Liquor licenses sell in the Sioux Falls secondary market for a quarter of a million or more.
And it’s holding back South Dakota’s economy and hospitality industry entrepreneurs.
This is according to the Cato Institute, a libertarian think tank that defends freedom and the free market.
The Washington DC-based organization released the results of a study this week that ranked America’s 50 states and their friendliness to entrepreneurs.
Overall, South Dakota scored positively due to a generally lax regulatory climate and low taxes, behind only the state of Georgia.
After:Liquor license restrictions let Sioux Falls businesses pay, wait, or gamble
But the state’s tightly regulated liquor licensing rules and uncertainty over the legalization of marijuana prevent Mount Rushmore state from being the most entrepreneur-friendly state in the country.
âLegalization creates opportunities for marijuana growers and retailers, as well as startups that provide the industry with equipment, funding, advice and other products,â wrote Chris Edwards, director of Cato’s fiscal policy studies division, in the 42 pages. report he wrote and published on Wednesday.
Is it difficult to get a liquor license?
What is certain, however, is that future South Dakota bar and restaurant owners are struggling to enter the hospitality market due to the limited number of liquor licenses the state is providing. disposition.
Edwards took note of a 2019 Argus Leader survey that found people were waiting a decade or more for a liquor license to be available from their city governments.
This is because the number of liquor permits that cities and counties are allowed to issue depends on the population, and their price must be at least $ 1 for each resident. In Sioux Falls, a new permit costs almost $ 200,000.
Sioux Falls businessman Ted Thoms told the Argus Leader in 2019 that he put his name on a waiting list when considering a steakhouse near 12th Street and Sertoma Avenue. By the time his name was called, a decade had passed and he had already sold the land to a developer. He said the investment in the restaurant was “one of the worst investments I have ever made”.
After:How a man took advantage of the Sioux Falls liquor license loophole
With new licenses only available when the population is updated and certified, which is done every two years in Sioux Falls, those with the capital available are pushed into the secondary market in their search for a license, where they are sold for $ 300,000 or Suite.
Edwards’ report notes that entrepreneurs also face similar challenges stemming from liquor licensing regulations, including in New Jersey, Rhode Island and Pennsylvania. And in all of these cases, “the high cost of alcohol licensing blocks entry to new restaurants, thus limiting competition.”
âIt also benefits large corporate chains compared to independent contractors,â he said.
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