What You Don’t Know May Hurt You
By Charles Y. Hoff, Esq., and Michele Stumpe, Esq.
Restaurant and Hospitality Legal Team at Taylor, Busch, Slipakoff & Duma
So, you want to open a new restaurant and have an eye on a location where an existing restaurant is going out of business. You are thinking that all you need to do is buy the equipment in an asset purchase and arrange for the landlord to assign the remainder of the lease to you. Sounds simple? It may be, but unfortunately that’s not the norm. Many an unwary entrepreneur has been caught off guard by issues such as a prior owner’s tax liens, local laws that are inconsistent with their business model, premises restrictions and other pitfalls that can turn your dream into a nightmare. Property and/or back taxes owed by the previous owner can lead to complications that may result in your inability or difficulty in obtaining an alcohol license.
Once you think you’ve covered your bases with the Department of Revenue, you have a whole host of other issues that can arise with the local government. For example, some cities and counties will refuse to grant alcohol licenses to new owners of establishments that have a prior history of criminal activity or alcohol violations. It may not seem fair that the “sins” of the prior owner are thrust upon you, but the laws of successor liability and privilege licensing are alive and well in Georgia. Many of these scenarios can be avoided by exercising some due diligence prior to closing.
DO YOUR HOMEWORK!
Check to make sure your business concept is legal (you’d be surprised about the things you cannot do in various counties – like letting a customer bring in a special bottle of wine for their anniversary). Also, be aware that it may take upwards of three months to obtain a license for your new establishment under even the best of circumstances. So, it’s never too early to start the process. It can be arduous, including requirements such as obtaining driver’s histories, fingerprints and multiple meetings with various local governing bodies before you can get approved. In addition, the Department of Revenue has recently changed their procedures, renewing their interest in clearing the books of all outstanding tax issues.
If you are breathing a sigh of relief because the prior owner is willing to let you operate under their license for a period of time after the closing until you get approved, watch out. Many jurisdictions consider the existing license void upon the change of ownership. You might not get caught, but if you do, you could be looking at another year before you can even apply for another license. These are just a few of the issues that can arise in the wonderful world of alcohol licensing. The key is to become educated about the process and the potential hurdles before you sign on the dotted line.