By: Louis Terminello, Esq. and Kevin Cruz*, Law Clerk
You are an Entrepreneur. A savvy one at that, and you think to yourself “those guys in the liquor business make money hand over fist.” So, you shop around for a retail liquor license, otherwise known as a quota license in the state of Florida, and open your very own neighborhood (package) store. You learn quickly that the Florida market is very competitive. Between the big box stores like Total Wine and other independent chains, pricing products consistent with competitors becomes extremely difficult.
Similar to many industries, a vendor’s cost is directly correlated to the quantity purchased from a wholesaler. The more cases you buy from a wholesaler, the lower your cost, and more importantly your margins increase. However, mom and pop shops have neither the financial resources nor warehouse space to buy sufficient volume to compete with chain stores.
So, how exactly do these small package stores keep up? Well, one method is pool-buying. Pool-buying is when individual retail licensees create a legally compliant and licensed purchasing group and then combine their individual orders into a single order or transaction. A designated and permanent pool-buying agent is selected from within the group that will collect and combine all orders onto a master invoice and execute the purchase on behalf of the group members. Collective buying power within the group allows members to achieve lower costs on lower inventory levels while retaining the ability to offer competitive pricing. This means a pool-buying member’s cost on one case of vodka is the same price as what a non-member or big box retailer would have paid on a large volume “quantity discount.”
Florida, as well as other states, permits pool-buying groups to include almost all license types. Although pool-buying within the alcohol beverage industry has been around for some time, it is underutilized. Perhaps you are the owner of two package stores and want to perform a merchandise transfer between your stores. Florida law precludes such a transfer unless those two stores are part of the same pool-buying group, even if both licenses have a common owner.
The structure of pool-buying groups must adhere with Florida alcoholic beverage law the formation of which becomes very complex. Pool-buying agreements must be drafted and included with other application requirements. If you seek assistance in creating a pool-buying group, the Greenspoon Marder Hospitality, Alcohol and Leisure Industry Group has created numerous pool-buying groups and consulted on pool-buying compliance. Please contact us at ljt@gmlaw.com to see how we can advise you on yours.
*Not An Attorney
About Greenspoon Marder Greenspoon Marder is a national full-service business law firm with more than 200 attorneys and 26 locations across the United States. Since our inception in 1981, our firm has been committed to providing excellent client service through our cross-disciplinary, client-team approach. Our mission is to understand the challenges that our clients face, build collaborative relationships, and craft creative solutions designed and executed with long-term strategic goals in mind. We serve Fortune 500, middle-market public and private companies, start-ups, emerging businesses, individuals and entrepreneurs nationwide.
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