Every restaurant or bar in Massachusetts that serves alcohol must hold an on-premises liquor license.60 Under MGL c. 138, §17, the Commonwealth allocates on-premises liquor licenses to most municipalities through a population-based quota formula overseen by ABCC. LLAs decide whether to issue licenses within that statutory limit, subject to ABCC review and approval. Across responses to the stakeholder survey, concerns about the quota system were the single most-discussed topic in open-ended responses, appearing in 37% of responses.61
The quota formula sets how many on-premises licenses a municipality may issue based on its population according to the most recent federal census. First, the formula allocates to each quota municipality62 one All-Alcohol license for every 1,000 residents (or fraction thereof, meaning a partial count, whether 1 or 999, is counted as a whole 1,000).63 Second, when the population of a municipality exceeds 25,000 residents, the formula allocates one additional All-Alcohol license for every 10,000 residents (or fraction thereof) above 25,000.64 For example, Andover, with 36,485 residents, is allocated 39 all-alcohol licenses, calculated as follows:
- one All-Alcohol license per 1,000 residents: 36,485 residents, rounded up to the next 1,000 (37,000 residents), divided by 1,000 = 37 All-Alcohol licenses; plus
- one additional All-Alcohol license per 10,000 residents above 25,000: 36,485 residents – 25,000 = 11,485, rounded up to the next 10,000 (20,000 residents), divided by 10,000 = 2 additional All-Alcohol licenses.
Regardless of population, each quota municipality is allocated at least 14 All-Alcohol licenses.65
With respect to Wine-and-Malt licenses, the formula allocates to each quota municipality one Wine-and-Malt license for every 5,000 residents (or fraction thereof, meaning a partial count, whether 1 or 4,999, is counted as a whole 5,000).66 Andover is allocated eight Wine-and-Malt licenses, calculated as follows:
- one Wine-and-Malt license per 5,000 residents: 36,485 residents, rounded up to the next 5,000 (40,000 residents), divided by 5,000 = 8 wine-and-malt licenses.
Regardless of population, each quota municipality is allocated at least 5 wine-and-malt licenses.67 (See Figure 6 for an on-premises quota formula calculation visualization.)
This Finding examines the mismatch between license supply and demand, resulting from the state-imposed population-based quota formula. This study’s analysis of license utilization demonstrates the disproportional impact of the formula on quota municipalities of varying populations.
There are 64 quota municipalities that face artificial license scarcity created by the state-imposed population-based quota formula.
The population-based quota is a crude instrument: It sets each municipality’s license ceiling from resident headcount alone and ignores other conditions repeatedly identified by interviewees and survey respondents as driving local demand. Chief among them are seasonal and tourism populations—municipalities in which the service population swells far beyond their resident count for part of the year. In the survey, 21 respondents—many from Cape Cod (e.g., Dennis, Truro, and Wellfleet), the Islands (e.g., Edgartown and Nantucket), and coastal communities (e.g., Rockport)—cited tourism or seasonal populations as a factor the formula misses.68
A municipal official from the Town of Lee, with a resident population of 5,694, in Berkshire County, described exactly this mismatch: “The quota doesn’t really take into account our seasonal population. Just one timeshare resort almost doubles our population in the summer, and that’s not taken into account.”69 Lee is one of the 26 local-control municipalities,70 so it can issue licenses to accommodate a fluctuating population. Quota municipalities experiencing fluctuating populations due to tourism must address demand with exception licenses71 when allocated licenses are insufficient. Salem, for example, a quota municipality in Essex County, with a resident population of 44,744, but which draws over 1 million visitors annually in October,72 is allocated 47 All-Alcohol and 9 Wine-and-Malt licenses under the quota formula. As the formula counts only year-round residents, not the visitors who fill restaurants and hotels during peak tourist season, a municipality’s license allocation bears no relationship to the demand it actually serves at peak times. Salem has had to resort to pursuing 20 exception licenses to meet demand, including 13 obtained via special legislation.
