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City of Lakeville
Kenrick Liquor Store RFP and Strategic
Business Plan Review
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The Lakeville municipal liquor stores were established in 1934 as a means to control the
sale of alcoholic beverages while providing revenue back to the city. While control
remains the primary purpose for existence, Lakeville Liquors has grown into the largest
and most successful municipal liquor store operation in the state. Over the years, and
despite obstacles within the liquor industry including the opening of tap rooms, Costco
Liquor, Total Wine, Sunday sales and GASB legislation, the Liquor Department has
effectively navigated the operation with the guidance of the Lakeville City Council and
City Administration, placing approximately $1 million dollars annually back into the
community.
In 2019 we will exceed $16.1 million dollars in gross annual sales revenue, surpassing
last year’s sales by more than $900,000. Our continued success is vital to the City of
Lakeville and our ability to maintain one of the lowest tax capacity rates in all of Dakota
County.
The following pages provide a review of our operation.
History
LAKEVILLE LIQUORS HERITAGE:
The Heritage location opened June 1, 2000 after being relocated from a previous location
at the intersection of Dodd and Co. Rd. 50. This location has experienced an increase in
sales of 82.5% over the past 15 years.
ritage Drive:
Location: Hwy 50 and Heritage Drive
Opened: Opened: June 1, 2000
Sq. Footage: 8,960 sq. ft.
Ownership: Heritage Commons, LLC
Lease: Expires July 1, 2022
LIQUOR STORE HERITAGE STATISTICAL COMPARISON 1999 – 2009:
Gross % of Customer % of
Note Year Sales Change Counts Change
I 19 Est.$5,553,477 4.4%NA NA
2018 $5,320,523 7.4%212480 7.1%
H 2017 $4,954,869 5.4%198,375 5.9%
2016 $4,699,105 7.6%187,247 5.2%
F&G 2015 $4,368,113 -11.7%177,965 -8.3%
F&G 2014 $4,949,326 -1.7%194,070 -3.1%
E 2013 $5,032,576 3.1%200,266 1.8%
2012 $4,879,395 6.3%196,682 5.8%
2011 $4,590,325 0.6%185,880 2.0%
2010 $4,564,135 3.7%182,196 2.6%
2009 $4,403,161 2.9%177,602 0.8%
D 2008 $4,280,312 15.9%176,253 14.4%
2007 $3,693,822 8.0%154,110 5.6%
2006 $3,420,075 4.6%145,924 2.3%
2005 $3,269,919 8.1%142,651 1.3%
2004 $3,024,452 11.1%140,793 5.3%
C 2003 $2,723,287 4.3%133,765 -0.4%
2002 $2,612,056 10.6%134,306 5.1%
B 2001 $2,361,101 32.6%127,786 19.4%
A 2000 $1,780,558 8.6%107,019 25.7%
See next page for notable fluctuations affiliated with this location
Location Review
Notable fluctuations in operating revenue and customer counts can be attributed to the
following:
A. 2000 – Closure of Liquor Store #2 location on Co. Rd. 50 and 175th St.
B. 2001 – Relocation from Dodd Blvd and Co. Rd. 50 to Heritage Commons
C. 2003 – Implementation of age verification
D. 2007 – Opening of Cub Foods, October 2007
E. 2013 – Opening of Total Wine in Burnsville (September)
F. 2014 – County Road 50 Construction & Total Wine Competition
G. 2015 – County Road 50 Construction (Phase 2) and Total Wine Competition
H. 2017 – Sunday sales started July 1, 2017
I. 2019 – County Road 50 and Highview Roundabout and maximum sales per sq ft
surpassed losing efficiencies and customer traffic flow
LAKEVILLE LIQUORS GALAXIE:
Lakeville Liquors Galaxie is a city owned facility which was relocated from its previous
location at 161st St. and Cedar Ave in October 2007. The previous location was marketed
and sold to Paster Enterprises in January 2008. This location has witnessed growth of
61.4% over the past 15 years.
Location: Co. Rd. 46 & Galaxie Ave.
Opened: October 9, 2007
Sq. Footage: 11,243 sq. ft.
