New Liquor License Laws — Montgomery County

This will be the first of what I hope will be several posts on interesting new laws that came out of the 2014 Maryland legislative session.  This post concerns new alcoholic beverage licensing laws in Montgomery County, Maryland.  Many of these new laws were the product of the County’s Nighttime Economy Task Force, which was aimed at making the County a more attractive place to those seeking lively after-hours offerings.  Unless otherwise indicated, these laws go into effect on July 1, 2014:

  • Ratios of Food to Alcohol Sales:  Restaurants and taverns holding licenses to sell beer, wine and liquor have been required to keep records showing that the total sales of alcoholic beverages does not exceed those of food.  Starting July 1, however, the minimum food sales has been decreased to 40%, thus allowing for bars and taverns to provide a greater offering of high-end (and thus more expensive) beers, wines and cocktails.
  • Class D-BWL (Beer Wine & Liquor) Licenses:  The county Board of License Commissioners may now issue a Class D license for on-premise consumption of beer, wine and liquor.  This license provides for the same 60/40 alcoholic beverage, but only requires the ratios to be met during the hours before 9pm, thus allowing the establishment to cater to those more interested in beer, wine and cocktails during those later hours.
  • Later Last Call:  New Class D license holders, as well as those holding Class B-BWL, will be entitled to serve alcohol until 3am, instead of 2am.
  • Limits on Number of Licenses Lifted:  Prior restrictions on a person holding multiple alcoholic beverage licenses have been lifted such that an individual may hold up to 10 Class B licenses, which allow for on-premise sales at hotels and restaurants, in the county.  This will be significant to operators with, or seeking to establish, multiple locations in the County.
  • Beauty Salon License:  Montgomery County beauty salons will be able to apply for and obtain a beer and wine license, notwithstanding the fact that they do not serve food.  That local salons could not provide such a service to their customers has long been seen as a hindrance in their competition with similar salons in the District of Columbia.

This list is not exhaustive and some other laws were passed affecting other types of businesses or specific localities, but these appear to be the laws that will affect the widest range of bars and restaurants and have an impact on the lives of most County residents.

Next up:  Laws affecting small alcoholic beverage producers and distributors.

Legislation Moving Forward to Remove Liquor License Residency Requirements

A few weeks ago, I wrote a post here about the possibility that counties in Maryland may consider removing the requirement that liquor licenses be held by at least one resident of the county that issues it.  Shortly thereafter, the blog BethesdaNow picked up on the story and interviewed me about whether that might be a good idea for Montgomery County.

Well, it appears this issue has gotten the attention of some influential folks here in Montgomery County and there is now legislation moving forward in Annapolis, sponsored by Del. Tom Hucker, to exempt Montgomery County liquor license holders from this residency requirement.  A hearing is scheduled on the legislation for this afternoon, February 17, at 1pm.

Continue to check back here for more news as this legislation continues to move forward.

TTB Backlog for Breweries Highlights Need to Get Applications Done Right the First Time

The federal Alcohol Tobacco Tax & Trade Bureau (TTB) announced earlier this month that, as of the end of 2013, there were over 3700 active brewer’s notices on file with the TTB.  A federal brewer’s notice is required to operate a brewery and sell beer in interstate commerce.  That number represents a 12% increase over the total at the end of 2012, demonstrating the explosive growth in craft brewing in the United States.

The TTB also cited the government shutdown as contributing to the backlog of applications for both new breweries and new product or label approvals.  While TTB notes it is “work[ing] tirelessly” to process these applications in a timely manner, that this backlog exists highlights the need to ensure that all applications are in order when they are submitted so further needless delay can be avoided.

Bethesda Apartment Building Construction Causing Closures, Spawning Lawsuits

In the last two years, the Woodmont Triangle area of downtown Bethesda has seen a building boom in high-rise luxury apartment buildings.  Construction of one of those buildings, however, appears to be taking its toll on some established local businesses, and has now caused the closing of two local restaurants and an automotive repair shop.

To read more on this ongoing controversy, and the multiple lawsuits it has spawned, please see my post here, which summarizes the excellent coverage from the blog BethesdaNow.