Respondents also cited other factors such as the regional commercial draw of districts serving a larger trade area; transit-oriented downtowns that generate after-hours foot traffic; and redevelopment that creates demand ahead of measured population growth.73 Other respondents described businesses moving to neighboring municipalities or states when supply is capped, or being priced out of high-demand commercial districts.74 In the DLM survey, these accounts came disproportionately from respondents in municipalities that were already at or above their § 17 quota. A municipal official in Watertown (issued 26% more licenses than the quota formula allocates, including special legislation and other exception licenses) called the system “inherently unfair, especially for an urban community” that “has chosen the path of economic development,” adding that “restaurants are a key element of creating vibrant commercial districts, and you cannot open a restaurant without a liquor license.”75 A Foxborough official (issued 92% more licenses than the quota formula allocates, including special legislation and other exception licenses) reported that “cost is not the issue,” it is “the limit” that constrains development; and a business owner in Fitchburg described “a city on the rise” with “lots of opportunities for new eating establishments” held back by limited license availability.76
To measure whether the quota allocation matches demand, this study examined how much of each quota municipality’s license allocation is actually in use. License utilization is the share of a municipality’s allocated on-premises licenses that have been issued to license holders.77 A municipality that has been allocated 20 licenses, and that has issued 10, is at 50% utilization; one that has issued all 20 is at 100%. Licenses granted by special legislation or other exceptions sit outside the allocation and are not counted here; the license utilization measure reflects the formula alone.
Because a single statewide average would minimize the differences between municipalities, this study sorted the 302 quota municipalities into the four following bands, based on their utilization rates:78
- Underutilizing (below 50%)—fewer than half of allocated licenses issued; substantial unused capacity
- Moderate (50–79%)—more than half issued, but room remains
- High (80–99%)—nearly all issued; few or no licenses left for prospective licensees or larger economic development projects
- At or over quota79 (100% or more)—every allocated license issued.
Municipalities in the high and at or over quota utilization bands (above 80% utilization) are classified in this report as constrained municipalities.
Figure 10 below maps license utilization across the Commonwealth.
Figure 10. On-Premises License Utilization in Quota Municipalities
Figure 11 below shows how the 302 quota municipalities and the remaining available licenses held by those municipalities are distributed across the four license utilization bands.
Figure 11. On-Premises License Utilization and License Availability
The contrast is sharp. At one end, 139 underutilizing municipalities (46.0%) are holding 2,173 unused licenses (58.3%), and the 99 moderate municipalities (32.8%) are holding 1,293 unused licenses (34.7%). At the other end, the 64 constrained municipalities (21.2%) hold only 263 unused licenses (7.0%) among them, with 12 holding none at all. Because the formula considers a single factor—population—license supply does not align with demand. This illustrates the supply and demand mismatch of the state-imposed population-based formula.
License constraint impacts 64 quota municipalities (21.2% of quota municipalities) but affects 41.6% of quota municipality residents (36.2% of the statewide population).80
In other words, approximately 2.5 million people across the Commonwealth live in municipalities with economic development impacted by license scarcity.
Figure 12. Quota Formula Affects Approximately 2.5 Million Residents in Constrained Municipalities
The net result of the supply and demand mismatch is that unconstrained municipalities have 9.4 times the number of remaining on-premises licenses available per 10,000 residents than constrained municipalities, creating accessibility and financial barriers to entering the market for small business owners. For instance, a Cambridge restaurant owner described being “invited to go to the Seaport and take a property, but there’s no way I could have afforded the license plus the buildup”— a direct consequence of what he called the “artificial scarcity created by a system that, frankly, is now archaic.”81
Figure 13 on the next page shows the contrast in license availability between the 10 constrained and unconstrained municipalities with the most remaining available licenses, sorted by population size.82
This comparison illustrates that municipalities of similar population have vastly different license utilization rates.
Waltham (64,477 residents, 99% utilization) has one on-premises license available, while similarly sized Malden (65,133 residents, 52% utilization) has 41. Salem (44,744 residents, 98% utilization) has one on-premises license available, while Arlington (46,111 residents, 48% utilization) has 31. These pairs show directly why population alone is not a sufficient measure of demand: The formula treats Waltham and Malden, and Salem and Arlington, nearly identically, yet one municipality in each pair has exhausted its allocation while the other has a significant number of licenses available.