Ownership: City of Lakeville
LIQUOR STORE GALAXIE STATISTICAL COMPARISON 1999 – 2009:
Gross % of Customer % of
Note Year Sales Change Counts Change
19 Est.$5,566,266 5.7%NA NA
2018 $5,265,787 4.4%218723 2.7%
I 2017 $5,042,200 2.6%212,952 5.2%
2016 $4,914,642 4.0%202,394 -2.7%
H 2015 $4,725,946 -5.5%208,018 -2.2%
H 2014 $5,002,994 -2.0%212,705 4.1%
H 2013 $5,107,593 4.2%204,379 6.6%
2012 $4,903,066 7.1%191,799 0.0%
G 2011 $4,576,017 -3.9%191,799 -1.5%
2010 $4,762,960 0.6%194,779 -1.4%
F 2009 $4,735,936 -2.9%197,599 -3.1%
E 2008 $4,877,772 15.7%204,010 5.2%
2007 $4,216,861 5.9%193,959 3.4%
D 2006 $3,982,633 5.6%187,577 2.3%
C 2005 $3,770,945 9.8%183,304 5.4%
2004 $3,433,154 6.2%173,873 1.9%
B 2003 $3,232,709 5.7%170,673 0.9%
2002 $3,058,646 6.3%169,179 2.8%
A 2001 $2,876,449 13.5%164,542 9.8%
2000 $2,535,084 3.0%149,837 -3.2%
See next page for notable fluctuations affiliated with this location
Notable fluctuations in operating revenue and customer counts can be attributed to the
following:
A) 2001 - Closure of Liquor Store #2 location on Co. Rd. 50 and 175th St.
B) 2003 - Implementation of age verification
C) 2005 - Opening of Kowalski’s Market
D) 2006 - Closing of Kowalski’s Market
E) 2008 – Relocation from Cedar Ave. to Galaxie Ave,
F) 2009 – Opening of Apple Valley Liquors on Pilot Knob
G) 2011 – Cedar Avenue construction
H) 2013-2015 – Total Wine opening September 2013
I) 2017 – Sunday sales started July 1, 2017
LAKEVILLE LIQUORS KENRICK:
Lakeville Liquors Kenrick opened in November of 1997. This location was sold in April
of 2018 for $2.3 million dollars with a lease back of 20 years. Despite this being the
location most impacted by the opening of Total Wine in Burnsville, this location
observed an increase of 20.3% over the past 15 years.
Location: Cty. Rd. 46 and Kenrick Ave.
Opened: December 4, 1997
Sq. Footage: 9,714 sq. ft.
Ownership: City of Lakeville
LIQUOR STORE KENRICK STATISTICAL COMPARISON 1999 – 2009:
Gross % of Customer % of
Note Year Sales Change Counts Change
J 19 Est $5,078,515 8.3%NA NA
I 2018 $4,688,300 2.22%187,567 -0.08%
H 2017 $4,586,455 1.59%187,715 0.84%
G 2016 $4,514,768 0.20%186,148 -1.65%
G 2015 $4,505,855 -8.51%189,269 -5.33%
G 2014 $4,925,236 -6.04%199,930 -3.71%
G 2013 $5,241,848 -3.46%207,623 -6.69%
2012 $5,429,560 4.47%222,511 4.09%
F 2011 $5,197,167 -4.21%213,778 -3.64%
F 2010 $5,425,746 -0.53%221,855 -0.23%
E 2009 $5,454,920 3.31%222,371 3.35%
D 2008 $5,279,979 3.47%215,162 1.52%
2007 $5,102,956 8.38%211,938 6.83%
2006 $4,708,553 6.04%198,393 1.89%
2005 $4,440,224 9.16%194,713 5.23%
2004 $4,067,694 4.34%185,032 0.26%
C 2003 $3,898,679 1.94%184,545 -3.29%
B 2002 $3,824,391 3.02%190,829 -0.91%
A 2001 $3,712,255 54.12%192,582 48.45%
2000 $2,408,617 6.91%129,731 1.87%
See next page for notable fluctuations affiliated with this location
Notable fluctuations in operating revenue can be attributed to the following:
A) 2001 - Closure of Liquor Store #2 location on Co. Rd. 50 and 175th St.
B) 2002 - Closure of Kenrick Ave. to the north for sewer improvements
C) 2003 - Implementation of age verification
D) 2008 – Opening of Galaxie Liquor Store
E) 2009 – Opening of Brunswick Zone
F) 2010 – 2011 - 35W two-year construction project
G) 2013 – 2016 Total Wine Open September 2013
H) 2017 - Sunday sales started July 1, 2017
I) 2018 – Kenrick parking lot construction
J) 2019 – Parking lot revisions, lack of construction
Page 58 of the Shenehon study recommended that sales per square foot in a retail liquor
environment should not exceed $495.14 per square foot.
