurs, this is nothing new: it's just the cost of doing business, or not doing business, in a booming city.

But for the rest of us, the effects are just now being felt. You don't need a calculator to realize that numbers like this have a huge effect on the restaurant business: who's in, who's out, and, most important, where your average citizen can go for a drink. The people getting out of the business are owners of small bars with a local clientele -- the places where everybody knows your name (and where a beer doesn't cost $5). The people getting into the business operate huge tourist-oriented restaurants whose parent companies can afford the buy-in price. Liquor licenses are changing hands in a one-way flow, and it's altering the texture of Boston's city life in a hurry.

It's a commonplace that the recent bloom of urban life in Boston has fueled an unprecedented boom in the restaurant business. And restaurants, in turn, enrich the city. Every restaurant and bar means more life on city streets after 5 p.m.

But a restaurateur can't do business without permits. Among these, the license to stock a full bar -- the "all-alc," in the parlance of the board that issues it -- is key. Says one restaurateur: "It's the asset. Other than your construction, the license is everything."

By law, to get one all you need is good character and the cash to pay a modest annual fee. But in practice that hasn't been true for years. Boston's licenses are tightly capped at 650, a number set decades ago, and right now every one of those licenses is in use. So owners wanting a license have to find one first, then arrange to buy it from the holder.

"It's the only way you can get into the restaurant business in Boston," says Joe Quattrocchi, who owns Vox Populi with partner Brian Lesser. "In New York, you can go find a site, and as long it's not near a church or school, you can get a liquor license. Here, if you want to get into the restaurant business, you've gotta buy a license."

But not just any license will do. By law, the all-alc entitles you to serve liquor anywhere within city limits. In practice, however, certain neighborhood associations exert so much power over the approval process that their neighborhoods are all but impenetrable. A license bought from a Dorchester bar, for instance, will be useless in the Back Bay -- you can buy the license, but you'll never get approval to move it into the neighborhood. This is why a license already located in the Back Bay is a quarter-million-dollar slip of paper: there's a limited quantity and nearly unlimited demand.

This past summer Stan Frankenthaler, one of the city's best-known chefs, appeared in front of the powerful Neighborhood Association of the Back Bay (NABB) to seek its approval to acquire a liquor license. Such meetings are standard procedure for anyone opening a restaurant, and a semi-official part of the licensing process. (The Boston Licensing Board, before it will seriously entertain a license application, always asks owners whether they've met with the neighborhood, and NABB in particular enjoys virtual veto power over the process.) Normally Frankenthaler would be an ideal candidate for a liquor license: he's relaunching his award-winning restaurant Salamander in a new luxury-apartment building. But Frankenthaler had one big problem: he was buying his all-alc license from a Bickford's in South Boston.

BUYER BEWARE: when Brian lesser (pictured) and partner Joe Quattrocchi put a full bar in their new Back Bay restaurant, they had to track down one of the few existing licenses and buy it from the holder. It wound up consuming half their $600,000 start-up costs.

"Obviously," says Michael Ward, then-head of the neighborhood association, "the committee voted to oppose the transfer of an out-of-neighborhood license." Frankenthaler eventually got his license over the opposition of the neighborhood: in July the three-member Boston Licensing Board voted, two to one, to allow the transfer, and the license was finally approved by the state three weeks ago. But in his success, Frankenthaler remains a decided exception. Indeed, what happened is so rare that Frankenthaler himself can't name another instance in which a license has been transferred into the Back Bay.

The North End, too, enjoys a de facto moratorium on liquor licenses: the Boston Licensing Board simply will not allow a new license there. Legally, this is a tenuous situation, because licenses are supposed to be valid citywide. Daniel Pokaski, chairman of the licensing board, says: "We cannot say legally there's a moratorium. We have the fiction of a moratorium."

Fiction or not, though, when Joe Quattrocchi went to renovate the Back Bay Brewing Company, he didn't just need a license. He needed a Back Bay license, an entity that doesn't officially exist.

Because of all the hassles involved -- the huge sums of money, the hurdles to jump, the rigorous approval process -- Back Bay licenses tend to stay in the same hands year after year. The Back Bay is "almost like a private club," says bar owner Gordon Wilcox. "Except when the national chains come in and drive up the price a little. It's been the same people for years. . . . there aren't a lot of new operators in the Back Bay."

