Wednesday, January 28, 2009

Washington Will LOSE Money With New Liquor Stores

Our governor here in Washington, Christine Gregoire, has come up with a wonderful new plan to raise additional money for the state government to squander. She's decided to open up to ten more state run liquor stores. Unfortunately The "Gov" must have skipped classes when she took economics, or maybe just never took the class at all.

Here's the deal: In Washington we have roughly 320 liquor stores. Half of them are run entirely by the state liquor control board, with state employees. The other half of the stores are officially called Contract Liquor Stores and are run by private citizens very similar to a franchise operation. The state provides them the inventory, and the contract store gets a percentage of the gross sales. Regardless of the size of the contract store or their sales volume, the State always makes money, since all operating costs, rent, payroll, etc., are paid by the store owner, not the state.

Overall, considering all the liquor stores together, they show a positive income for the State. However, and it's a big however, the State run stores barely break even, or lose money, but the contract stores all make money, some more than others, but all are profitable by the nature of the contract.

The governor has decided that to bring in more money, she would authorize and open up as many as ten more STATE stores. Assuming that the total amount of liquor purchased, regardless of the type of store for the purchase, is a constant for any given year. The argument that more liquor store will produce more liquor consumption may be true, but the change overall will likely be fairly small.

If you open more stores, their sales will have come from sales that would have been made at another liquor store at some other location. So we have two possibilities. First, the sale otherwise would have been made at another State run store. Net financial gain: ZERO, and additional operating costs have been incurred to run the new store. Bottom line then is the State LOST money on that sale.

The second possibility is that the sale otherwise would have occurred at a Contract store where the state would have received a guaranteed profit from the transaction. By moving this sale to one of the new State run stores the profit from the sale, if any, will be greatly reduced.

In short, there is no way that new State run liquor stores will increase the State's liquor control board's revenues. What the new stores would add is more State employees. Did I mention that the State store employees are unionized?

What the governor SHOULD do, which would increase liquor control board revenues and reduce costs at the same time is obvious. Convert ALL of the State run store into Contract stores and let private enterprise take over.

That would reduce the number of State employees, however, so that will never happen..................



At Saturday, January 31, 2009 8:10:00 AM, Anonymous Anonymous said...

Your assuming that a dimocrap who was put in her position through an outright fraudulent vote-c0unting proceedure CAN do simple math.

At Friday, October 16, 2009 12:21:00 PM, Blogger Steven Frable said...

If you want some numbers to support your theory that an increase in licenses won't do anything, please read my post! You won't be disappointed.

P.S. After doing some light Googling on this subject, I came across your blog. Good work, keep it up!

At Wednesday, January 27, 2010 11:51:00 PM, Blogger Travis Pahl said...

Having the state contract out their stores is NOT the free market. What they should do is elliminate the state liqour control board and allow free enterprise to return to the liqour market.


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