Mar. 21—New on the menu at Café Pasqual's: Prickly Pear Margarita, Bloody Maria Especial, Naughty Martini.

(You might need to try the martini to find out why it's naughty.)

Under the state's overhauled liquor license system, the popular downtown restaurant is able offer spirits for the first time in its more than 40 years of operation.

"This is something we have wanted since day one, to have the full dining experience," owner Katherine Kagel said. "So many patrons have been disappointed over the years — they couldn't have a drink. And now they can."

A bill signed into law by Gov. Michelle Lujan Grisham in 2021, which took effect July 1, has opened the door to sales of spirits for small dining businesses like Café Pasqual's, which previously could obtain an affordable state-issued license to sell beer and wine but would have had to pay up to $500,000 for a license to sell liquor, or lease one, from someone who already owned a license.

Kagel said that was a price she couldn't afford.

Restaurateurs with new and long-term businesses are now able to purchase liquor licenses from the state for as little as $1,550 or as much as $10,000 per year.

The new law also permits home delivery of alcohol with food orders from eateries.

Many New Mexico restaurants are buying into the new business plan.

According to data from the state Regulation and Licensing Department, more than 100 dining establishments have been approved since July 1 to offer wine, beer and liquor — including Joe's Dining in Santa Fe, which offers a New Mexico spirits-only menu of cocktails.

Under the new system, a business that has held a beer and wine license for at least a year, which costs $1,050, can obtain a permit to sell New Mexico spirits for an additional $500. The option has proven popular. So far, 62 restaurants in the state have been approved for that license, compared with 56 approved for the full alcohol license for $10,000.

As of Friday, there were 16 license applicants awaiting approval, while 34 restaurants had been approved to deliver alcohol with food orders.

It's a big change from a decades-old system long criticized as cost-prohibitive for businesses and a monopoly controlled by a small number of license holders who leased and traded a limited number of state liquor licenses like high-dollar real estate. Advocates say the new system offers a more even playing field for restaurateurs who want to thrive following nearly two years of business operations upended by the coronavirus pandemic.

"This was designed for economic development," said Andrew Vallejos, director of alcohol control for the Regulation and Licensing Department.

Based on conversations he's had with restaurant owners, Vallejos said, "It really gives the restaurateur the ability to give the customer exactly what the customer wants."

The state's new restaurant liquor license allows businesses to serve a customer only three alcoholic drinks with dinner, he said. Restaurants also must show at least 60 percent of their profits come from food sales.

Most restaurants "average 10 to 20 percent in liquor sales," he added.

Roland Richter, owner of Joe's Dining on Rodeo Road, said his longtime restaurant recently got approval to offer New Mexico spirits. And there are plenty of quality products in the state, he added, mentioning a "nice rye" from a Taos distillery and apple brandy from Santa Fe Spirits.

The new license accomplishes at least two goals, he said: It supports New Mexico distilleries and makes his restaurant more attractive to dinner patrons, especially those dining in groups. If just one person in a party of six wants an aperitif, he said, the entire group is more likely to choose a place that serves alcohol rather than one that does not.

He estimates his business sees $100 to $200 per day in increased profits from alcohol sales.

Several eateries in Santa Fe are preparing for alcohol sales, including El Palacio on Palace Avenue downtown, a small, family-owned establishment known for its breakfast and lunch offerings. The change will allow the restaurant to expand to dinner service.

"Breakfast is a lot of work for little money," owner Damian Muñoz said. "Dinner is better business. When you go out to dinner you — even I — want a beer."

The Santa Fe City Council recently approved his application for a full liquor license. He's working with a bartender friend to fashion a drink menu and hopes to start offering dinner and drinks within a month or so.

Other local businesses, such as the soon-to-open Dos Amigos Sport Mexican Restaurant, are still awaiting city approval to offer spirits.

Caley Shoemaker, founder and chief distiller at Altar Spirits in the Railyard, said the restaurant, which opened in December, has seen business pick up after it obtained a liquor license and city approval. When people come in for fajitas and want a drink that complements it, "A wine margarita is not as good as a real margarita," she said.

"If we have people visiting [Santa Fe] who want a good cocktail, they'll look ahead and see who has a margarita," Shoemaker said. "Having that ability to have more choices available for customers is an economic boon."

Sam Gerberding, who manages the Inn of the Governors and Del Charro restaurant, served as president of the New Mexico Restaurant Association when the new law took effect in July. He said it may be too soon to see the full economic effects of the liquor license overhaul because it occurred in the middle of the pandemic, when businesses were just trying to survive. That might have delayed many restaurant owners from applying for a license.

"We were all so preoccupied with other situations," he said. "I think people are just now starting to say, 'We can relax and start looking at how to invest money in the future.' "

Despite the value of a liquor license — "especially in a town that is so big for margaritas," Gerberding said — it comes with built-in challenges. Most restaurants adding spirits will need to hire more employees and ensure they are properly trained.

"It's a lot easier to pour beer on tap and pour a glass of wine than make mixed drinks," he said. "That adds another dynamic on top of everything. You can take someone who is 20 years old, who is fairly sharp, and teach them about a few beers and about a good focused wine list, but hiring somebody who can make every drink under the sun that people want changes it tremendously."

Servers also have to be prepared to recognize and deal with a customer who is inebriated, he added.

Kagel said her restaurant has a two-drink limit for dinner guests and no bar set up for those who only want drinks.

Richter also said he doesn't have a bar and doesn't push the new liquor option at Joe's Dining.

"We never had people just coming in and sitting at the counter to drink, and that hasn't changed since we got the license," he said. "We don't encourage it."

Kagel recalled visitors from outside New Mexico previously expressing surprise that Café Pasqual's did not serve liquor.

"Finally the state of New Mexico has caught up with the real world," she said.

One of her regular customers, Bill Fisher of Santa Fe, said he likes the new state law. He couldn't understand why, for years, he could not buy a cocktail to go with his lunch or dinner at Café Pasqual's.

A month or so ago, when he found out margaritas were on the menu, he ordered one at brunch.

"It was pretty incredible," he said. "Great, just great."