The City of Cambridge takes flex pricing to a new level

I have a couple of gym buddies who live in Cambridge, and they were all abuzz yesterday about an article on liquor licenses and how they’ve been so patchily issued in their town over the last couple of years. How patchy? Well, the price for a license – depending on whether you were canny enough to find the right lawyer or knew the right question (or person) to ask – was anywhere from free to $450,000.

That’s quite a swing, especially for a low margin business like a restaurant.

Even after reading the article twice, I couldn’t quite follow the thread on how this all worked. (I was going to say that I couldn’t quite follow the “logic”, but that would be absolutely the wrong word to use with respect to how liquor licensing goes down in Cambridge.) Here’s how I think things work:

To get a liquor license, you either need to buy one from an existing owner for whatever the market could bear, or get one from the city for free.

Sometimes, the free licenses depended on what section of the city Cambridge wanted new restaurants to spring up in. Thus, for a while the licensing commission – a paid lead commissioner and the chiefs of the police and fire departments – were more open to new free licenses for up and coming, techie-ville Kendall Square than they were for old, beaten up Central Square. Guess the Cantab Lounge – a dive bar –  and a few other spots where you could get liquored up, or just have a drink with dinner, were good enough for Central.

But this preference for Kendall over Central didn’t work for everyone. Sumaio Chen wanted to open a place in Kendall and ended up paying $200K for one -  a license that other restaurants in Kendall were getting as a freebie

Chen would have loved the same deal, but it was as though she didn’t know the secret handshake. Nothing on the Cambridge License Commission’s website or at its offices explained how to get a free license, and Chen’s advisers told her she had to try to buy one from another restaurant first. (Source: Boston Globe)

That bit about having to “try to buy one from another restaurant first”? Apparently, the decision on whether or not you were trying hard enough was completely arbitrary. Or looked that way.

In all, 95 restaurants, bars, hotels, and clubs in Cambridge operate with free licenses, or 38 percent of the total, city records show. Another 157 hold licenses they bought from other owners, and now worry they overpaid, as free licenses become more available.

This is Massachusetts, and this is Cambridge, from whence Cambridge Favorite Son Tip O’Neil so famously said, “All politics is local”. So, needless to say, there were lawyers – home boyos – with connections who knew the ropes and could show folks around. Sometimes these intermediaries worked for the sellers. Sometimes for the buyers. Sometimes for both. (Oh,  boy…)

No one knew this patchwork of inequity better than the lawyers who made a living navigating the murky system. With so little guidance from the city, many restaurant owners turned to a small cadre of well-connected attorneys who often preached the advantages of buying a license. Other times, they schooled license applicants in how to convince commissioners that they had tried in vain to buy a license, and deserved a free one.

As for those who worry that the liquor license that they paid so dearly for may be worth nothing, given that a license can be had for free. I have just two words to say: taxi medallion.

The relatively new chairman of the commissioner, who was brought in in January 2016 to help clean up the licensing mess, doesn’t have a lot of sympathy for those who got stuck paying big bucks for a license.

[Nicole] Murati Ferrer made no apologies for past policies on issuing licenses, or the negative consequences for owners caught in the middle. She said the commission had no duty at hearings to inform owners of their options, and that people needed to seek information from the city earlier in the process.

Others think differently:

…some City Council members are sympathetic. In a statement in June, they said the city had been giving bad advice to restaurant owners about liquor licenses. They have even weighed possible reparations

Reparations! Wow! Sounds crazy, but I will note that one of the investigative reporters who worked on this story is Sacha Pfeiffer, who was one of the Spotlight Team members who exposed the Boston Archdiocese sex abuse scandal – a story that got made into the Academy Award-winning movie Spotlight. So I suspect there’s more to come on this story.

Again, Murati Ferrer isn’t shedding any tears, crocodile or otherwise, over the issue.

Commission chair Murati Ferrer, however, said the city bears no blame for failing to disclose all license options to restaurant owners. She suggested attorneys were at fault if their clients didn’t understand: “I think it’s shame on the lawyer.”

Caveat restaurateur and all that, but I think there’s plenty of blame to go around on this one. And I wouldn’t bet against more shoes dropping. (C.f., Sacha Pfeiffer)

Me? Why doesn’t Cambridge – or anyplace else: pick a city, any city – just rent the licenses? The cost of a lease might be flex-y, depending on what type of operation we’re talking about – white table-cloth foodie vs. watering hole. Moving forward, that would put everyone on pretty even footing. Except, of course, for those looking for reparations for the $450K they spent on a license when the joint next door got theirs for free.

Sounds like it’s time to lawyer up!