Selling a liquor store in Canada

A private liquor store can be one of the easier small businesses to sell, because in some provinces new store licences are hard or impossible to get. That does not mean a buyer will skip the details. They want to see steady sales and margins, a clean licence history, a lease that will last and a clear plan for moving the licence into their name. Here is what to expect and how to prepare.

What buyers look at first

Most buyers of a liquor store ask the same questions early. Have clear answers ready before you list:

• Sales and profit. Two or three years of numbers, split by category such as beer, wine, spirits, coolers and cider, and other goods.
• Margins. What you earn on each category, and any volume pricing, rebates or promotions that affect it.
• The licence. The licence type, its renewal date, any conditions and any past contraventions or penalties.
• The lease. Rent, years left, renewal options and whether the landlord will agree to a new tenant.
• Staff and hours. Who works the till, their pay and training, and how many hours you put in yourself.
• Stock and equipment. Roughly what is on the shelves and in the cooler, and the age of coolers, shelving and the till system.

Buyers will check these during due diligence, so it helps to gather them now. Our list of documents needed to sell a business is a good start.

Sales, margins and seasons

Show the buyer two years of sales by month and by category, with the gross margin on each, and make sure the totals match your bank deposits, your sales tax returns and your tax returns. Liquor sales often rise around long weekends, summer and the holidays, so monthly numbers help a buyer see the normal pattern and plan stock and staff.

If you work long shifts yourself, list your wage and any personal costs run through the store as add-backs with proof, and be honest about what it would cost to pay someone for those hours. If sales have slipped, for example because a new store opened nearby or traffic patterns changed, say why; see selling when sales are down.

Why the licence matters so much in BC

In British Columbia, a private liquor store usually holds a licensee retail store licence, sometimes called a cold beer and wine store. The Province says there is a moratorium on new licensee retail store licences, new applications are not being accepted, the moratorium is in effect until July 1, 2032, and there is no wait list. When the moratorium was extended in 2021, the Province noted that existing licences may still be transferred with approval of the Liquor and Cannabis Regulation Branch.

That means for most buyers, buying an existing store is the main way to own one, and the licence is a large part of the value. It also means the buyer and their lender will look hard at whether the licence is in good standing. Keep the renewal fee paid every year, even while a sale is under way, because the Province says an expired licence cannot be transferred. Other provinces handle liquor retail differently, so check the rules where your store is.

How the licence transfer works

In British Columbia, the current licensee starts the transfer in the Liquor and Cannabis Licensing Portal by entering the buyer's business name and email address. The buyer then completes the application. The Province says the buyer needs a Canada Revenue Agency business number registered to the new applicant and a Business BCeID to use the portal, and must send a Personal History Summary and the screening documents it lists, such as a criminal record check, along with a sample sign and the application fee, which it lists as $330.

For licensee retail stores, the buyer must also show proof of valid interest in the premises. The transfer guide says this can be a certificate of title, an offer or option to buy the property, or a signed lease or assignment of lease that does not expire for at least 12 months from the date the licence is issued. So the lease and the licence need to be worked out together.

The store can stay open while the transfer is reviewed. The seller stays responsible for the licence until the Branch tells both sides that the application is administratively complete. From that point the buyer becomes the deemed licensee and may operate the licence. The handbook also says a buyer who gets a licence through a transfer must do a thorough audit of all liquor on the premises to make sure none is unlawful. Make the transfer a condition in your purchase agreement, and do not set a closing date on a guess about timing.

If you sell shares in your company instead of the store's assets, the handbook says you apply for a permanent change to the licensee rather than a transfer, and share transfers or changes must be reported within 10 days. See asset sale vs share sale.

Staff, training and records

In British Columbia, the licensee retail store handbook says Serving It Right must be completed by licensees, managers who supervise the sale of liquor and sales staff, and the licensee must keep records for at least six years showing each employee's name, certificate number and expiry date. Have that list up to date so the buyer can see who is trained.

The handbook also lists records a licensee must keep for at least six years, including liquor purchase and sales records, a liquor register, contracts with other licensees, incident records and employee records. A tidy set of records makes due diligence faster and gives the buyer confidence in your numbers.

A buyer will want to know who works in the store, their pay and hours, and who is likely to stay. In British Columbia, section 97 of the Employment Standards Act says that when a business is sold, the employment of an employee is considered continuous, so a buyer who keeps your staff takes on their years of service. See what to tell employees.

Stock, suppliers and the lease

Stock is usually counted on or just before closing day and paid for at cost, on top of the price for the business. Agree in writing who does the count and how damaged, expired or slow moving products are treated. See selling a business with inventory. Make a list of supplier and service accounts, such as distributors, the point of sale system, payment terminals, the alarm and cameras, and insurance, and note any equipment like branded coolers that belongs to a supplier rather than to you. Our guide to transferring contracts, licences and permits has a checklist.

The location is much of a liquor store's value. Check how long is left on the lease, the renewal options, any limits on use and whether the landlord must approve a new tenant, and remember the buyer's valid interest needs at least 12 months of term. See your commercial lease when selling. If you own the building, see selling a business and the building.

Customer and staff information

Staff files, loyalty programs and any customer email lists include personal information. In British Columbia, section 20 of the Personal Information Protection Act lets a business share personal information with a prospective buyer without consent, but only if it is needed to decide whether to go ahead and the buyer agrees to use it only for the deal. Share totals and summaries first, under a confidentiality agreement, and hand over full files at closing.

Tax on the sale

How the sale is taxed depends on whether you sell assets or shares and how the price is split between goodwill, the licence, equipment and stock. See goodwill when selling and taxes when selling a business.

When a registered buyer acquires all or substantially all of what is needed to carry on the business, the section 167 election on Form GST44 can often remove GST/HST on the sale. In British Columbia, PST generally applies to taxable goods in the sale such as coolers, shelving and fixtures, but not to inventory bought for resale or to goodwill, and the Province says a buyer should get a PST clearance certificate before buying a business. See GST and PST when selling.

A simple worked example

These numbers are made up and rounded for illustration only. Your own deal, timing and tax will differ.

Questions to take to your lawyer and accountant

• Should this be an asset sale or a share sale, given the licence and tax?
• How should the licence transfer or licensee change be written into the purchase agreement as a condition?
• What happens if the Branch does not approve the buyer?
• Will the landlord consent, and will the lease give the buyer at least 12 months for valid interest?
• How should we count and price the stock?
• How should we split the price between goodwill, the licence, equipment and stock?
• Can we use the section 167 election, and how does PST apply to the equipment?

For more, read what your lawyer and accountant do. Running a corner store instead? See selling a convenience store in Canada. Selling a different kind of shop? See selling a retail store or boutique in Canada. Making wine, beer or spirits? See selling a winery, brewery or distillery. This guide is general information, not legal or tax advice for your situation. Questions about listing with us go to hello@sellmybusinessdirect.com.