Avoiding Interlocking Business Prohibitions in Pennsylvania Liquor Licensing

Daniel C. Conlon, dconlon@tuckerlaw.com, (412) 594-3951

Navigating Pennsylvania’s strict 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:

1. Manufacturing Licenses: Breweries, wineries, and distilleries.
2. Wholesale Licenses: Beer distributors and importers.
3. Retail Licenses: Restaurants, hotels, and clubs.

According to Sections 411 and 443 of Pennsylvania’s 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. 

What is an Interlocking Interest?

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 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.

How the PLCB Spots Interlocking Interest

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.

Also, every license transfer investigation includes a review of the source of funds used to acquire the license:

• The PLCB requires applicants to disclose the names of all individual investors or donors contributing funds for the license acquisition.
• Investors must submit personal identifying information and may need to interview with a PLCB investigator.
• Applicants must report any indirect interests in conflicting license classes.

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 while leasing property to a restaurant 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 their interest in the wholesale business.
• In some cases, restructuring ownership may resolve the conflict.
• If no resolution is possible, the liquor license application will be denied.

Protecting Yourself with Contingency Lease Clauses

To avoid financial or legal risks, applicants should include a contingency clause in their lease agreements and license purchase agreements. This clause should state that the agreements are 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.

Need Help with Your PLCB Liquor License Application?

Navigating interlocking business prohibitions requires careful planning and knowledge of the law. Our team specializes in Pennsylvania liquor licensing laws and can guide you through every step of the application process.

Contact one of our attorneys  today to ensure your application proceeds smoothly and your business stays compliant with PLCB regulations.