Alcohol Permits and Licenses When Buying a Brewery
A brewery cannot legally brew or sell beer without the right approvals, and those approvals are tied closely to who owns the business and where it operates. When a brewery changes hands, brewery permits and licenses are one of the first issues buyers, sellers and lenders need to plan around. In many cases the buyer will need to obtain its own approvals rather than step into the seller’s, and the timing of that process can shape the entire transaction.
This article is general information for buyers and sellers of existing, operating craft breweries, brewpubs and taproom breweries. Permit and license rules vary by state and locality and change over time. Permits and licenses should not be assumed to transfer. Nothing here is legal or regulatory advice; buyers and sellers should work with qualified attorneys experienced in alcohol regulation.
The Layers of Approval
- Federal brewer permit: generally required to produce beer for sale, issued for a specific owner and premises
- State manufacturer license: state approval to brew, which may come in different classes with different privileges
- Retail and taproom privileges: the right to sell beer for on-site consumption or to go, which may be part of the manufacturer license or a separate license
- Local licenses and approvals: city or county licenses, health permits for food service, occupancy and zoning approvals
- Label and product approvals: label and, in some cases, formula approvals required before certain beers can be sold
Why Approvals Generally Do Not Transfer
Permits are typically issued to a particular legal entity at a particular location. A change in ownership, whether through an asset purchase or a change in the owners of the entity, may require notice, an amendment or entirely new applications. Even in an entity purchase, regulators may require background information on new owners. The rules depend on the jurisdiction and the type of approval.
How Permits Shape Deal Timing
Because a buyer may need approvals in place before operating, the purchase agreement should address what happens while applications are pending. Approaches can include conditioning closing on approvals, using interim arrangements where the law allows them, or structuring a transition with the seller. Which options are available varies by jurisdiction and should be decided with counsel. Lenders will also want to understand the plan before funding.
Self-Distribution and Wholesale Rights
Some states allow breweries to sell directly to retailers within limits, while others require sales through licensed distributors. Those privileges may depend on the license class, production level or other conditions, so buyers should confirm what the new owner will be permitted to do. Distribution is also shaped by distributor contracts; see our article on brewery distributor agreements.
Premises and Zoning Issues
Permits often describe the licensed premises in detail. Changes to the layout, taproom or outdoor space may require approval. Zoning and use permissions for brewing and on-site consumption also need to match the operation. Our article on brewery real estate and lease review covers these site issues.
Compliance History Matters
Buyers should review past violations, excise tax filings and any pending matters with counsel and accountants. A history of problems may affect the buyer’s applications, the price or the terms of the deal. Our craft brewery due diligence checklist includes these items.
What Lenders Want to See
A lender financing a brewery purchase may want evidence that the buyer is eligible to obtain the necessary approvals, a realistic timeline from counsel and a plan for operating legally from the closing date forward. Financing, including SBA loans for craft breweries, depends on business structure, use of proceeds, program rules and lender review.
For Sellers
Sellers can help by organizing every permit, license, label approval and compliance record and by cooperating with the buyer’s applications. See our article on how to sell a craft brewery.
US Professional Funding helps buyers finance the acquisition of existing, operating craft breweries and coordinates with their advisors on deal timing. Learn more about our craft brewery acquisition financing.
