NJ Liquor License Reform Alliance Calls for
Progressive Policy to Bolster NJ’s Economy

The Problem

After Prohibition ended in 1933, policymakers in New Jersey continued to restrict who could sell liquor. And today, laws passed in the 1950s and 60s still limit the number of consumption liquor licenses for bars or restaurants to one for every 3,000 residents in a town. As New Jersey embraced progressive economic development policies over the last half-century, liquor license rules remained the same and have become a hindrance to small business entrepreneurship and local downtown development.

The issue comes down to Economics 101, when supply is low for a product in high demand, the price goes up. New Jersey has stuck by policies that manufactured scarcity for so long, that the cost of liquor licenses in many towns has ballooned to prices unattainable to many small businesses-owners. The statewide average cost to purchase a liquor license is around $350,000, but we have seen prices in the millions in some areas of the state. These staggering prices make it problematic for those without access to immense capital to get in the game; which raises equity concerns, especially considering 42 percent of New Jersey’s restaurants are owned by minorities and 28 percent of main street businesses are started by immigrants.

Similarly, New Jersey’s draconian liquor policies are hindering craft alcoholic beverage manufacturers – popular, tourism-based economic drivers in several communities throughout the state. Even in light of reforms instituted in the last decade to help spur the development of the local craft beer, wine, and  spirits industries, compromises were made in appeasement of special interest objections to get even those incremental reforms adopted. For craft breweries in particular, New Jersey’s State Division of Alcoholic Beverage Control (ABC) rules severely limit these businesses from providing the food and entertainment “experiences” that have helped this industry flourish in other states, resulting in the relatively small economic impact of the industry in New Jersey compared to its competitors in our Northeast region. If similar restrictions were applied in the future to other nascent state alcohol manufacturers, the same, if not worse, ramifications to those industries would jeopardize the livelihoods of those sectors in the state.

Economic Impact

Big picture, New Jersey trails New York in the number of restaurants per capita, and both New York and Pennsylvania in the number of drinking establishments and number of active licenses per capita. The New Jersey Economic Development Authority estimates that reforming New Jersey’s liquor license system could generate up to $10 billion in new economic activity over 10 years and create upwards of 10,000 jobs annually.

What does it mean to restaurateurs and entrepreneurs? Alcohol preparation is less labor intensive than food preparation, alcohol markups are high, and alcohol has a long shelf life. On average nationally, alcohol makes up 20 to 25 percent of restaurant sales, and restaurants generally aim for alcohol to account for 30 percent or more of total sales. According to the National Restaurant Association’s Restaurant Industry 2030: Actionable Insights for the Future, “margin pressures will remain intense and tight for restaurants of all types and sizes”. For New Jersey restaurants, where real estate and labor costs are particularly high, 20 to 30 percent in sales and an 80 percent profit margin for alcohol can be the difference between thriving or merely surviving.

Meanwhile, according to the Brewers Association, the craft brewing industry contributed $76.3 billion to the United States economy and more than 490,000 jobs. With only 140 establishments, New Jersey ranks 45^th in the nation in breweries per capita. Overall craft beer production, distribution, marketing, and sales translate into an economic impact of $1.8 billion and over 11,000 jobs. However, if New Jersey was meeting its relative per capita potential, it could realize another $318 million in economic impact and over 2,600 jobs. Both New York and Pennsylvania rank in the top 5 states in overall craft beer economic impact; and Vermont and Maine rank in the top 5 states in per capita economic impact. What do these Northeast neighbors have in common? Their policies encourage and support liquor industries as drivers of tourism and economic development.

In 2022, National Craft Distiller sales hit $7.5 billion generated by the 2,687 operational craft distillers in the United States. Due to New Jersey’s difficult legal structure, there are only 36 craft distillers in this state compared to our neighbors of New York with 199 distillers and Pennsylvania with 156 distillers. Both our neighboring states rank in the top 5 craft distilling states. Nationally, the trend has been for growth in the industry in almost every state, but New Jersey has even seen craft distilleries shutter.

The Answer

The NJ Liquor License Reform Alliance supports a progressive policy that rectifies the immense economic deficit the current system of manufactured scarcity and overregulation creates for the state’s economy and its small businesses. To put our restaurant industry on par with neighboring states and the nation, New Jersey needs to increase the number of food and beverage establishments that can sell alcoholic beverages, while minimizing impact on existing license holders. At the same time, New Jersey must not only ease restrictions on our craft producers, but implement policies that bolster them as critical components of our hospitality, manufacturing, and tourism industries.

The NJ Liquor License Reform Alliance is not supporting a specific piece of legislation yet, as the pending liquor license reform bills are still in their early stages and will doubtless change over time. The Alliance supports general reform of New Jersey’s outdated liquor laws, and will work with the Murphy Administration and NJ Legislature to create reasonable and equitable legislation that recognizes the needs of NJ’s small business owners, as well as existing license holders.

We welcome you to join the NJ Liquor License Reform Alliance to be listed on our webpage, receive call-to-action emails, and generally provide moral support to this reform initiative. We also call on those in support of reform to contact your Legislators to let them know!