From 36 years of history within the liquor industry and in consulting for cities both large
and small, the Liquor Operations Director created a threshold capacity of $600 per square
foot. This standard has also been adopted by MMBA as well as many national retailers.
Using either threshold:
• The Heritage location will exceed both of them this year, creating obstacles for
growth.
• The Kenrick location by the end of 2019 will surpass the Shenehon standard and
will surpass the MMBA standard in an estimated 4-5 years.
• The Galaxie location was constructed in 2007 with the goal of not exceeding the
$600 per square foot threshold for 15 years. In it’s twelfth year of operation, this
location will surpass the Shenehon threshold this year and will surpass the $600
per square foot threshold within the next 3 years.
The effect of a store exceeding capacity includes customer dissatisfaction, overcrowded
parking lots, limitations on product selection, and most importantly a reduction in gross
profit, net income and potential increases in worker comp claims.
Sales History Per Square Foot by Location
Sales Per Sq. Ft.
As stated previously, two developers responded to the RFP; APPRO Developments and
Loeffler Construction and Consulting. Summary of these proposals are as follows:
APPRO Proposal 1:
• The City of Lakeville would donate the land required for the liquor Store site to
them free of charge and APPRO would construct the building.
• Building would be leased back to the city at $14.75 per square foot.
• The City would pay additional CAM charges and any property taxes.
APPRO Proposal 2:
• APPRO Development would purchase the necessary land for the liquor store site
for $10 per square foot and would construct the building.
• Building would be leased back to the city at a rate of $20.86 per square foot.
• The City would further be required to pay CAM charges and any required
property taxes.
APPRO did not express any interest in developing the remainder of the property under
either scenario.
Loeffler Proposal:
• Loeffler would purchase approximately 2.5 acres to develop the site at $10 per
square foot.
• They would construct the liquor store and lease it back to the city at a rate of
$31.55 per square foot with 1.5% annual increases after the first year.
• The city would be required to pay CAM charges and any required property taxes.
• In addition, they would require one month of rent to be held as security for the
term of the lease.
• The Loeffler proposal also includes a $360,000 allowance for tenant
improvements including coolers, shelving and items beyond the scope of
constructing the shell of the building.
• They also requested a two year first right of refusal to develop the remaining
property.
Budget Exercise:
For the exercise, we utilized the first-year sales projections from the Shenehon report, we
prorated utilities based on the size of the building and increased personnel by 25%, less
those positions within office administration which would remain constant.
While there are additional details to determine the best interest of the city such as
construction expenses and others, the following budget exercise was completed to
determine the impacts on the liquor operations if the city moved forward with the
proposals from APPRO Development or Loeffler Construction:
Proposal Review
In reviewing the Shenehon market study, the proposals submitted in response to the RFP
and the municipal liquor operations data, staff has concluded the following:
• The proposed budget exercise demonstrates that under any of the lease terms
provided by Loeffler Construction or APPRO Development there would be a loss
in net operating income of 30-54%.
• The sales capacity of each of the existing stores is reaching, and in some cases,
exceeding capacity. If a new location is not constructed to pull some customers
away from the existing locations, other investments will need to be made into
those stores to insure continued growth.
• The Shenehon study indicates the market is ready for a fourth liquor store and the
Keokuk property is the optimal location for the successful placement of the store.
• The fourth liquor store would also serve as a protective measure against
legislation such as single beer licensure, allowing the city flexibility to buy in
larger quantities to obtain optimum pricing and dealer incentives.
• Lakeville Liquors has recovered from the increased competition and changes in
legislature and is demonstrating tremendous growth that is anticipated to continue
into the future.
Options to consider:
1. Accept one of the proposals for private development of the site and move forward
with negotiations.
2. Reject the two proposals for private development of the site and delay
constructing a fourth liquor store until some future date and pursue other avenues
to alleviate the overcapacity issues at the other existing locations.
3. Reject the two proposals and begin to prepare construction estimates for a city
owned and operated 12,500 square foot liquor store for Council consideration in
early 2020. The undeveloped portion of the property would be retained for future
development as a pad ready site.
Liquor Committee:
The Liquor Committee reviewed the above information and the proposals received from
the RFP and recommend the City Council reject the two proposals and begin the process
to construct a city owned 12,500 square foot liquor store to be operational in 2021. The
Liquor Committee also recommends the undeveloped portion of the property be retained
and marketed separately for future private development.
Conclusion