How to establish / open a liquor store in Gauteng,
South Africa

The intention of this exercise is to assist the first time Liquor Store entrepreneur to note some factors which might influence his/her decisions when establishing a new Liquor store. The intention is NOT to give legal or financial advice. All information is available for the entrepreneur to use at his / her own discretion and risk and Frik Liebenberg Business advisory services cc does not except any responsibility whatsoever for losses which the entrepreneur may occur when using this information. This information is by no means comprehensive and must be adjusted to suit specific situations and to suit provinces other than Gauteng.

Opening a new Liquor Store is an exciting venture but not without risk. Before you jump in and start spending money on your new venture, stop and read these few pointers that may save you money and loads of frustration.
The question is often asked “Where do I start?

1. SAPS Clearance

2. Premises.

You need a premises before you can even apply for a Liquor License. The public area must not be less than 50m2. The ideal is that your premises is +500m or more from a church, school or similar business. However this is not always possible. Do not start spending money on renovating the existing building or start building a new building or sign a lease contract on the building before you have cleared the following:

• Visit your local Municipality’s Town Planning or Land Use department and confirm with them that the premises or stand that you want to use are suitable for a Liquor Store. (You need the ERF number of your premises)

5. Start planning your shop

It is not a good strategy to be the cheapest in town and never start a price war!

• Decide on your product strategy. The type of products you will sell depends on your target market’s income. Initially and before start up it is difficult to know for sure what products are fast movers, however you can talk to other dealers who are outside your influence area. Establish the fast moving stock and list them.

Unfortunately you can not only stock fast moving stock. Some stock should be kept as a service product to customers who are seeking alternative products. Your shop should be well stocked and must look successful. Do not allow partly stocked shelves but rather reduce the number of shelves. Keep them stocked to the brim. You can achieve this by moving your beverage coolers forward to reduce the initial floor space and removing some shelves.

• Diversify. If you want to stock products other than liquor and smokers requisites, you need to apply to the liquor board to stock such items. Examples are rugby shirts, flags, biltong, braai equipment and other paraphernalia.
• Initially stock high priced items such as exclusive wines and whisky with care. Keep a low stock of it until you have established the demand for it.
• Compile a Suppliers List with alternative suppliers. Your purchases can influence your profit margins dramatically. Shop around for better deals. Your relationship with your suppliers is critical. Try to line up alternative suppliers where possible. This should include refrigeration mechanics, electricians etc.

Some suppliers offer a percentage discount on bulk/case purchases. Buy all your fast moving stock from them. The slow moving stock can be purchased elsewhere and in smaller quantities.

• Decide on an Employment Strategy. Many successful businesses have failed because of employees. Take note of the following:
• Do not employ anybody to do the work that you can do.
• Work out your budget and cash flow before you employ anybody. It is not fair to an employee if you inform them soon after you employed them that you can not afford them.
• Do not trust anybody. Ensure strict financial an stock control. Do your own buying and stock control. Ensure that your employees have no access to the Point Of Sale systems manager’s files. You as the owner must enter all stock delivered into the computer program and NO staff member may have any access to that program.
• Follow up the applicant’s previous employees and get a reference.
• Follow up the applicant’s qualifications.
• At least one male must be employed as a “customer service” person. He will assist the customers in finding their purchase required by the customer, but he is actually there to observe for shoplifters or security threats. He will be equipped with a remote panic button which is connected to an armed response alarm. A liquor store is less busy on Mondays than Fridays and Saturdays. You can plan the number of staff and their working hours accordingly.
• Draw up disciplinary procedures for the employees. If an employee is found guilty of theft, do not only dismiss the person. Lay a criminal charge against that person and prosecute. Otherwise the person moves to a new liquor store and repeat the the same.
• Insurance cost. Some lease contracts requires the lessee to insure for shop- front windows and other breakages. Also insure the Stock and Equipment.
• Register with the Receiver of Revenue such as Income Tax, Employees tax (PAYE), Value-added tax (VAT) if applicable, Unemployment Insurance Fund (U.I.F.)
• Apply for a Business License (if applicable) at your local Municipality.
• Appoint a registered accountant. Seek advice from your accountant on VAT registration and tax issues. You can save substantial amounts of money by using professionals.
• Decide on your business hours and stick to it. Advertise it at the entrance of the shop. You should keep in mind the security aspect inside and outside the shop, and taking into account the surrounding shop’s closing times.
• Decide on the legal entity of the business such as a Sole Proprietor, Company (Register the Company) or partnership (Draw up a partnership agreement).
• Banking. Negotiate with different banks the Cash deposit fee charged by that bank. (Cash deposits can attract huge bank charges) then open an account.
• Order your stock. There is a direct correlation between the stock holding and the turnover, but only up to a point. If you open a self service Liquor store and your stock is less than R150 000 to R200 000 (in 2014), then it is unlikely that your liquor store will survive. If you open a counter service liquor store then you can get away with R70 000 worth of stock. Decide on Minimum / Maximum stock levels and re-order levels of your stock.
• Credit card machine. Negotiate with your bank for the installation of a credit card machine.
• Before opening buy an advertorial in the local newspaper with opening specials. Limit the specials both by quantity and time period.
• Ice sales can initially be achieved by selling ice purchased from suppliers. Once your business is established you can consider an ice making machine.

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6. Budget

Work out a Budget. Without a Budget you can fail before you opened your doors. Remember to budget for the actual and hidden cost which are listed but not limited to the following:

• Cost of the Liquor License Application.(± R13500 in 2014)
• Cost of your first payment to the Liquor Board on approval of the Liquor License. ±R1500 in 2014)
• Rent deposit.
• First months rent in advance.
• Cost of stock.
• Electricity deposit.
• Painting and renovating the shop.
• Tiling the shop floor. (if required)
• Lighting and wiring. (if required)
• Burglar bars and safety gates.
• Alarm system and camera system.
• Signwriting.
• Stationary, printing etc.
• Cost of equipment, furniture and fittings plus installation.

• Cost of electrical installation of equipment
• Cost of Point of Sale system and software.
• Plumbing. (if required)
• Trading License.
• Computers and software.
• Employment contracts.
• Cleaning material and equipment.
• Transport. (initially you can survive with a trailer)
• Cost of rent while waiting for the Liquor License.
• Installation the alarm system
• Installation the turnstiles.
• Packaging material.
• Telkom line.

Some notes on a Liquor Store

Make sure that the electrical distribution board of the shop you have decided to rent have the capacity to carry the electrical load of your equipment. Your lease contract may have a clause placing to onus on the tenant to ensure that the shop is suitable for your purpose. They will not rewire the electrical distribution board.