Priced out: How Boston’s broken liquor license system drives chefs from the city

When Boonnak thought up Mahaniyom four years ago, he had a startup budget of $300,000. He initially wanted to open his restaurant in South Boston, his onetime home after migrating from Thailand. But Boonnak also wanted a permit to serve alcohol. Boston — up against a stringent state-mandated cap — had none to give out, and buying one off another restaurant on the secondary market, as is the norm, would have cost twice his entire budget.

So Boonnak headed to Brookline Village, where he acquired a license for an annual fee of around $4,000.

When he looks back at the city today, he sees other young chefs fleeing for greener — which really means cheaper — pastures, while most of the new restaurants that do open in the city are backed by deep-pocketed investors. What else can you expect, he said, when the right to pour an old fashioned in Boston proper runs you $600,000?

“We’re just keeping the rich rich and making the poor poorer,” he said.

There is no official count of how many restaurateurs have left Boston for someplace they can secure a cheaper liquor license. But ask around, and people in the industry guess that dozens, at the least, have decamped for various neighboring cities, the suburbs, or foodie outposts all over New England.

Consider the consequences of that exodus. The sky-high cost to serve booze constricts the city’s restaurant landscape, which, in turn, means fewer opportunities for everyday consumers and aspiring restaurateurs alike. It sparks hard questions about who has the privilege of running a small business here, and who is shut out. And it lessens the city itself, made dimmer by the absence of both inventive cuisines and intimacy restaurants often offer.

What it comes down to is a math problem. The economics of opening a restaurant rarely work in Boston when the cost of obtaining a liquor license is taken into account. Food industry margins are notoriously thin and are only sliced thinner by the exploding cost of ingredients. Hiring the experienced waitstaff who provide the type of hospitality that customers often consider as important as what is on the plate takes another hefty chunk of revenue. The money from a $34 entree flows to many hands, from the chef who created the recipe, the cooks who prepared it, the manager overseeing your evening, and the host who seated you.

One reliable profit center is booze. Markups on beer, wine, and liquor are substantial and can spell the difference between a restaurant making money or losing it. But in Boston, selling alcohol requires enough cash to buy a license, usually for hundreds of thousands of dollars. This favors corporate concepts: 300-seat steak-and-seafood spots, tourist joints, and sports bars. Independent restaurants — often far from the well-trod paths of downtown and the Back Bay — cannot count on the foot traffic to pay off a pricey license.

Still, many cooks who got their start in Boston kitchens are eager to stay in the city where they understand the culture of neighborhoods, the expectations of customers, and the personalities of potential investors.

That is all Juan Pedrosa wants. Formerly a chef at Yvonne’s and Lolita Cocina & Tequila Bar in Boston, Pedrosa left for Laconia, N.H. — where he paid $900 for a liquor license — during the pandemic to open Bar Salida. It was a success, and Pedrosa said he was able to pay down his debt within a year before deciding to close on a high.

Now the Waltham native dreams of seeing his name printed in small type at the bottom of the menu of a restaurant in Boston, not New Hampshire.

“The people willing to bet on me are in Boston,” Pedrosa said. “But ask yourself: Is it really worth me trying to muster up a million bucks? Two million bucks?“ Pedrosa asked. “Because at the end of the day, it’s a restaurant, and we have a ridiculously high rate of failure. Doing something about the liquor license system could make the odds that we succeed a little better.”

Small businesses that do chase the dream of operating a restaurant can be pushed to scrape together funds from family and friends, take out a second mortgage on a home, or sign onto a loan akin to the cost of a college education.

To launch her wine bar Dear Annie, Lauren Friel made a go of it without bank loans or investors. “Not a bone in my body” considered Boston, said Friel, who opened in Cambridge’s Porter Square in 2019. And she stayed frugal: Many of the chairs, pillows, and poufs came from IKEA, the walls decorated with colorful art from second-hand stores. Customers pay for drinks and food at the counter upfront, which lessens the service costs by a smidge. No more than 30 people can fit in the whole place, with an additional 35 seats outside in the warmer months.

“Dear Annie was — is — a risk, between our service model and the style of our dining room,” Friel said. “We were able to do that because we weren’t half a million dollars in debt the day we opened those doors.”

It’s no accident Dear Annie opened in Cambridge, where Friel could get a liquor license directly from the city for a $7,000 annual fee.

