Nov. 15, 2021

Sioux Falls has been authorized to issue 19 additional full-service on-sale liquor licenses to businesses, but there isn’t a plan yet for how some of them will be allocated.

The city has to wait for U.S. Census population figures before state law will allow new licenses to be issued. Estimates can be done every other year and have resulted in a few new ones over the past decade but nowhere close to 19.

The new authorization will allow the city to offer a license to every business on a waiting list that has been in place since before the 2010 census – with one left over. And it’s not clear yet how that license or any turned down by businesses on the list will be handled.

The city stopped adding to the waitlist in mid-2019 with support from the Sioux Falls City Council. This week, the council will hear the first reading of an ordinance to set a price for the license, based on population, at $240,646 initially and $1,500 each year after that. It’s the first step toward being able to offer licenses to those on the list, said Jamie Palmer, the city’s licensing specialist. Twenty days after the change takes effect, her office can begin selling licenses.

Some on the list, such as C.R. Lloyd Associates, which holds the top two spots, have plans for their upcoming licenses. Lloyd Cos. plans to use both as part of its Steel District downtown redevelopment, which needs a license to go with the Canopy by Hilton hotel as well as restaurants from a Twin Cities operator in an office building on the property.

Others, such as Tom Slattery, owner of JJ’s Wine, Spirits & Cigars, plan to buy the license because they now can and figure out a plan for it later. Licensees have two years to put the license to use before losing it.

“You don’t have any choice. You have to take it. You’re stupid not to,” said Slattery, adding his could be used for future business expansion. “Any bank will finance it because it’s a solid asset.”

The market historically has been so solid that some on the list might be there never intending to use their licenses but instead planning to resell them.

While the city has not been able to issue new licenses, their price has climbed on the open market – generally selling for between $300,000 and $350,000.

“There’s always one or two entities out there looking for a license,” said Scott Blount, senior broker associate at Lloyd. “The demand can be directly correlated to the price a license will sell on the open market, which is around $325,000. … There could be one or two on the list that still are from the old school, ‘let’s buy a license and flip a license and make a quick $125,000.’”

But that might not be such an automatic deal given the high number of new licenses coming into the market, he added.

“What that will do is push demand down a little bit,” Blount said. “Right now, there’s not strong demand for national restaurant expansion. Coming out of COVID, everyone is catching their collective breath. I think it will be renewed though. The interest in our market from national restaurants will be renewed because I think things will settle back down and head back closer to the way they used to be.”

He’s also working with a tenant for a future restaurant now that is not on the list but will be in the market for a license, he said.

“Typically when I’ve done restaurant deals … I’m able to find one on the open market, but they end up having to pay.”

The city also offers a full-service license to restaurants that do the majority of their business in food for $192,517 but hasn’t had many takers.

Here’s the full list of those eligible for an on-sale liquor license:

• C.R. Lloyd Associates
• C.R. Lloyd Associates
• Thomas Thompson Fun Inc.
• Vikash Patel
• Anupama Patel
• Sandtrap Inc.
• Speak E-Z LLC
• Tslat Inc.
• Keith McGuire
• Jerad Rokusek
• Commonwealth Gaming & Holdings Corp.
• Larry Michael Lang
• Thoms Co. Real Estate
• Hegg Cos. Inc.
• Interactive Holdings Inc.
• Thunder Road of Sioux Falls Inc.
• Lloyd and/or Jayne Solberg
• Hegg Cos. Inc.

Of those, at least one – Larry Lang – is deceased. The former owner of Michael’s Steakhouse applied when his restaurant was located on Louise Avenue in 2007.

Paul Hegg, CEO of Hegg Cos., said he had just learned the company could buy two licenses and doesn’t yet have a plan for them.

Others on the list own other restaurants and bars in the community, develop hotels or own convenience stores.

As for licenses that are left over, the process for allocating them “is to be determined yet,” Palmer said. “We have to work through the list before we can discuss any remaining licenses.”

In the case of a retailer such as a convenience store securing a full-service on-sale license that also could allow for off-sale, potentially alleviating another wait at the city for a package liquor license.

The city was granted 27 new package licenses and has a waitlist of 13 businesses. Many of those are in the process of applying for licenses, and that waitlist also has been stopped.

Much like the on-sale licenses, a process for remaining off-sale licenses still needs to be developed.

Editor’s Note: This story has been updated to clarify the difference in pricing between an on-sale liquor license and a full-service restaurant license.