Brewery Law

It's Five O'Clock Somewhere - but not in North Carolina

There are few basic rules that most folks in the business of serving booze know.  No selling to anyone under the age of 21. No selling to people who have already had too much to drink. Last call is at 2:00 a.m. However, with the meteoric rise in the number of bottle shops, breweries, tap rooms, bars, distilleries, and tasting rooms, most of which have an on-premises serving component, all trying to fill seats at the bar, it makes sense to take a look at the do’s and don’ts of promoting on-premise sales.  

 

Alan Jackson and Jimmy Buffett were right that It’s Five O’Clock Somewhere, but not in North Carolina.

For most states across the county five o’clock signifies the start of the discounted booze binge known as happy hour.  North Carolina has no need for this end of the workday tradition because jobs in North Carolina offer a much greater level of personal fulfillment than jobs in other states.

 

So what exactly are the rules related to "happy hour?" 

1.     An on-premise permitee cannot sell more than one drink to a patron for a single price. While BOGO promotions are certainly legal at your local grocery store, they are prohibited at your local bar.

2.     A permittee cannot establish a single price based upon the required purchase of more than one drink.  This rule prohibits offering a discount if the bar patron agrees to drink in bulk.

3.     No delivering more than one drink at one time to a patron for his consumption. Basically, a guy cannot come up to the bar and order 3 beers for himself, and get all three at the same time.  However, this does not prohibit the same guy from going up to the bar and buying three beers, one for himself, and one for his two buddies. Additionally, this rule does not prohibit the sale of pitchers and bottles of wine to two or more patrons.

I know what you’re thinking all my boilermaker aficionados, that your local bar has been breaking the rules just for you. No. A “drink” can include two different alcoholic beverages severed separately at the same time to a single patron if such “drink” is a customary combination.

 

So what can you do to get the people going?

North Carolina allows a permittee to offer free or discounted drinks, with the kicker being that if an on-premise permittee wants to sell or give away a drink “at a price that is different from the usual or established price” they must offer the discount for the full business day.  Additionally, a permittee can charge a single price for a meal/drink combo, but the total price must reflect the actual price of the alcoholic beverage and not a reduced price. 

ABC Omnibus Legislation – What HB 909 (now SL 2015-98) means for the North Carolina Beer, Wine, and Spirit industry.

Back in June, HB 909 was signed into law (Here, for full text). For most, summertime is a busy time of year, and you might not have had time to catch-up on the doings of the North Carolina Legislature. Not to fear, this post highlights some of the most important provisions from booze focused HB 909.

 

Powdered Alcohol

North Carolina has decided that powdered alcohol is completely illegal. The prohibition includes manufacturing, selling, importing, consuming, and even the possession of powered alcohol.

Tribal ABC Commission

 The new law authorizes the Eastern Band of Cherokee Indians to establish an independent tribal alcoholic beverage control commission to regulate the purchase, possession, consumption, sale, and delivery of alcoholic beverages within Indian Country. Additionally, the law allows the Tribal ABC to issue both commercial and retail ABC permits. The tribal ABC will have sole jurisdiction for all alcohol related matters within Indian Country, but will also recognize all permits granted by North Carolina ABC.

On Site Distillery Sales

North Carolinians, there is now an alternative to visiting you local ABC store for all your liquor needs… you can go on a distillery tour! Prior to this law, all liquor had to be purchased from an ABC store. Now, distilleries that produce less than 100,000 gallons of booze per year can sell one commemorative bottle per year to each customer visiting the distillery. Not surprisingly, the distillery must still collect and remit the 30% liquor tax.

Wine Growlers

If the establishment has the correct permits, you can now purchase a wine growler. No seriously… you can fill a growler up with wine and take it home.

Alternating Brewery Proprietorships

I am especially excited to say that this law clears the way for fledgling breweries to share space and equipment (but that’s it, not malts) with established breweries. This clarification of the old law makes way for projects like the Rocky Mount Brewmill, which is North Carolina’s first beer incubator.

Contact Brewing

Another friendly statue for start-up and growing breweries. This law clarifies that it is permissible for a brewery to receive beer that the receiving brewery contracted with another brewery to produce. After receiving the contracted for beer, the brewery may basically treat it as if it had been brewed right there in their own brewery.

Thoughts

With the exception of the prohibition on powdered alcohol, HB 909 is overall favorable for the beer and wine industry. Clarifications in alternating brewery proprietorship and contract brewing laws, not only make it easier for start-up breweries to share resources with bigger more established breweries, but it also gives established breweries the flexibility to coordinate efforts with other breweries to increase production and satisfy demand. While it is extremely difficult to foresee all the economic consequences of this legislation, this new law certainty makes it easier for newcomers to join North Carolina’s booming craft beer industry. 

