Acquiring off-licences: A guide for startups.

For many, a trip to the off-licence for a few bottles of wine or cans of beer has become a weekend ritual. Whether it’s for ice, cigarettes, or just stocking up for a gathering, these establishments are embedded in our culture. With the rise of off-licences on every high street, you may be tempted to view this as a lucrative business opportunity. But is an off-licence truly a license to make money?

Interested in starting your own business? Check out our comprehensive guide to launching a business for expert insights.

What is an Off-Licence?

The UK boasts thousands of licensed premises ranging from pubs and bars to restaurants and, notably, off-licences. Most off-licences are independent stores, but management-run chains like Thresher also play a significant role in the market.

Independent off-licences often double as corner shops or convenience stores, offering a range of products, including alcohol, snacks, and everyday items. Some, however, focus exclusively on providing expert knowledge in wines, beers, and spirits, enhancing their appeal to discerning customers.

In contrast, larger chain off-licences such as Victoria Wine and Thresher, owned by Allied Domecq and Whitbread respectively, are well-established and come with significant brand recognition. Although they compete with independent off-licences and supermarkets that offer alcohol at lower prices, these larger chains typically aren’t easily found on business listings.

David Rhodes of Lakey and Co, business transfer agents, notes that running an off-licence is relatively straightforward: “The operation is basic, albeit demanding of time, with typical hours from midday to 10 PM. The key is to select effective stock and monitor sales effectively.”

The Competitive Landscape

Competition in the off-licence sector is fierce. You’ll find yourself vying for customers against supermarkets, convenience stores, newsagents, and even online retailers who can undercut prices and enhance convenience. Additionally, the trend of “booze cruises”—where customers travel abroad for particularly cheap alcohol—introduces another layer of competition.

When strategizing your business, consider factors such as location, adjacent takeaways that may drive traffic to your shop, and ease of parking. The ability to stop conveniently can significantly affect your foot traffic.

Who is Suited for an Off-Licence Business?

Operating an off-licence comes with unique demands, including longer hours compared to typical retail businesses. Legally, you can open as early as 8 AM in England, Wales, and Scotland, but many owners opt for a 10 AM or noon start to align with typical customer buying patterns.

Given that sales peak in the evening, especially during warm summer afternoons, being prepared to meet the late-night demand is crucial. Patience is a must, as customers may be in a less-than-ideal state after a few drinks.

Furthermore, acquiring the necessary licensing and understanding regulatory requirements is essential. A savvy business sense will help you navigate stock supply and demand dynamics; if a product isn’t moving quickly, it’s wise to rotate it out for more popular alternatives.

Understanding the Costs

Investing in an off-licence is similar to purchasing property—it requires an upfront price agreement plus additional costs that can add up quickly. Recognizing these hidden costs is vital for budgeting.

Initial Outlay

This encompasses both the purchase price of the business and initial startup expenses, which can vary widely. You might inherit some infrastructure, but be prepared for possible additional costs, including:

• Renovations or improvements to the premises.
• Equipment, such as cash registers and computers.
• Initial stock to welcome customers.
• Transportation, whether a delivery vehicle or personal transport costs.

Working Capital

Your business will thrive on a well-managed stock inventory. Expect costs of goods sold to represent up to 80% of your sales. Having adequate working capital—between £20,000 and £30,000 for a business costing between £50,000 and £70,000—will cover initial stock purchases, wages, and other fixed costs.

Miscellaneous Costs

Don’t overlook additional expenses, such as:

• License and training fees.
• Advertising and marketing costs.
• Maintenance expenses for equipment and cleaning services.

Profit Potential

The UK leisure industry remains robust, and off-licences have seen steady growth. However, awareness of market changes—including the impact of online sales and “booze cruises”—is crucial for planning.

Your potential earnings will depend heavily on multiple factors:

• Operating hours and customer demographics.
• Premises location and size.
• Competition from local rivals.
• Product range and delivery service offerings.
• Management of stock and theft prevention.
• Additional income sources, such as advertising space for local events.

With expected gross profit margins hovering around 17.5%, you might anticipate annual earnings of at least £20,000—before deducting rent, wages, and other expenses. Remember, successful off-licences often focus on volume sales, particularly with popular items.

Strategies for Success

• Evaluate Potential: Thoroughly assess your location for business viability.
• Communicate with Legal Advisors: Be transparent with your solicitor about licensing processes.
• Develop a Comprehensive Layout: Map out your shop, ensuring access to popular products enhances customer convenience.
• Conduct Competitor Analysis: Understanding nearby businesses will strengthen your positioning.
• Utilize A Solicitor: Ensure all legal aspects are handled properly, including relevant applications and public notices.
• Prioritize Marketing Efforts: Once your off-licence is established, effectively promote your offerings to the community.
• Plan for License Renewal: Be aware of license renewal timelines, which can extend up to three years.