Big News: Private Liquor Stores May Be Coming to Montgomery County

As we continue our review of the 2017 Maryland legislative session, which ended last week, it is clear that, for those of us in Montgomery County, one of the most consequential – and overlooked – new laws relates to how hard liquor is sold in the County. For the first time since anyone can remember, private retailers will be able to obtain the right to sell spirits such as vodka, rum, whiskey, and gin in their stores.

Now, as with all good things, there are some restrictions on who can apply for these privileges – for example, convenience stores that sell items other than beer and wine (e.g. snacks or groceries) will not be eligible. And eligible stores will still need to contract with the County for the authority to make these sales (with that process still to be worked out via regulations to be formulated by the County DLC).  But still, don’t let anyone tell you any different – this is a very big deal.

Until now, anyone who wanted to buy a bottle of liquor to take home had to buy it at a County-owned retail store. This was a cause of great frustration to many, not only because residents were captive to the selection that the County Department of Liquor Control decided to stock in their retail stores, but also that there were only 26 such stores – for a population of over a million people.

With this change, there are now – immediately – approximately 150 stores that meet the requirements and are eligible to seek full beer, wine & liquor retail sale privileges. If even a fraction of those stores actually sought and obtained the right to sell liquor, the number of available outlets to buy spirits could double, or even triple. Presumably, many would attempt to differentiate themselves from the DLC-owned stores by offering more hard-to-find or craft spirit brands. This increased availability, variety, and overall competition will be great news for consumers.

But it is also wonderful news for so many of our County’s small beer & wine store owners, who are generally prohibited by law from owning more than one store and can often struggle to finds ways to maintain profitability. As lawyers who work with small business owners every day, and who do all we can to ease that struggle, it is gratifying to know so many of our clients will have the opportunity to expand their product offerings in such a dramatic manner.

New Maryland Law to Cure Liquor Licensing Glitch

Credit: CHRIS URSO, Tampa Bay Times

We wrote here last year about a glitch in Montgomery County liquor licensing laws that limited individuals to holding one beer & wine license in the county, whereas an individual could hold up to ten beer, wine & liquor licenses.  This, of course, made little sense and caused any restaurant with more than one location in the county to incur the additional cost and bear the additional regulatory burdens of a full liquor license, even if the restaurant just wanted to serve beer and wine.

The glitch in the law has been particularly frustrating to fast casual operators, who are likely to have several locations — and increasingly are moving to serve beer and wine
— but also do not generally need a full liquor license.

I am happy to report, however, that today Governor Hogan will sign into law a bill that will raise the number of beer & wine licenses an individual can hold to ten as well.  This new law, which will go into effect on July 1, will not only save many restaurants already operating in the county thousands of dollars a year, it will also make the county more attractive as a place for restaurant chains to grow and prosper.  (Note:  Anne Arundel County law is set to change as well, increasing the number of beer & wine licenses allowable for one individual from 2 to 5).

And how did this all come about?  As it happened, around the same time I wrote the post referenced above, I had the occasion to discuss this matter with senior licensing staff at the Montgomery County Department of Liquor Control, and explained that this was a frustration to many of my restaurant clients with multiple locations, and that it was likely a deterrent to smaller restaurants, particularly fast casuals, opening new locations in Montgomery County.  It was not any formal advocating for a change to the law; it was just an expression of frustration about the state of the law and the burdens it placed on my clients.

To the DLC leadership’s credit, however, within weeks I was told that the matter would be brought up with the county’s delegation to the Maryland General Assembly, and later last fall, was advised a bill was being prepared for presentation in the Assembly during the 2017 session.  The bill passed both houses unanimously and, as mentioned, is set to be signed today.  So, while I would like to take some credit for raising this issue in the first place, I commend DLC staff — notably the amazing Kathie Durbin — for being so responsive to the needs of our small restaurant owners here in Montgomery County.  This was good government at work, and we will all — businesses and consumers alike — benefit from it.

Can My Landlord Lease to One of My Competitors?

GARY T. MILLS/The Times-Union -- Jan. 2012 -- Quiznos Sub recently closed at 7159 Philips Highway.

(GARY T. MILLS/The Times-Union — Jan. 2012)

My family and I had dinner this past weekend at the newest location of a locally-based fast casual restaurant chain.  It had a line nearly out the door and every table was full.  After dinner we noticed that, in the same shopping center, was an existing restaurant serving the exact same type of food.  It was nearly empty.  And I have to figure it will not long survive.

Competition can be brutal in the restaurant business, of course.  And no one can — or should — expect to be protected from competition entirely.  Competition is, after all, necessary.  And it is even desirable in many ways.  It drives innovation and fosters outstanding customer service.  If you can’t stand competition, go find another business to get involved in.

But should restaurant owners be able to expect their landlords to give them some protection?  Or at least not undermine them directly by bringing a competitor into their same shopping center?  The answer is: not necessarily.

I wrote a while back about the need to seek exclusivity provisions when negotiating restaurant leases, and for those provisions to have teeth.  Your landlord is not your partner, and not your protector.  The only way your landlord will keep your competitors out of your shopping center is if it is financially harmful for them to do so.  And those provisions have to be included and negotiated at the time the lease is being signed.

I don’t know what this smaller, older restaurant’s lease said about exclusivity – or if it said anything at all.  But I do know that if it did say anything, it was not strong enough for this landlord to hesitate in bringing in a shiny, new, well-financed competitor.  And because of that, the smaller competitor is probably going to go out of business.