 

Raleigh's New Outdoor Seating Ordinance: What Local Businesses Need to Know

"51 Complaints involving Calls for Service to RPD and Complaints to City Staff
- One of the reasons cited in the Raleigh City Council's August 11, 2015 presentation on the proposed Raleigh Outdoor Seating Ordinance - dubbed by locals as the "Save the Patio" campaign.  

Like it or not, the Raleigh City Council passed the Outdoor Seating Ordinance, causing concern for many Raleigh restaurants and bars and their loyal patrons.  Because this will impact most of Raleigh's nightlife, here is a summary of what you need to know:

Outdoor Seating Permits Required:

If you are an "Eating Establishment," "Food Business,"  or "Private Club,"  you must apply for an outdoor seating permit if you wish to use City sidewalks.  

  • Eating Establishments ("EEs") are defined as "any establishment engaged in the business of regularly and customarily selling food and non-spiritous liquor, to be consumed on the premises." EEs include restaurants, cafeterias, cafes, lunch stands, grills, snack bars, fast-food, and drug stores with lunch counters.  See revised §12-2121(a)(2) of Raleigh City Ordinance. 
  • Food Businesses ("FBs") are defined as "an establishment engaged in the business of regularly and customarily selling food and non-spiritous liquor, primarily to be consumed off the premises." FBs include groceries, drugstores, and convenience stores. See revised §12-2121(a)(3) of Raleigh City Ordinance. 
  • Private Clubs ("PCs") are defined as "an establishment that is organized and operated solely for a social, recreational, patriotic, or fraternal purpose and that is not open to the general public, but is open only to the members of the organization and their bona fide guests as set forth in G.S. §18B-1000."  See revised §12-2121(a)(4) of Raleigh City Ordinance. 

Only the property owner can apply for the Outdoor Seating Permit (so if you are leasing property, you will need to talk to the property owner before applying).  Also, if you are in a multi-floor building, the first floor will always have the right of first refusal and you must have direct access to the sidewalk in order to apply for the permit/ use the sidewalk for seating.  In other words, if you are not on the first floor but you have direct access to the sidewalk (a la The Hive), be nice to your first floor neighbors. 

Applications must include things such as a scaled drawing of the proposed outdoor seating area, hours of operation, evidence of a valid insurance policy with minimum liability of $1M, an indemnity statement to hold the City of Raleigh harmless, and all permits applicable to your establishment.  There is also a $300 permit fee.  A copy of the application can be found here.

Outdoor Seating Hours & Other Restrictions

Hours of Operation:   If your business is closed, your outdoor seating must be closed too.  You can allow patrons to dine and drink outside until 1am on Fridays and Saturdays and 12:00am on all other days of the week.  You can still serve alcohol until 2am- it just has to remain inside the establishment. 

Boundaries:   If you allow alcohol in your outdoor seating area, you must clearly show the boundaries of the seating area so people do not wander with their beers into "public" territory.  You must also post signs at all "designated exit points" that clearly state it is illegal to remove alcohol from the specific outdoor seating area.  You as the establishment (and those that operate it) are responsible for any alcohol that makes its way outside of these boundaries. 

Pedestrian Right of Ways:  Pedestrian clearances are also mandated under the new ordinance.  You must have a 5 foot wide (unobstructed) pedestrian corridor at all times through the "public right of way."  If your are located on Fayetteville Street, as many of you are, your unobstructed pedestrian corridor must be 7 feet wide.   There is also a chance additional restrictions may apply under the Americans with Disabilities Act and the NC Building Code. Talk to your attorney for more information.

Occupancy:   Occupancy of outdoor seating areas are based on actual seating capacity and must comply with the Maximum Floor Area Allowances under Table 1004.1.1 of the NC Building Code.  Outdoor Seating areas cannot include cash registers, minibars, tents, or similar appurtenances.  

I got the Permit, Now What?

Outdoor Seating Permits are valid for one-year and expire on June 30th of each year.  Renewal applications must be received no later than June 30th.  These permits are NOT assignable.  This means if the establishment changes ownership, the permit follows the Permit Holder and may be rendered invalid.  The new ordinance defines a "change in ownership" to include "any change in the ownership of shares in a privately held corporation, [the] sale of all or part of a sole proprietorship, or any change in the membership of any form of [LLC]."  If you are publicly traded, an acquisition of more than 10% of stock also equates to a "change in ownership."   Talk to an attorney if you are unsure whether this applies to you. 

Violations

Now for the stuff you really care about: what happens if I don't comply.  Violations can lead to a $100 penalty for first time offenders, $500  penalty + suspension for 30 days for second time offenders, and revocation for 12 months for third time offenders. 

The full text of the new ordinance can be found here.