On The Verge Of Liquor

Loudon liquor store 'uncharted waters'

Man working to build one of the first in county

Johnny James plans to break ground within weeks on land in the Center 75 Business Park that will be home to one of Loudon County's first liquor stores.

"It's uncharted waters for me," said the owner of James Body Shop and Wrecking Service.

James is the recipient of one of only two certificates of compliance issued by the city of Loudon. The certificates are necessary to seek a liquor store license from the state.

An August countywide referendum approved allowing liquor sales in the county as long as the liquor stores were located inside Loudon city limits.

Voters within the city of Loudon rejected the referendum. Nevertheless, the city had to follow the countywide mandate.

In what was sometimes a heated process, the city council had to determine who would get the certificates and rule on controversial issues such as distance from churches and schools.

"It's been a real experience," said Loudon City Manager Lynn Mills.

James said he has been trying to get up to speed on the liquor business. He found out this week that the 0.63-acre site in the business park would not be large enough to meet all zoning restrictions, so he must ask for a variance from the city council. If a variance is not granted he can meet codes by increasing the lot size to 0.67 acres. The sale of the enlarged plot would have to be approved by the county commission and the city council.

"I've hired a lawyer to help with some of the legal issues, but I've also been talking to friends who own liquor stores," he said.

His attorney, Loren Plemmons, was busy during the city council meeting in which the certificates of compliance were awarded.

Just minutes before the council was to decide which applicants would be granted certificates, Plemmons pointed out that one of the other businessmen competing for a license had not properly filed his limited liability company paperwork with the state.

The council was forced to drop the competing bid from consideration, Mills said.

The competitor eliminated from the selection process was local banker Ed Bell, who bankrolled the effort to put the liquor store issue on the ballot. All the applications had problems, Bell said.

Bell said he and his partners spent an estimated $50,000 to $60,000 marketing the liquor store referendum to Loudon County voters over two elections.

"Not one soul came to help us," Bell said. "After we did the work, there were a lot of people who wanted to take advantage of the opportunity."

Bell is still considering legal options and might even wait until the next election to put the issue on the ballot in Lenoir City.

Bell also was competing for the same piece of property at the Center 75 Business Park that James now plans to occupy. The Loudon County Economic Development Agency had offered both businesses an option on the land. Had the city council not rejected Bell's application, there might have been a battle over who had rights to the property.

James said he researched several business ideas over the past few years, looking for a profitable opportunity that wouldn't require a lot of his time to manage.

"I read economic reports on various businesses," he said. "Just about the only business sectors that have shown strong growth during the 2007 to 2008 period are alcohol and tobacco."

The biggest challenge was finding a location. "I must have looked at five locations," he said.

James decided on Center 75 because it had good access to the highway. Heading south on Interstate 75, there will not be another liquor store between his store and Chattanooga, he said.

The location also has easy access to Tellico Village via Highway 72, James said. During the August referendum, a large number of votes in favor of liquor stores came from Tellico Village.

James plans to build a 3,600-square-foot brick and metal building. The store, which will be called 72 Wine and Spirits, could be open as soon as July 1.

The total startup cost of the venture will be about $653,000, including permits, land, building and inventory. Initial inventory stocking costs could run $100,000 to $200,000, he said.

"I've been advised not to overstock," he said. "In the liquor business, if you buy it, you have to sell it or drink it."

If you buy it, you also have to pay the city of Loudon a tax on it, whether you sell it or not, said city manager Mills.

In addition to sales tax, laws also allow the city to charge "inspection fees" on all stocked inventory. Inspection fees are 8 percent on all inventory, with one-half percent going to the wholesaler and 7.5 percent going to the city, Mills said.

With the potential inventory going through two stores estimated at hundreds of thousands of dollars per year, inspection fees could generate tens of thousands of dollars or more in new revenue for the city each year.

The certificate for the second liquor store in Loudon was granted to James Purdy, CEO of Purdy Brothers Trucking in Loudon County. Purdy, who founded his trucking company 37 years ago, doesn't expect to have any trouble learning the liquor business.

"I don't think it will be that much different than any other business," he said.

Grove Wine and Spirits, which will be located in 3,000 square feet of existing commercial space on Grove Street close to the center of Loudon, should be open by May 15, Purdy said.

Purdy believes location will also be the key to his store's success. The number of people visiting the downtown has been growing, he said.

In addition to sales tax and inspection fees, the city of Loudon will get an added bonus, Purdy said.

Because the store is located inside the Courthouse Square Revitalization Act zone, the city will be able to keep all sales tax revenue that would have been paid to the state over the next year, he said. The money is distributed to business owners to make improvements in the area surrounding the courthouse square.