Question
A local restauranteur who had been running a profitable business for many years recently purchased a three-way liquor license. This license gives the owner the
A local restauranteur who had been running a profitable business for many years recently purchased a three-way liquor license. This license gives the owner the legal right to sell, beer, wine, and spirits in her restaurant. The cost of obtaining the three way license was about $90,000 since only 300 such licenses were issued by the state. While the license is transferable, only $75,000 is refundable if the owner chooses not to use the license. After selling alcoholic beverages for one year, the restauranteur came to the realization that she was losing dinner customer and that her profitable restaurant was turning into a noisy, unprofitable bar. Subsequently, she spent about $8,000 placing advertisements in various newspapers and restaurant magazines across the state offering to sell the license for $80,000. After a long wait, she finally received one offer to purchase her license for $77,000.
(a) Was her decision to advertise and ask for $80,000 a good decision, given that she could have decided to not use the license (essentially return the license to the state) and get a refund of $75,000?
(b) Should she accept the offer of $77,000 for her license?
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