There are 5 key factors to value a liquor store:
Location: Liquor stores located in busy shopping centers, strip malls or near major tourist attractions generate more foot traffic and sales per unit than stores in remote areas.
Margin: Typically, liquor stores located in economically disadvantaged neighborhoods obtain higher profit margins. Generally, smaller liquor units are sold more frequently in low-income neighborhoods. Liquor bottles typically have about a 75 percent profit margin compared to wine’s profit margin of 25 to 35 percent.
Store lease: Leases should be at least 10 years and with a maximum escalation clause of around 4 percent a year. The less economically developed the area, the less rent will be. For example, in Manhattan, New York average rental space for a liquor store ranges 3 to 4 times as expensive as in neighboring bureaus.
Lottery: Liquor stores with lotteries bring in more customers and as a result experience higher sales figures. Additionally, lotteries account for about 6 percent of store profits.
Warehouse: Liquor stores including inventory storage warehouses can save business owners anywhere between 5 to 8 percent through wholesale discounts. With a large storage space, businesses can buy in bulk and take advantage of vendor discounts. Also, owning a large warehouse with inventory creates more capital raising options in the future.
The COVID-19 pandemic is causing disruption for business owners in liquor industry.
Read more: How to Manage Liquor Store Inventory