July 3rd, 2024

Prospect of new liquor licenses brings hope for business renaissance in BIPOC neighborhoods

Getting a liquor license in Boston is a complicated affair.

Nearly 100-year-old legislation that limits the number in the city, alongside longstanding racial wealth gaps, has meant that many of the city’s licenses to sell wine, beer and other forms of alcohol have ended up in Boston’s whiter neighborhoods.

But legislation at the State House could bring over 200 new licenses to the city, most of them targeted at communities of color.

Royal Smith, who runs the District 7 Tavern in Roxbury and is a part of the Boston Black Hospitality Coalition that has been pushing for the legislation, said the bill would take steps toward leveling the playing field for neighborhoods that don’t see the same offerings for restaurants and nightlife and the economic benefits those bring.

“Codman Square should look the same as Lower Mills, should look the same as Cleary Square,” Smith said. “This bill will change that.”

If passed, the bill would create five new licenses each year for three years, in 12 ZIP codes, mostly in Roxbury, Dorchester, Mattapan, Hyde Park and East Boston.

Nick Korn, a principal at the firm Offsite, which does training and development for restaurants and the liquor industry, said the bill may not be able to address the larger issues caused by the liquor license cap, but called the legislation important palliative care for the issue of backfilling licenses into neighborhoods that have historically seen them sold to other parts of the city.

“It’s not going to solve the problem, it’s not going to fix the underlying condition, but it’s going to hopefully treat one of the symptoms,” Korn said, “which is our neighborhoods have a lack of gathering spaces and sit-down restaurants because of this pattern that’s been created by a secondary market and the ability to transfer licenses out.”

The issue stems from a 1933 law, passed immediately following the repeal of Prohibition, that capped the number of liquor licenses in each city or town in the state.

In most municipalities, that quota is determined — and redetermined — by the municipality’s population, but the legislation carved out an exception with a hard cap for Boston.

When a municipality reaches its cap, as has happened in Boston, transferable licenses — ones that can be used for a business anywhere in the city — tend to be sold from one restaurant owner to another on a secondary market, rather than being distributed by the city. Those licenses become a hot commodity that can sell for six-figure sums, according to a 2022 report by Offsite.

That kind of price tag is one that restaurant owners generally need to consider before they can even think about other costs.

“That’s the barrier of entry, if you really think about it,” Smith said. “You’ve got to have that upfront. Before you even start construction costs, before you think about the lease and all these other things, you’ve got to think about that initial half-a-million-plus dollars.”

The cost can be prohibitive. Reporting by the Boston Globe quoted restaurant owners who set aside hundreds of thousands of dollars to purchase a transferable liquor license in the city, only to find that when the time came to make the purchase, it wasn’t enough.

Frank Poindexter, a partner at Wally’s Café Jazz Club, said the new licenses would open the door for more small businesses to try their hand at running restaurants.

“We will give young small-business entrepreneurs a chance of being able to compete,” he said. “Having a liquor license will enable people to balance out the costs and the potential revenue that comes with running a business, because foods margins are so low, so having a liquor license will increase your opportunity to … stay in business and succeed, because the margins are a little higher.”

Steep costs also can lead to bigger companies with deeper pockets buying up a liquor license and moving it out of a neighborhood.

Poindexter said Wally’s Café — which has had a transferable liquor license for almost 80 years — has been approached to sell its license, and over the years the size of those offers has only climbed — he estimated recent attempts to purchase it reached the $500,000 or $600,000 range.

He and his family have turned down the offers, both to honor the legacy of their grandfather, who opened the club, and to keep a nightlife location that welcomes families of color.

Fixing an imbalance

The secondary market also leads to an imbalance where licenses in Boston end up.

According to the Offsite report, in whiter neighborhoods in the city, like the North End, Beacon Hill and Seaport, there are about 100 to 500 people per transferable liquor license.

In the city’s more diverse neighborhoods, like Hyde Park, Roxbury, Mattapan and Dorchester, there may be 3,000 to 9,000 people per license.

According to the Boston Black Hospitality Coalition, Black-owned businesses make up about 2% of liquor license holders in the city.

“We don’t own these licenses, and that is a direct correlation to us not owning Black-owned restaurants and watering holes that we need,” said state Sen. Liz Miranda, who represents the 2nd Suffolk district.

She pointed to Blue Hill Avenue in her district, which, along it’s roughly four-mile length, has five restaurants with licenses to serve alcohol. Compare that to Hanover Street, the third-of-a-mile-long main drag in the North End, with its 33 licenses.

Throughout the years, there have been some new licenses added, either to the general cap or, in the past two decades, through creation of licenses restricted to certain neighborhoods, like those that would be created by this legislation. When a business closes or no longer needs that license, it is returned to the city, rather than put up for sale on a secondary market.

Korn said the bill’s focus on ZIP codes, rather than just increasing the number of licenses generally in the city, will help treat some of the challenges facing business owners seeking a license to sell alcohol.

“As much as we all want to be under the banner of Boston and to be one city, … there’s a lot of different elements of the city, and there’s a ton of structural inequities built in and baked into our system over decades and decades,” Korn said.

Employment and stability

The new licenses could have a significant impact in the neighborhoods where they’re allocated. Segun Idowu, Boston chief of economic opportunity and inclusion, said he thinks the licenses will spur a “renaissance” of small business openings across the city.

“They’re helping to employ people,” Idowu said. “If a business is earning more revenue, there’s the opportunity to raise wages for the workforce and it’s inviting more people to the city to enjoy all that’s going on.”

The increased economic support can also provide increased stability for restaurant owners.

“It can be the difference between making enough in the month to make sure you’re paying staff on time and paying yourself as the business owner, getting your bills paid, and also being able to tuck something away for rainy days or for your future plans of world domination and opening up your second, third, fourth or fifth business across the city and across the region,” Idowu said.