Figure 13. Constrained and Unconstrained Municipalities by Available Licenses83
Constrained municipalities share common characteristics. They tend to be larger population centers with higher densities.84 They have well-established commercial districts, strong hospitality sectors, tourism economies, or lively restaurant scenes that sustain robust demand for on-premises licenses.85 Examples include Boston (98.7% license utilization),86 Waltham (98.8%), Salem (98.2%), Holyoke (98.0%), New Bedford (93.9%), Brookline (93.8%), and, among towns, Chatham (100%) and Hadley (89%).87
Somerville illustrates how far license demand can outrun the quota formula. In 2015, the city only had 5 available licenses.88 In its home rule petition filed that same year, Somerville sought 65 additional on-premises licenses to ease the constraints on restaurant and commercial development, demonstrating that the quota formula does not support demand driven by factors other than population.89 The Legislature ultimately authorized 50 new licenses.90
The demand-side pattern observed in Somerville repeats across other municipalities. For instance, Northampton, described by a municipal employee as “the former restaurant mecca of Western Massachusetts,” has operated above quota for decades.91 While the quota formula allocates 37 on-premises licenses to Northampton, the city has 64 issued licenses, including special legislation and other exception licenses. Demand drove repeated home rule petitions; most recently, after a lottery in which only one of four prospective licensees obtained a license, municipal leadership pressed for additional relief and secured a package of seven special legislation licenses in 2023.92
A license holder in Pittsfield described the demand-side reality plainly in the survey: “Many want to grow downtown businesses and are limited as to what businesses they can court based on quotas. Potential tenants will move on to a municipality where they can more easily open their business.”93 A Tyngsborough municipal official has seen prospective businesses go elsewhere when no license is available.94
The formula disproportionately disadvantages larger municipalities; the statutory minimums result in more licenses per capita allocated to smaller municipalities.
In the second part of this Finding, license utilization numbers are broken down by the following increments identified in the quota formula tied to population: municipalities with fewer than 14,000 residents, municipalities between 14,000 and 25,000 residents, and municipalities with over 25,000 residents.
The quota formula was written for the Massachusetts of 1933, when 294 municipalities (84%) had fewer than 14,000 residents and were allocated the statutory minimum of 14 All-Alcohol and 5 Wine-and-Malt licenses.95 The formula’s design reflected that reality. In the decades since, the Commonwealth has experienced substantial population growth, development, and urbanization: Two-thirds of residents now live in municipalities of 25,000 residents or more. By the most recent decennial census in 2020, the number of municipalities with fewer than 14,000 residents had fallen to 205 (58%), while the number with 25,000 or more residents had more than doubled to 80 (23%). See Figure 14 on the next page. The 80 municipalities with more than 25,000 residents in 2020 were home to approximately 4.69 million residents (66.7% of the population of the Commonwealth).
Figure 14. Change in Number of Municipalities Statewide by Population Category
Despite these demographic shifts, the quota formula remains unchanged. The formula’s 19-license minimum allocation (14 All-Alcohol and 5 Wine-and-Malt licenses) disadvantages municipalities that have grown in population since 1933. This outdated formula results in quota municipalities with fewer than 14,000 residents being allocated 2.7x more licenses per 10,000 residents than larger quota municipalities.96 More specifically, quota municipalities with fewer than 14,000 residents are allocated 34.3 on-premises licenses per 10,000 residents, compared with 12.9 in municipalities of 14,000 or more—166% more licenses.97 Figure 15 below illustrates this uneven license distribution across these population categories.
Figure 15. The Minimum Allocation Advantage98
The disconnect between the quota formula and current demographics is even more apparent when comparing license and population shares. Across quota municipalities, those with fewer than 14,000 residents account for 17.0% of the population but hold 33.0% of the licenses that the formula allocates, while municipalities of 25,000 or more account for 64.6% of the population but hold only 52.3%. The formula allocates a disproportionately larger share of licenses to smaller municipalities. See Figure 16 on the next page.
Figure 16. The Allocation Mismatch—Population Share vs License Share99instrument
The evidence in this Finding points to a paradox in the population-based quota formula: scarcity in municipalities where prospective licensees want to open establishments and unused capacity in other municipalities. The quota formula was calibrated to the 1933 municipal landscape and yet has been applied, unchanged in its essentials, to present-day commercial reality, resulting in a supply and demand mismatch that impedes economic growth. Municipal officials describe the mismatch from inside the system. A Longmeadow town official wrote that basing the allocation on population “does not take into account communities that have universities (where students may not be considered residents) or a community that has a robust commercial or economic sector where the daily population increases.”100
| Date published: | October 13, 2026 |
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