Is New Jersey’s Liquor License Overhaul a Game Changer?

NJ Governor Phil Murphy recently signed legislation into law ushering in a significant transformation of the state’s antiquated liquor license laws. This marks the first meaningful update to New Jersey's retail liquor license laws in nearly a century. This comprehensive overhaul aims to boost the availability of liquor licenses statewide, provide relief to breweries and distilleries, and create new opportunities for small businesses.

New Jersey has an expansive history of alcohol production and sales, dating back to the colonial period. New Jersey established state liquor control laws after Prohibition in the 1920s. Since then, some new license categories have been introduced, but very few meaningful changes have been implemented. In the 1980s and 1990s, New Jersey created new licenses for wineries, brew pubs, and breweries. In 2013, the state issued its first distillery license since before Prohibition. Apart from these specialized licenses, the state’s laws regulate a strict alcohol supply chain. Those who manufacture can only sell to distributors. Distributors, in turn, can only sell to retailers who then sell directly to customers. The supply of these Class C retail licenses is extremely limited and highly coveted. They are sold in public auctions, routinely for more than $1 million. The prohibitive market value of the Class C licenses allows large, multi-unit operations with access to more cash to outbid hometown restaurant operators.

Key Changes

Inactive/Pocket Licenses

The new law addresses the longstanding issue of inactive and pocket licenses. License holders can no longer retain a retail consumption license indefinitely without using it. If a license remains inactive for two years, the holder must either use or sell the license. If neither option is exercised, the license can be transferred to a neighboring municipality. This change is anticipated to inject more than 1,000 licenses back into the market, an approximate 15% increase over the number of current active licenses.

Mall Licenses

A new class of retail consumption liquor license is being introduced, allowing municipalities to issue licenses for food and beverage establishments in shopping malls. This move is expected to create up to 100 new licenses throughout the state, providing a boost to struggling malls and stimulating economic activity. Restaurants in strip malls are not eligible for the new license, however.

Breweries, Cideries, Meaderies, and Distilleries

The law brings permanent relief to breweries, distilleries, cideries, and meaderies by easing existing restrictions on the specialized Class C “Plenary Retail Consumption” License. They are no longer required to provide tours to serve drinks, and they can now offer snacks, collaborate with outside vendors, host more events, and participate in a variety of onsite and offsite activities. Additionally, the legislation increases production limits and allows direct sales and distribution of beer produced on premises.

Next Steps for Your Business

In light of this new legislation, there are some short-term and ongoing steps you should consider:

Evaluate Your License Status – Ensure you are following the new regulations.

Explore New Opportunities – This might be the perfect time to consider establishing or expanding new businesses in areas where licenses were not previously available. The introduction of mall licenses may make the state’s indoor malls of at least 750,000 square feet a desirable home for your new restaurant location. Consider the expanded availability of liquor licenses in your strategic planning process.

Stay Informed – It is important to consider that municipalities may approach the distribution of licenses differently. It is likely that a larger number of licenses that have been inactive will become available soon after the new law becomes enforced. Also, investigate potential auctions or sales in your target municipality and those neighboring it. Stay connected with the industry through online groups, workshops, events, and more.

Hopefully, with the implementation of this new legislation, the Garden State’s liquor sector and patrons will be saying “cheers!”