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ALCOHOL POLICY GETS NEW TWIST

September 23, 2009 12:36 am

BY BILL FREEHLING

Under a test program the Virginia Department of Alcoholic Beverage Control is running, some restaurants could significantly increase their take from liquor sales.

Any Virginia establishment that sells mixed drinks, with the exception of private clubs, must maintain a food-to-liquor ratio of 45-to-55 under current ABC rules.

In other words, for every $45 a restaurant makes in food and non-alcoholic beverage sales, it can take in no more than $55 from sales of liquor drinks. Beer and wine sales are not included in the calculation; restaurants that sell only beer or wine must do at least $2,000 per month in food sales.

The food-to-liquor ratio has drawn complaints from establishments that complain it hasn't kept pace with liquor prices or people's tastes for more expensive drinks. Nightspots selling premium-liquor drinks for $10 or more can struggle to sell enough food to keep the ratio in balance.

To address those concerns, the Virginia ABC has launched a two-year pilot program that experiments with the ratio. Twelve restaurants in the state--all located in the Northern Virginia, Richmond or Hampton Roads areas--are participating in the program. It runs through July 2011.

The pilot program allows participants to base food sales on the volume of liquor purchased rather than the money they obtain from mixed-drink sales. The pilot participants will be required to sell $350 of food per gallon of liquor bought from ABC.

Some simple math explains how the new rules could benefit businesses that are classified as restaurants but that rely heavily on liquor sales to survive.

There are 128 ounces in a gallon, and the typical mixed drink has 1.5 ounces. That means there are about 85 drinks in a gallon.

Restaurants that sell each drink for $5 would take in about $425 and be required to sell $350 worth of food. That is about in line with the current 45-55 ratio.

But restaurants will be able to derive significantly more money from liquor sales if mixed-drink prices exceed $5, as is common. Drinks sold for $10 would allow restaurants to make roughly double what they can now make on liquor sales.

W. Curtis Coleburn, who is ABC's chief operating officer and the architect of the pilot program, explained the history of Virginia's liquor laws and the rationale of the pilot program in the organization's summer newsletter.

The ratio was created when liquor-by-the-drink was first allowed in Virginia in 1968. The General Assembly decided that mixed drinks should be served in restaurants, not "mere watering holes."

The law has been amended several times. Originally, the sale of food had to exceed the sale of all alcoholic beverages. Later it was changed to where food had to be 45 percent, and in 1990 beer and wine were removed from the calculation.

The pilot project is intended to establish a food requirement about equal to the current requirements but make it easier for restaurants that sell a high volume of expensive drinks.

At the end of the project, the ABC Board will report its findings and any recommendations to General Assembly committees on or before July 1, 2011.

ABC spokeswoman Jennifer T. Farinholt said the 45-to-55 ratio is not a challenge for most restaurants. Among the strategies she's heard if there is an issue are expanding the hours the establishment is open, marketing food more aggressively and offering food specials.

Paul Stoddard, who owns the Sunken Well Tavern in Fredericksburg with Steve Cameli, is among the group that hasn't had any trouble maintaining the ratio. He doubted that many places in the Fredericksburg area would either.

"As long as you're constantly serving food, you're fine," said Stoddard, who is making plans with Cameli for another restaurant in the former home of Frederick's and The Loft in downtown Fredericksburg.

Matt Simmons, president of Capital Ale House, likes the 45-55 rule. He spends about $400,000 building the kitchens at his restaurants and taprooms. Easing the food requirements would allow competitors to enter the market with fewer costs, which he thinks would be an unfair advantage.

Simmons added that the 45-55 rule isn't much of an issue at Capital Ale because of the focus on beer rather than mixed drinks.

Simmons thinks it makes sense to change the rule so it's based on liquor volume rather than sales. He thinks that would allow smaller establishments to charge market prices on drinks.

Bill Freehling: 540/374-5405
Email: bfreehling@freelancestar.com