Wet Your Whistle in Montana
Editorial Note: Growing up in Montana my grandfather use to joke that how they determined if a town was a town in Montana was by two basic requirements: a post office and a watering hole. Somehow I don’t think he was talkin’ about refreshing his horse ! Since my grandfather was pre – Toby Keith, he wasn’t referring to ”Beer for My Horses”.
While Montana has big trout, big mountains, big skies, and some memorable local watering holes; owing a bar in Montana can offer some unique opportunities when it comes to ownership and operation of a business in light of recent economic conditions and why it may be a investment choice worthy of consideration in 2012 as you seek ROI (return on investment).
Although there are a number of types of licenses in Montana, the two most frequently used are the All Beverage with Gaming and the Beer & Wine with Gaming. Since the mid 80’s Montana has allowed holders of both types of licenses to operate a combination of up to 20 video poker & keno machines (starting in 2012, Video Line Games – “Las Vegas style Slots”) per license. The two major differences in the licenses are:
- All Beverage can serve full liquor as well as beer & wine whereas the Beer & Wine is limited to just beer & wine.
- A person can hold only one All Beverage in their name, but can own multiple Beer & Wine licenses.
In the mid 80’s when video gaming started, All Beverage Licenses in Billings were selling for around $100,000. In the larger communities in Montana (Billings, Bozeman, Helena, Great Falls, Missoula and Kalispell) license values began climbing to a point before the recession in 2008 when All Beverage Licenses were selling as high as $1,000,000. This increase was due primarily to gaming and the fact that each community is set up on a quota based on population which meant the market and availability dictated the value.
Why the increase? Gambling revenues for the state peaked in 2008 at $423 million gross income on 18,350 machines ($23,042/machine) which the State of Montana received 15% tax on amounting to over $63 million. Revenues had dropped to $349 million by 2010 and license values in Billings are currently running between $500,000 and $600,000.
Here’s how the numbers work. The key number on a 20 machine operation is the weekly Drop (the total amount of money going through the machines every 7 days). What is left at the end of each night is the Hold (the money left after all payouts have been made). This is the number that the State of Montana Taxes 15% of on a quarterly basis. The Hold fluctuates but for this example we will use 25%. Example: 20 machine drop @ $50,000 per week = $2,600,000/yr x 25% Hold = $650,000 Gross Revenue Less 15% State Tax ($97,500) = $552,000 Gross Profit for the license holder. If the license holder owns the machines, they keep it all. But, if the license holder uses a vendor, the vendor owns the machines and splits the Gross Profit with the license holder 80-20 to 60-40 (negotiable) with the larger % going to the license holder.
Drops around the state for 20 machine operations vary greatly from $25,000-$30,000 per week to a few at $75,000-$95,000 per week. To utilize the full potential of a license, successful operators serve beverages, food and operate a casino. In the case of a All Beverage License, you can operate a full bar, serve food and operate a 20 machine casino with each area providing it’s own income stream and profit center. Good operators can make a very good living by maximizing the potential of their license, keeping their costs in line and providing quality food, beverages and service.
To learn more about this subject and look at options to diversify your Bakken royalty dollars connect with Chuck directly through either his website or his listing in the Synergy Station Directory.
June 14, 2012 - 6:32 PM
I have always been amazed by how much you and your colleagues accomplish. And how well you serve your clients.
Brenda Segna