In other neighborhoods, new operators are coming in -- and small-time neighborhood operations are disappearing as licenses change hands.

In Park Square, one of the city's fastest-changing neighborhoods, when an old bar called Richard's closed earlier this year, its license was snapped up by West Coast seafood giant McCormick & Schmick, which needed it to open a 263-seat restaurant in the basement of the Park Plaza Hotel.

Across the street, the divey Tar Bar was evicted when the Motor Mart building began renovations two years ago. Its license sold for $160,000 to Gordon Wilcox, for his new bar, Flash's, on nearby Stuart Street. The license belonging to the Hub Pub next door went to 350-seat Maggiano's Little Italy, owned by a Dallas-based company that operates more than 1000 restaurants, including Chili's.

In each one of these cases, an all-alc license has migrated from a funky old bar to a new place catering to conventioneers or upscale urbanites. If you're in the Chamber of Commerce, this looks a lot like neighborhood improvement. But to people who live here, it looks like a neighborhood that's becoming another Back Bay. Suddenly you can't go anywhere for a $2 bottle of Bud and a cigarette.

Licensing lawyer Dennis Quilty has watched the changes -- and has certainly benefited from the price escalation. But he's aware of the flip side. "In the Back Bay, because of these prices, you can't have a small neighborhood operation," he says. "It's really kind of sad, I think. There's no question that there are fewer and fewer places to go that are just hangouts -- cheap eats, drink a beer at the bar, watch TV."

In general, rising rents are the real engine behind the decline of small, inexpensive neighborhood bars. But the license process does make a difference. For one thing, it assures that a downscale bar going out of business won't be replaced by a small, casual place. Or perhaps it won't be replaced by a bar or restaurant at all: Richard's, the bar whose license went to seafood giant McCormick & Schmick, lost its lease and is now office space.

And a six-figure license is a tempting sale for a barkeeper whose business might be worth much less than that.

"Let's face it," says Quilty. "Lots of people are making money on these transactions. I mean, someone years ago got issued the document for a couple hundred bucks, and you're selling it for a couple hundred thousand."

To be sure, not every license is worth as much as a Back Bay one; it's easier to move a license into the Theater District, so an all-alc there isn't worth quite as much. But given the total cap on licenses in the city, that means a booming Theater District can actually suck licenses away from other neighborhoods.

BLB chairman Dan Pokaski articulates the dilemma: "You'll have the Sheraton. They'll walk in to a hoppin' bar on Dot Ave and offer [the owner] $80,000. The guy says, `Here's my retirement' -- but then the neighbors on Dot Ave have an empty storefront."

At the South End's Waltham Tavern, one of the few remaining dive bars in central Boston, the manager says people have knocked on the door, interested in buying the bar's license, "two or three times, maybe, in the last couple of months. We never got them before."

If this all sounds kind of cloak-and-dagger, it is. The license trade is a notoriously gray area in city policy. Every license that changes hands does so at a public hearing in City Hall. But the real acquisition -- the meeting of buyer and seller -- is entirely private.

Here's how it works: Rande Gerber -- New York bar developer, Cindy Crawford's husband -- wants to open a bar in the Park Plaza. He hires a local licensing lawyer, who plies his sources and finds a bar owner in Mattapan who'd be happy to unload his all-alc for the right price. For $100,000, the owner agrees to give it up. Since Gerber is opening an upscale hotel bar in a neighborhood without the clout of the Back Bay, the deal is approved by the BLB and the old license is quietly reissued as a new license for Gerber's bar.

The layering of middlemen has its own effect on neighborhood evolution. As the BLB's Pokaski puts it: "Who can afford to hire these attorneys to keep an eye on what's available? The hotels, the big corporate chains."

And clearly, the more development the city sees, the more tightly constricted the market becomes, and the more it becomes a high-stakes, unregulated system. Increasingly, Boston is a city with a dwindling handful of neighborhood bars and a concentration of high-volume restaurants in the middle of town. It's not an unusual arrangement, but it seems foolish to live with a system where each new chain restaurant means another local bar in one of the neighborhoods has gone out of business.

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