Launching her second spot, Rebel Rebel in Somerville, was even easier. She opened under a shared liquor license that applied to multiple eateries within Bow Market in Union Square.

Some take that as a sign that other towns have caught up to what restaurateurs need in a way that Boston has not.

Brookline only charges restaurants between $2,000 and $4,850 a year for their licenses, depending on the type of permit and the closing time, and the fee structure in Somerville is similar. Multiple chefs told the Globe those licenses are granted easily, unless there is significant opposition from neighbors.

In some ways, the differences are natural. Brookline is far smaller than Boston, and while it, too, has a state-mandated cap — 115 licenses, compared with 1,200 in Boston — it has never quite been reached. Brookline is also frankly of less concern to the state Legislature than Boston with its 700,000 residents, high-profile venues, and seasonal onslaught of tourists.

Cambridge, too, has loosened its rules, even if doing so involved some pain. Its state cap ended in the early 1980s following a bill that allowed municipalities, except Boston, to opt out of the quota system, but the city imposed caps in some neighborhoods until 2016. Restaurateurs who had paid up to $450,000 to buy a permit before the change saw their assets devalued, and a rift emerged between chefs who had paid up for a license and those who leaned on a well-connected group of attorneys to obtain one for free.

But today, that strife is in the past, and peace has helped an egalitarian and diverse lineup of restaurants bloom. Kendall Square benefited from an influx of permits that helped bring life to its streets, whereas before, the neighborhood was “just a fledgling of itself,” said Will Gilson, owner of Puritan and Co. and three places in Cambridge Crossing.

And in Porter Square, Friel of Dear Annie feels surrounded by small businesses with deep roots — One Ramen, Chivo Taqueria, and the Chinese spot Chagso — run by “people we know.”

“In Boston proper,” Friel said, “the national restaurant chain is your neighbor.”

Keeping costs low tamps down the menu sticker price, attracts a greater diversity of customers, and allows chefs to pay employees enough to live in a city already ravaged by an affordability crisis, said Emily Isenberg, a creative consultant who works on revitalizing public and private space across the region. “Those are people we need to keep Boston alive,” she said.

But what seems like a simple concept can prove difficult to bring to life.

Maya Mukhopadhaya, a 35-year-old Jamaica Plain resident, for example, spent the past year searching for locations both in Boston and surrounding towns, aware that the liquor license would likely stand in the way. Ultimately, she found a workaround, buying Espresso Yourself on Centre Street in Jamaica Plain for $200,000.

Her dream is to transform the space into a coffeehouse by day and wine bar by night, complete with bottles from faraway places and snacky accompaniments. She plans to keep the spot afloat with profits from the coffee shop until a restricted license for Jamaica Plain becomes available. But who knows when that will be?

“Getting approved is not the hard part, but then you idle in a waiting list,” Mukhopadhaya said. “No one knows when one will become available. That is the step that feels out of my hands.”

All the impediments to new dining spots and rising chefs can make Boston feel, well, boring.

Rachel Miller, chef-owner of Nightshade Noodle Bar in Lynn, talks effusively about other American cities, where restaurants with signature dishes and imaginative menus rack up renown and James Beard Awards. Boston comes up short, largely because the local food scene puts investors first, and menus second, Miller said. Diners are searching for restaurants with good stories and precise flavors, and we too often fail to deliver.

“That does not make for a compelling food scene,” she added. “It makes for complacency.”

She escaped the cycle by leaving Boston for downtown Lynn, where she opened Nightshade with pennies to spare, using her savings and a $115,000 loan from the City of Lynn and doing much of the grunt work — installing floors and light fixtures — herself. Each item Miller serves is carefully crafted over months before appearing on her prix fixe menu. Her profits are her own, as are any losses.

“I just refuse to play the game,” she said.

So does Boonnak. He recently decided to expand and open a Thai-inspired “high dive” bar, Merai, on Harvard Street, a couple blocks from Mahaniyom in Brookline Village. The landlord gave him a deal on the space, and the liquor license came through at lightning speed from Brookline Town Hall.

“Everything fell into place. I would say it’s luck,” he said. “I don’t think I would get that lucky in Boston.”

Diti Kohli can be reached at [email protected]. Follow her @ditikohli_.