Navigating Pennsylvania’s strict PLCB liquor licensing rules can be challenging, especially when it comes to interlocking business prohibitions. Whether you’re applying for a restaurant liquor license or negotiating a lease agreement, understanding these restrictions is critical to avoiding costly delays or denials. In this article, I break down how interlocking interests arise, common pitfalls, and strategies for compliance.
Pennsylvania operates under a three-tier liquor licensing system:
- Manufacturing Licenses: Breweries, wineries, and distilleries.
- Wholesale Licenses: Beer distributors and importers.
- Retail Licenses: Restaurants, hotels, and clubs.
Under the Liquor Code, individuals or entities are generally prohibited from holding licenses across multiple tiers or having an indirect interest in a different class of license, unless an exception applies. More on the exceptions later.
Why Interlocking Interests Matter
An interlocking business interest occurs when someone involved in one license class—directly or indirectly—has an interest in another class. For example: A landlord who owns shares in a wholesale beer distributorship or a brewery cannot lease property to a tenant applying for a retail liquor license. The Pennsylvania Liquor Control Board (PLCB) closely examines these relationships during the licensing process. When a lease agreement is part of a liquor license application:
- The PLCB requires disclosure of all landlord ownership details.
- The landlord must provide information on all officers, members, directors, and sub-entities.
- Any indirect interests in conflicting license classes must be reported.
Failure to disclose or resolve interlocking interests can result in license denial or application delays.
Real-World Example of an Interlocking Conflict
Imagine a landlord owns a minority stake in a beer distributorship or brewery and is the proposed landlord for a property with a restaurant business applying for a retail liquor license. This creates an interlocking conflict, as wholesale and retail licenses cannot overlap.
Potential Solutions:
- The landlord may need to divest his/her interest in the wholesale business.
- In some cases, restructuring ownership of the landlord entity may resolve the conflict.
- If no resolution is possible, the liquor license application will be denied.
To avoid financial or legal risks, applicants for a retail liquor license should include a contingency clause in their lease agreements. This clause should state that the lease is voidable if the PLCB denies the liquor license application.
Exploring Exceptions to the Rule
While the interlocking business prohibition is strict, there are certain exceptions that may apply. Consulting with an experienced liquor licensing attorney is essential to fully explore these exceptions and determine if your situation qualifies.
Key Takeaways for License Applicants
- Understand Pennsylvania’s three-tier licensing system.
- Disclose all ownership and indirect interests during the PLCB application process.
- Use lease agreements with contingency clauses tied to PLCB approval.
- Work with an experienced liquor licensing attorney to identify and resolve potential interlocking conflicts.
- Consult with an attorney to explore exceptions to the interlocking prohibition rule.
