Virginia Bar Challenges Food-Drink Ratio Law

     RICHMOND, Va. (CN) — A Virginia bar known for its selection of expensive, small-batch craft bourbon is challenging state authorities’ enforcement of a 35-year-old law it calls “arcane and Draconian.”
     McCormack’s Whisky Grill and Smokehouse, a Richmond, Va., bar which proudly pairs the stiff-priced drinks with affordable Southern fare, says the statewide liquor license requirement that at least 45 percent of total revenue be earned in food sales favors the very same seedy “gin mills” it was designed to deter.
     In the industry trend toward artisanship, McCormack’s touts itself as a pioneer, giving the average drinker an opportunity to sample the top shelf liquors they could not otherwise afford — some of which carry hefty price tags up to tens of thousands of dollars a bottle.
     McCormack’s claims it has taken every measure to abide by the law, but that it cannot lower its markup on liquor prices, which as it stands is significantly less than the industry standard.
     One $350 shot of Pappy Van Winkle’s Family Reserve 23-year bourbon can upset the balance of the average diner’s $60 meal — two or three shots can wipe out an entire day of food sales, McCormack’s claims.
     “Despite the fact that only an ounce-and-a-half of liquor was sold, this transaction destroys the establishment’s ability to comply with the ration solely because the high-end bourbon is so much more expensive than food,” McCormack’s says a lawsuit filed May 13 against the Virginia Alcoholic Beverage Control Board.
     But if it is expected to compete with local restaurants in food prices, the current food-beverage ratio renders its business model untenable, McCormack’s says.
     “Accordingly, McCormack’s is limited to what it can charge for food without driving away diners,” according to the complaint, which was filed in Richmond Circuit Court.
     Still, alcoholic beverage control, or ABC, laws make it perfectly legal for other restaurants to sell mass quantities of cheap swill at happy hour prices, McCormack’s says.
     “The irony is that the current formula actually encourages the operation of ‘gin mill’ establishments — restaurants that sell low-cost and low quality distilled spirits at high volume while selling cheaper food that more easily offsets the mixed beverages sold,” the complaint states.
     In November, 2015, Virginia’s Department of Alcoholic Beverage Control slapped McCormack’s with a $1,000 penalty and a 15-day suspension of its liquor license for failure to meet its quotient of food sales by less than six percent during the previous fiscal year.
     In an appeals hearing, the ABC agent who issued the violation testified that he did not believe the restaurant had deliberately violated the rule, and that they indeed sell a sufficient amount of food to justify having a liquor license, according to the complaint.
     “There is a reason that McCormack’s is the only restaurant in Virginia specializing in very expensive high-end spirits,” administrative hearing officer Sara Gilliam said in her Nov. 19, 2015, decision.
     “It is extremely difficult to meet the current food-to-mixed beverage ration when the price of distilled spirits is so much more expensive than the price of food,” Gilliam said.
     In its final April 16, 2016, decision, a panel of three ABC commissioners reduced the penalty to $500 in fines with a 7-day license suspension, but refused to overturn the violation they said was “merely a technicality,” according to the complaint.
     “[T]he licensee’s non-compliant ratio is a direct result of its business decision to sell high-end, expensive spirits, which the board acknowledges serves as a deterrent to overconsumption,” the majority decision is quoted in the complaint. “The licensee also provides greater product variety and availability, which is a benefit, not a detriment, to consumers and the public.”
     Virginia is one of 17 control states in the nation where state authorities retain exclusive control over the sale of hard liquor and certain types of spirits in government-operated retail stores.
     The food-beverage ratio dates back to 1968 when Virginia’s ABC department was appointed to oversee the sale of alcohol in bars for the first time since the repeal of prohibition. Since then, serving food has been a prerequisite for any establishment wishing to serve alcohol.
     Lawmakers in 2015 and 2016 proposed several initiatives to amend the requirement, such as lowering the percentage of minimum food sales required by law or imposing instead a flat food revenue requirement of $10,000 per quarter.
     Though Virginia Gov. Terry McAuliffe increased the price of liquor earlier this year, he did not adjust the food-beverage ratio, Sen. Bill DeSteph, R-Virginia Beach, told Courthouse News.
     “A place like McCormack’s Whisky bar has great food but the average price of a drink is $23 or $24. The average price of an entree is $20. You’re never going to meet your ratio with that model,” DeSteph said.
     He added, “They have the largest whisky collection in the state, and they were highlighted in ABC magazine as having the largest whisky collection in the world.”
     DeSteph, who is the patron of two bills awaiting review, said he is hopeful that the law will change next year.
     “What we should do is just say okay, so sell $10,000 of food a month and sell spirits,” said DeSteph.
     The senator said an ABC task force is discussing the issue and “we are working on it as we speak.”
     McCormack’s called the law “arcane and Draconian.”
     “The arcane mathematical formula derived from a time when there were no craft spirits and the variety of distilled spirits available in the Commonwealth all hovered around the same low price point is simply unworkable in the modern day era of quality high-end spirits and craft cocktails,” the 27-page complaint states.
     “We need to lower the ratio,” DeSteph said. “It’s just the right thing to do.”
     ABC officials neither confirmed nor denied the talks, but noted in its April decision that “the licensee has proven that ‘consumer trends toward higher-priced spirit drinks [are] contributing to difficulties meeting the food ratio,’ a phenomenon which lacked evidence in 2011.”
     McCormack’s is represented by attorney Cameron W. Gilbert of Chester, Va. ABC authorities declined to comment on McCormack’s pending lawsuit.

%d bloggers like this: