Chicago sits at the top of the list along with Philadelphia as the top two BYOB cities. If you’re like me, you love BYOB. There’s something really cool about bringing your own bottle of wine to a restaurant. Part of it is about avoiding the extremely high mark up on wine, but just as much, I think, is the fact that it’s a unique and fun experience. Somehow I always feel like I’m getting away with something.
I’ve often heard people pontificate about why Chicago has so many BYOB restaurants in the first place, so I’ve done the research, and I’m here today to set the record straight:
Myth 1: Chicago has so many BYOB restaurants because it’s so darn expensive to get a liquor license.
It’s not cheap to get a liquor license, but for any legitimate restaurant it is surely a good investment. The cost for the Illinois and Chicago licenses combined is around $2,500 per year. Restaurants are also required to get liquor liability insurance. When you tally it all up, with the increased liability, license costs, and lawyer fees, the business is probably looking at around $10,000 per year max. (Are you a local business owner? Email me and tell me what you pay.)
Liquor revenue for a typical restaurant can range from 15%-40% of their gross revenue, and an even higher percentage of gross profits. Typical cost of sales for food in restaurants are around 40% of food revenue. For liquor, it’s often around 25%. So, using those costs, it would take just under 45K total revenue per year (food and drink) for the restaurant to break even in their liquor investment. There obviously isn’t a surviving restaurant out there that doesn’t pull in 45K. Beyond that, any smart BYOB owner would realize that they are likely taking on the same liability by letting people drink on premises as they would if they were selling them alcohol. So, if they are avoiding a liquor license just for the additional cost of liquor liability insurance, they are playing a risky game.
Note on the accuracy of these numbers: These figures don’t come from any industry-standard guides or large surveys, but based on all of the information I’ve found, they are reasonable estimates.
Myth 2: Chicago has so many BYOB restaurants because there are only a limited number of licenses to go around.
This one is not true either. There is no set limit on the number of liquor licenses in Chicago. To get the inside scoop, I read through all of the city’s liquor documentation and placed a few calls to the Business Licensing Center, and local Alderman’s office. I found that each ward is given the authority to regulate liquor licenses, and nearly all the power typically lies in the hands of the Alderman him/herself.
While there are certain dry areas and Moratorium Districts (regions in which no new liquor licenses are provided), the majority of the wards are not Moratorium Districts. Beyond that, wards that are Moratorium Districts usually only restrict new licenses for liquor stores, and almost never care if a restaurant wishes to sell alcohol.
There are certain situations where liquor license requests will be denied, but this is not why Chicago has so many BYOBs. If you are a restaurant owner, and you are BYOB solely because you couldn’t get a license, please let me know. I’d be interested to hear how many restaurants were actually rejected liquor licenses and why.
So now, the real reasons that Chicago has so many BYOB restaurants:
Reason 1: It’s Legal
Most other big cities require that restaurants have liquor licenses before allowing diners to BYOB. As I wrote in the earlier article, IL has given each municipality the right to regulate BYOB restaurants, but Chicago has chosen not to do so. I’ll write about the specific rules of other big cities in later posts.
Reason 2: Chicago Loves BYOB
People in Chicago love BYOB. Businesses are always looking to separate themselves from the pack. Allowing BYOB is a great way for restaurants to provide guests with a unique and exciting experience. Even though there are a lot of BYOBs, it still isn’t the norm. As long as people are looking to bring their own bottle to a local restaurant, you can bet there will be a restaurant looking to supply their demand.
Reason 3: Getting a Liquor License in Chicago is a Lot of Work.
Getting a liquor license is surely not an easy process. It’s complicated to understand everything that is involved, and how it will affect your business. It takes time to read through all of the documentation, prepare the paperwork, go through inspection, and do everything the right way. It also requires an upfront cost to secure the license. It’s simply easier for many owners to avoid all of this while starting their business and claim their restaurant BYOB.
Here’s a look at all that is involved:
- Fill out a business information sheet and set up a meeting with the city.
- Determine if your business is in a restricted area (e.g., too close to a school), dry area, or Moratorium District.
- Review zoning and submit a detailed floor and site plan.
- Potentially required to pitch your license request before local community committees or to the Alderman him/herself (ward specific).
- Provide proof of liquor liability insurance.
- Complete Beverage Alcohol Sellers and Servers Education and Training (BASSET) and get a certificate. This can be done in one day of training, and there are many online license providers.
- Pass background checks for owners, major investors, and their spouses.
- Present a financial disclosure form
Why do you think Chicago has so many BYOBs? Have any more good reasons? Beg to disagree?