County Liquor Board Wants to Nix Residency Requirements for Liquor Licenses

The Baltimore Sun had an interesting story last week about how the liquor board of Harford County, Maryland, wants to eliminate the state requirement that every county liquor license application have on it at least one resident of the county.  As stated in the article, it can often be a challenge for a restaurant to identify a resident to serve as the resident agent and, even after one is identified, the operations of the establishment can be dependent on maintaining the relationship with that one individual.  Indeed, it was that very issue that brought the matter to fore in this instance.  [Read the full article here]

These residency requirements have presented particular challenges for my clients in Montgomery County, where many national chains and D.C.-based enterprises are often interested in adding locations.  To be issued a license, however, each of these applicants must identify a Montgomery County resident to join the application and maintain responsibility should the establishment violate local liquor laws.  That is rarely an insurmountable hurdle, but it can be a challenging one, and one that is arguably unnecessary.  Were this requirement eliminated, it could make it much easier to attract restaurants and bars to the County, something local authorities have deemed a priority.

Does Proposed Acquisition Raise Three-Tier Integration Concerns?

Generally speaking, and with some notable exceptions, the production, distribution and sale of alcoholic beverages in the United States are divided among three tiers, with ownership of producers, distributors and retailers required to remain separate.  For example, in Maryland, where my firm has its primary practice, anyone with an ownership interest in an entity with a manufacturer’s or wholesaler’s license is prohibited from holding a retail liquor license.  Although the 21st Amendment to the U.S. Constitution, which ended Prohibition, leaves it to the individual states to regulate the sale of alcoholic beverages, nearly every state has traditionally mandated this division among the three tiers.

Because the three-tier system is such an integral and widespread element of liquor regulation in the United States, it was with great interest (and some puzzlement) that I read this press release announcing the acquisition by a North Carolina craft brewery of a publicly traded beer, wine & liquor wholesaler.  (Read more here)  I was furthermore surprised to see that a substantial shareholder in the wholesaler was itself a company that owned several large, prominent restaurant chains, and that this company would remain a shareholder of the combined brewery/distributor.  Thus, it would seem that the proposed sale would lead just the sort of vertical integration between producer, wholesaler and retailer that the three-tier system was intended to thwart.  Illustrating this fact is a telling quote from the CEO of the chain restaurant company:

“We look forward to showcasing [the brewery]’s craft beers in our restaurants and assisting with its regional distribution.”

There you go:  brewery owns distributor, which will be assisted in such distribution by a restaurant chain which is a large shareholder in the combined brewery/distributor, all in an effort to promote that brewery’s beers in those same restaurants.  While not a true “tied house” situation, it could have similar effects.

Given this stated intention to use the vertical integration of the three tiers to its competitive advantage, it will be interesting to see how North Carolina liquor regulators view the combination of and cooperation between these companies.  Moreover, as the combined brewery/wholesaler company expands into other states, it will also bear watching whether it is met with resistance from other state and local alcoholic beverage licensing boards, either on applications for wholesaler’s licenses by the combined brewery/distributor, or on retail liquor license applications by new outlets of the associated restaurant chains.

Liquor Laws Continue to be Big Focus in Montgomery County

In order to compete with its neighbor the District of Columbia, Montgomery County, Maryland, continues to strive to make itself a more inviting place for those seeking after-hours entertainment options.  As indicated in my previous post, a sizable portion of these efforts involves reforming the county’s laws regarding the sale of alcoholic beverages.  In case you had any doubt, however, as to how important these issues are for the county, a recent article in the Gazette newspaper notes that more than two-thirds (9 out of 13) of the bills being considered by the county’s delegation to the 2014 General Assembly relate to liquor licensing and other aspects of the county’s regulation of alcohol.

If you have any questions about how any of these laws will affect your business, how you might be able to take advantage of any proposed changes, or how you can play a role in affecting the outcome of any of these proposals, please do not hesitate to contact us.

“Nighttime Economy Task Force” Issues Recommendations

Earlier this year, Montgomery County, Maryland, created a task force of local civic leaders and businesspeople to address issues that could make the county a more inviting place for those seeking lively nightlife offerings.  On October 21, 2013, this “Nighttime Economy Task Force” issued its recommendations, many of which — particularly those changing county liquor license requirements — will have a direct effect on the restaurant and tavern industry in the county.  Among the most welcome recommendations for this industry are:

[continue reading here]


Morris Law Firm Helps Bring Spanish-based Restaurant Chain to Bethesda

The locally-focused blog Bethesda Now featured a story last week on the upcoming opening of a new Bethesda location for the Spanish-based restaurant chain 100 Montaditos.  The local operators, who were approved for a Montgomery County liquor license on September 19, expect to open in early October.  The new location on Elm Street, just off Bethesda Row in downtown Bethesda, will be the first U.S. location outside of Florida.

The Morris Law Firm is pleased to have been part of the effort to bring 100 Montaditos to Bethesda, serving as their alcoholic beverage licensing counsel and assisting them in all aspects of their liquor license application and liquor board hearing.