How do I start a Liquor Business?
Introduction.
Before you jump in and start spending money
on your new venture, stop and read these few pointers that may save you money
and loads of frustration.
The question is often asked:
Where
do I start?
You start with your premises. You need a
premises before you can even apply for a Liquor License.
Do not start spending money on renovating the
existing building or start building a new building or sign a lease contract on
the building before you have cleared the following:
- Visit your local Municipality’s Town
Planning or Land Use department
and confirm with them that the premises or stand that you want to use is
suitable for the specific Liquor License (i.e. tavern, liquor store,
restaurant, pub etc.). Some stands have a Land Use Right for residential,
commercial, industrial and other.
Remember
that a stand zoned for business may not be suitable for entertainment /amusement.
(This includes a Tavern or Night Club License). A stand zoned for residential
will not allow a Liquor License unless approved by the Municipality. It is no
use to say that there are other businesses in the vicinity of your stand and
therefore it should be acceptable. Each stand is zone individually.
(If
your stand is in a rural area you need an official letter from your traditional leader confirming that you may apply
for a specific Liquor License on your stand).
- Request a Zoning certificate from the
Municipality on the stand that you
intend to use. Your Liquor License Consultant must be convinced that the
zoning is correct. In Gauteng you need a Local Authority Approval (A
letter confirming you may apply) for a Tavern. Pub, Liquor Store and Night
club in addition to the zoning certificate.
- Start planning your shop.
Decide on your target market. (High income, Medium income or Low income
group). Your product that you will sell depends on this decision as well
as the outlay and image of your shop.
For
a Liquor Store you may decide on a self service or service counter shop. This
depends on safety and security in the area. A self service Liquor store will
require much more starting- up stock than a service counter shop.
Decide
on the minimum equipment that you require for a shop conforming to your planned
target market. Source suppliers and secure prices on the equipment. Important
is a good Point Of Sale System which is linked to the Cash register and
computer.
Establish
the suitability of the electrical distribution board of the shop. That is, can
the distribution board handle the load of all your equipment without overload
trip outs?
Pay
attention to the condition and suitability of the shop’s floor. If it needs
replacement, estimate the cost.
Determine
the security cost such as burglar bars, safety doors, alarm system, armed
response and new locks for the shop (Don’t use the old locks. You don’t know
how many keys are floating around.)
Design
you signwriting and promotional material. Signwriting must be professional.
Take care that the sign can at least be read by someone traveling at sixty
kilometers an hour. The sign must be clear and eye catching. Do not write too
much on the sign. All other material must be professional and neat.
The
lighting of the shop is important. It must suit the required ambiance of the
type of business you intend to operate. A dark Liquor store does not contribute
to the image of an upmarket Liquor Store or any Liquor Store for that matter.
Ascertain
if the premises allow for suitable parking in terms of quantity and safety.
- Decide on your pricing strategy.
Visit opposition shops and determine their prices. Find out from suppliers
the cost price of your products. Decide on a price mark up percentage. It
is not a good strategy to be the cheapest in town.
- Decide on your product strategy. The
type of products you will sell depends on your target market’s income.
Establish the fast moving stock and list them. Unfortunately you can not
only stock fast moving stock. Some stock should be kept as a service to
customers seeking alternative products. Your shop should be well stocked
and must look successful.
- Negotiate a Lease Contract. If
you are not the owner of the property you require a lease contract between
you and the landlord. Be careful when signing the lease contract. Read the
conditions very careful, especially with regards to the following”
1.
Escalation clause. This
means the amount the rent will increase after every year. An annual escalation
of 8% is acceptable in today’s economy.
2.
Right to renew. The renewal
clause gives you the right to renew the contract after the expiry of the lease.
There should be a % increase or a rand figure of the first year’s renewal with
an escalation clause for every year thereafter until the end of the new
contract. The applicant is welcome to contact the writer for more information.
3.
The monthly payments
stipulated on the lease contract can be inflated by the lessor’s on costs such
as administration cost, security cost, cleaning cost, rates and taxes and
other. Remember the 10% guideline. If your rent is R15 000 your budgeted
turnover should be R150 000 for a retail shop. If you don’t expect that
turnover be aware.
4.
Insurance cost. Some lease
contracts requires the lessee to insure for shop front windows and other
breakages.
- Contact a reputable Liquor License
Consultant to give you a quote clearly confirming
all cost. Make sure you know what is included and what is excluded in the
quotation. Apply as soon as possible because a Liquor License Application
can take a long time. (4-6 months or longer) You can apply on an existing
premises or on a stand on which there is no building yet.