It’s not just about making more places for people to drink alcohol — Korn said the focus of the bill is really on restaurants, which he said can be a huge part of creating economic growth.

“It’s easy to conflate liquor licenses with drunken debauchery, and I actually think that that’s a false equivalency,” Korn said. “We’re not talking about nightclubs, we’re talking about sit-down restaurants.”

Healthier options

Under the legislation, businesses applying for the liquor licenses must plan to sell not only drinks, but also food, a move that Smith said will mean better access to healthier options.

He pointed to the dining landscape in city council District 7, which is, in no small part, made up of fried-fast-food restaurants.

It’s a trend that’s true across the country. The term “food swamps” is often used to describe areas where residents have easy access to food options, but limited access to healthy ones.

Research has found that the prevalence of such food swamps often lines up with indicators of structural racism, like redlining, and people living in food swamps are more likely to suffer from conditions like obesity-related cancers.

The costly liquor licenses only make the problem worse, Smith said. Without a liquor license, operating a full-service restaurant can be a costly challenge.

“There’s two types of eatery places, there’s takeout and there’s restaurants,” Smith said. “The only thing that changes the two is liquor licensing.”

Liquor licenses, and the higher profit margins serving alcohol can bring, can be the difference that makes operating a sit-down restaurant possible.

“It’s the difference between going to a takeout joint or picking something up at a counter and going home versus dining among the community,” Korn said. “That hugely impactful.”

‘Hope and transformation’

For supporters, the impact of the new licenses will not just be on the economics of the neighborhoods they enter but on how communities function and thrive.

Miranda called the bill one about hope and transformation. Smith said the liquor licenses will impact the way a neighborhood is able to interact.

“This bill is going to change the landscape of urban Boston, period. … This bill equals community,” Smith said. “This bill equals going down the street and supporting your neighbors and knowing your neighbors.”

That support could end up going both ways. Miranda predicted that, with more licenses and increased revenue from the sale of alcohol, small businesses will be more able to pay back into their communities and support fixes to the causes they care about.

“We need places on Blue Hill Avenue; we need places on Dudley Street so that way those entrepreneurs can say, ‘Hey, my business is doing well. I’ll give more money for scholarships. I’ll do some more murals. I’ll help with a certain cause — addressing homelessness or addiction or folks coming back from incarceration,’” Miranda said. “Right now, these businesses are struggling to keep their doors open.”

The proposed legislation is also the latest in efforts to revitalize the city’s nightlife. In early 2023, the city launched its Office of Nightlife Economy to bolster food and entertainment options, including a focus on making sure business owners of color — as well as community members looking for a night out — feel welcome and supported.

In April, that office announced its Wake Up the Night grant, which will use $250,000 in funding through the American Rescue Plan Act — one of the federal relief packages passed in response to the COVID-19 pandemic — to support efforts to foster safe and inclusive spaces, while funding the city’s nightlife economy.

Those grants will support programming from July through December.

The legislation, passed by the Massachusetts House of Representatives at the end of May, now is waiting in the Senate.

As it passed through the House, it went through a handful of changes. Legislators upped the ZIP code count from 10 to 12, adding two in Jamaica Plain and Charlestown; included the requirement of food sales; and added three licenses for Oak Square in Brighton, 15 for nonprofits like theaters and other community groups, and seven transferable licenses.

Some of those changes, especially the seven transferable licenses that ultimately will end up as part of the high-cost secondary market, raise questions for Smith and Korn — they were added as part of a more opaque process as the legislation passed through the House Ways and Means Committee.

But Korn said that even with the changes, the legislation keeps the spirit of the bill.

“If that’s the price we pay to get the spirit of the bill through and to get these restricted licenses for those neighborhoods that just really need them and want them …  I think that’s the cost of doing business,” he said.

And Miranda, who is the sponsor of the bill in the Senate, spoke positively about many of the changes.

For her, the added licenses for nonprofits will allow Boston residents to enjoy a more diverse selection of activities, like enjoying a glass of wine while seeing a show.

The seven transferrable licenses, too, present an opportunity, she said, suggesting the high-cost resale could be a boon to diverse communities rather than a loss.

As the bill moves through the Senate, Miranda said, she plans to propose amendments that could include adding guardrails to ensure some of those transferable licenses go to minority groups. She also said she might pursue increasing the number from seven to 12, to match the number of ZIP codes covered in the bill.

“The more important thing is, regardless if the number is seven, zero or 12, that there are some guardrails to ensure that BIPOC entrepreneurs, or entrepreneurs who are in these neighborhoods, who have lived here, their kids go to school there, want to see their communities get better, that they’re like, ‘Yeah, I can build generational community wealth with these transferable licenses,’ and still meet the goal of the intention of the first bill,” she said.

The timeline for the bill to pass is shrinking — the legislative session wraps up at the end of July — but Miranda said she’s working with chamber leadership, as well as the other state senators  who represent portions of Boston, and is optimistic that the bill will clear the Senate in that time.

Even that’s not the end of the road, though. If the bill does make it through, Smith said, there will be more work to be done to make sure that as the licenses enter the neighborhoods, restaurant owners actually find success.

“The second it passes, we have work to do to get people ready. We have to make sure that they stay ready,” Smith said. “There’s a lot of education and training that needs to be done, from the operator perspective and from the community perspective.”

But he said that this moment brings him hope.

“I’m from here, and I’m 40. I don’t see hope sometimes,” Smith said. “Yeah, this is only one thing — but for the first time in my life, I can kind of see light at the end of the tunnel.”

Boston Black Hospitality Coalition, business, liquor licenses, Offsite, Structural racism