As first reported by the Washington Business Journal yesterday, the ABC board is about to release four liquor licenses into the Georgetown moratorium zone. And one of them will be the coveted tavern licenses. But we’ve been down this path recently, and the result may leave many disappointed.
The heart of Georgetown is covered by a moratorium on new liquor licenses. There can be no more than 68 in total, including the inactive licenses being held “in safe keeping”. This moratorium has been in place since 1989, and it doesn’t look like it’s going to be removed any time soon.
There are benefits and drawbacks to the moratorium (that GM has written about here). But the primary impact is that if you want to open a new restaurant in Georgetown, you have to buy one of the inactive licenses on the secondary market. GM has heard from establishments that paid around $90,000 to buy one. This is a significant disincentive for new restaurants in Georgetown.
The Last Gold Rush
Several years ago when the moratorium was being renewed, ABRA and the ANC worked together to make seven new licenses available. This was an acknowledgement of the problem described above. It was hoped that quality restaurants would take the opportunity to snatch up the virtually free licenses.
It didn’t work out exactly as planned. Like the original gold rush, speculators rushed in. Here’s how those licenses were claimed:
- Bills Bar and Burger – Was supposed to go into the old Philadelphia Cheesesteak Factory building. Never came to fruition.
- Zenobia Lounge – Coffee shop wanted to sell liquor. After obtaining license, they decided they didn’t want to live with the restrictions so they stopped selling liquor and shifted the license to inactive. They still kept it though.
- Tacklebox – Jonathan Umbel had been trying for years to get a liquor license for this restaurant. He finally did. Unfortunately he’s getting evicted, so it’s not clear how much longer this will be around.
- Puro Cafe – Another restaurant that was already open, but it’s closed now. A potential buyer wanted to turn it into a hooka bar and (like Zenobia) deactivate the license so that they wouldn’t have to live with ABRA regulations or the voluntary agreement.
- Hu’s Wear – The owners of Hu’s Shoes said they wanted to open a restaurant where Bartleby Books used to be. The bookstore was kicked out; the restaurant never moved in.
- International House of Ping Pong – This was supposed to be a ping pong-themed restaurant in 1010 Wisconsin Ave. It never opened.
- Paul Bakery – This restaurant was planned but not opened when they obtained the license. They are still open and appear to be doing well.
That’s it. Three restaurants that never opened. One that since closed, and one that may close. And one that decided it didn’t want to use the license anymore (although still held on to it because our insane regulations make it a valuable asset).
The problem is that the licenses are granted on a first-come-first-serve basis. Earlier this year, ABRA announced that a new tavern license was available. The owners of Gypsy Sally’s literally raced across town to claim it.
But this leads to claim squatters who have at best sketchy plans for opening. As the last rush proved, there is no qualitative evaluation performed.
The New Gold Rush
So color GM skeptical that these new licenses will lead to new quality restaurants in Georgetown. GM predicts this is going to happen:
First, an existing restaurant will rush like Gypsy Sally’s to get that tavern license. These licenses are worth so much because it waives the requirements that the establishment generate 45% of its revenues from food sales. Second in line behind Gypsy Sally’s last time was Smith Point. If they don’t already have priority, they certainly are the most likely candidate to be waiting first at the door.
As for the remaining three licenses, who knows? GM believes that in order to claim them, an applicant at least needs an address. So it’s not something that anyone can just file for out of the blue. But as experiences like Hu’s Wear and Bill’s Burgers show, you don’t need much more than an address.
A Better Way
But here’s the thing, what even is the impact of the moratorium on Georgetown anyway? A moratorium is supposed to create an artificial ceiling on liquor licenses in order encourage other types of businesses. But in Georgetown right now, particularly on M St., the other types of businesses don’t need the help.
Since 2010, eight restaurants on (or immediately off) M St. have closed without being replaced by another restaurant. That’s a 15% drop.
Right now it appears that the moratorium does nothing that the marketplace isn’t already doing. If it disappeared on M St., there appears little chance that the honky-tonk and fratty bars that inspired the moratorium in the first place would return in numbers.
But if it were removed just for M St., some good things could occur. The unfair advantage clothing stores now have over restaurants would be removed (no more $90,000 entry fee). And the licenses would no longer be snapped up by speculators because they’d be worthless without a genuine business plan and a lease.
The high rents would probably all but rule out the fratty bars. Look at some of the restaurants that closed in recent years: the Saloun, Third Edition, Rugby, Garrett’s, and the Guards. (GM even hears that the uber fratty bar, Rhino Bar, is considering a change).
Maybe notwithstanding this encouragement we still don’t see more restaurants on M St. Oh, well. At least we tried.