- Compile a Suppliers List with
alternative suppliers. Your purchases can
influence your profit margins dramatically. Shop around for better deals. Your
relationship with your suppliers is critical. Try to line up alternative
suppliers where possible.
- Decide on an Employment Strategy. Many
successful businesses have failed because of employees. Take note of the
following:
1.
Do not employ anybody to do
the work that you can do.
2.
Work out your budget and
cash flow before you employ anybody. It is not fair to the employee is you
inform them soon after you employed them that you can not afford them.
3.
Do not trust anybody. Ensure
strict financial an stock control. Do your own buying and stock control. Ensure
that your employees have no access to the Point Of Sale systems manager’s
files.
4.
Follow up the applicants
previous employees and get a reference.
5.
Follow up the applicant’s
qualifications.
- Work out a Budget. Without
a Budget you can fail before
you opened your doors. Remember to budget for the actual and hidden cost
which are listed but not limited to the following:
1.
Cost of the Liquor License
Application
2.
Cost of your first payment
to the Liquor Board on approval of the Liquor License.
3.
Rent deposit.
4.
First months rent in
advance.
5.
Electricity deposit.
6.
Painting and renovating the
shop.
7.
Burglar bars and safety
gates.
8.
Alarm system and camera
system.
9.
Signwriting.
10. Stationary,
printing etc.
11. Cost
of furniture and fittings plus installation.
12. Cost
of electrical installation.
13. Cost
of Point of Sale system and software.
14. Plumbing.
15. Trading
License.
16. Computers
and software.
17. Employment
contracts.
18. Cleaning
material and equipment.
19. Transport.
20. Cost
of rent while waiting for the Liquor License.
- Remember the following when opening: (Some
of the following items may be applicable to you).
1.
Sign the lease agreement.
2.
Apply for the Liquor
License.
3.
Paint and renovating the
shop.
4.
Install the alarm system
5.
Install the burglar bars and
safety gates.
6.
Decide on the lay-out of the
business.
7.
Order and install the
equipment, fixtures and fittings.
8.
Order and install the
signwriting.
9.
Register with the Receiver
of Revenue such as Income Tax, Employees tax (PAYE), Value-added tax (VAT) if
applicable, Unemployment Insurance Fund (U.I.F.)
10. Register
with the Health department at your local Municipality.
11. Apply
for a Business License (if applicable) at your local Municipality.
12. Draw
up employment contracts.
13. Draw
up confidentiality agreements with employees, if required.
14. Draw
up restraint of trade agreements with employees, if required.
15. Draw
up disciplinary procedures for the employees.
16. Appoint
a registered accountant.
17. Open
a bank account.
18. Decide
on the legal entity of the business such as a Sole Proprietor, Company
(Register the Company) or partnership (Draw up a partnership agreement).
19. Take
out insurance on the assets of the business.
20. Order
Point of Sale system and train to use it correctly.
21. Draw
up a Menu and recipes if applicable.
22. Train
staff.
23. Order
stock.
24. Order
packing materials.
25. Order
stationary and marketing materials (Menu’s)
26. Order
Telkom telephone line.
27. Order
credit/debit card machine.
28. Order
staff uniforms if applicable.
29. If
your business is in Gauteng order a sign with letter 50cm high for the front
door which displays the following:
Name
of Business.
Type
of Liquor License (i.e. Restaurant)
Trading
times of the Business.
Liquor
License Number.
30. Order
Signs for the Ladies and Gents toilets where applicable.
31. Order
fire extinguishers and signs.
32. Order
staff attendance book.
- Some notes on a Licensed premises.
1.
Minors.
Section 46 of the Gauteng Liquor act 2 of 2003. A licensee shall not sell or
supply liquor on the premises to persons under the age of 18 years or allow such person..... to be in any restricted part of those premises. (A
restricted part is means a bar on any licensed premises in respect of which an
on-consumption license has been issued,.....
2.
Intoxicated
persons. Section 47 of the Gauteng Liquor act 2 of
2003. A licensee shall refuse to admit to the licensed premises or any part
thereof, or sell or supply to an intoxicated person and shall have such person
removed from the premises or any part thereof. (An intoxicated person is when
his/her capabilities are so impaired by liquor that he/she is likely to cause
injury to himself/herself or be a danger or nuisance or disturbance to others.
3.
No liquor may be consumed
inside a Liquor Store.
4.
No Liquor may be removed
from an on-consumption premises such as a Pub, Restaurant, Tavern, Club, Night
Club, and Pool Club. Hotel etc.
FRIK LIEBENBERG
Cell:082 556 8368
Email: frik.christien@gmail.com
ELMIEN LIEBENBERG
Cell: 074 373 1888
Email: info@liquorlicensing.co.za
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