Evaluating Lottery, Tobacco and Other Sales When Buying a Liquor Store
Many liquor stores sell more than spirits, wine and beer. Lottery tickets, tobacco products, snacks, mixers, ice and other convenience items can bring customers through the door and add to revenue. But these sales often work differently from alcohol sales: some are earned as commissions, some carry separate licenses or contracts, and some raise questions for lenders. When evaluating liquor store lottery and tobacco sales during an acquisition, buyers need to understand what each source really contributes and what risks it carries.
This article explains how ancillary sales may affect the evaluation of a liquor store. It does not use revenue percentages or margin benchmarks, because these vary widely by store and location. It is not legal, tax, regulatory or licensing advice.
Why Ancillary Sales Need Separate Review
Total sales can be misleading if they combine products with very different economics. A store’s gross sales may include items where the store keeps only a commission, as well as items it buys and resells. Looking at each category separately helps buyers understand where profit actually comes from.
Lottery
- How it is earned: stores typically earn commissions or fees rather than keeping the full ticket price, so gross lottery sales and the store’s actual income from lottery are different numbers
- Agreements and approvals: lottery sales generally require an agreement with, or approval from, the applicable lottery authority, which may need to be transferred or newly obtained by a buyer
- Cash handling: lottery creates additional cash, settlement and reconciliation responsibilities
- Customer traffic: lottery may bring in customers who make other purchases
Tobacco and Related Products
- Permits: tobacco and similar products often require separate permits or licenses, which may not transfer automatically
- Regulation: rules on what can be sold, to whom and how may vary by state and locality and can change
- Compliance history: age verification and any past violations should be reviewed
- Margins and inventory: economics differ from alcohol and should be evaluated separately
Other Products and Services
Snacks, mixers, ice, non-alcoholic beverages and other items can round out the customer experience. Some stores also earn income from services or vendor arrangements. Each source should be documented and understood.
Records to Request
- Point-of-sale reports showing sales by category
- Lottery settlement statements and commission records
- Tobacco and other permits, along with any compliance notices
- Purchase records for ancillary products
- Any vendor or service agreements
Our liquor store due diligence checklist explains how these records fit into the broader review.
How Ancillary Sales Affect Value
Ancillary sales can strengthen a store’s cash flow and customer traffic, but their contribution should be measured by the income the store actually keeps, not just gross sales. Revenue that depends on permits or agreements the buyer may not be able to obtain carries additional risk. Our guide to liquor store valuation explains how buyers approach these questions.
Licensing and Permits
Lottery, tobacco and alcohol may each be governed by different authorities, applications and timelines. A buyer should confirm which approvals are required and plan for them alongside the liquor license. Our guide to liquor license transfer covers the alcohol licensing side, and requirements for other products should be confirmed with the appropriate authorities.
Lender and SBA Considerations
Lenders evaluate ancillary revenue as part of overall cash flow and may ask how each source is earned and documented. For SBA financing, program rules address certain gambling-related revenue, and lottery sales may be part of that review. Whether and how lottery or other gaming-related income affects eligibility depends on current SBA program rules, how the revenue is earned and reported, the facts of the transaction and lender review. Buyers should raise these revenue sources with their lender early. Our guides to SBA loans for liquor stores and liquor store loan requirements explain how lenders evaluate acquisitions.
Planning After Closing
Buyers should plan how they will manage permits, lottery reconciliation, age verification and inventory for ancillary products. Some owners adjust their product mix after closing, but lenders generally evaluate the store based on its historical results.
US Professional Funding helps buyers finance the acquisition of existing liquor stores, including stores with lottery, tobacco and other ancillary sales, subject to lender and program review. Learn more about our liquor store acquisition financing.
