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New ABC program may eventually soften the hated 45% ratio

Stacey R. Hamman May 12, 2009 0

atthebarinsideVirginia legislators can raise a drink to the conclusion of another General Assembly. And to all the time they spent debating blue laws.

In fact, out of more than 15 new laws regarding the Alcoholic Beverage Control Act, six made specifications pertaining directly to blended alcoholic beverages or their vendors.

But the often-ridiculed law that requires restaurants to sell a minimum dollar value of food based on liquor sales has shown extraordinary staying power, in part because a powerful beer and wine lobby opposes upsetting the status quo.

But one law based on House Bill 2293, could make things easier for restaurant owners who want to sell high-quality liquor by allowing restaurants to calculate their ratio based on the volume of liquor sold, not by the dollar figure as is currently done.

As the law stands now, restaurants must at the end of every year file a mixed beverage annual report that details alcohol sales and shows the ratio of food to liquor. ABC stipulates that each restaurant must sell enough food and soda to account for at least 45% of the liquor and non-liquor sales — beer and wine excluded. The law is often broken and hard to enforce, according to restaurateurs and people familiar with the issue because ABC does not have the manpower to enforce it.

“To make these ratios, the restaurant owners often sell food at a loss just to get the [money] so that they can sell alcohol,” said Delegate David B. Albo, R-Springfield, who sponsored the bill.

HB 2293 creates a two-year pilot project that allows restaurateurs who have a mixed-beverage license to determine food-to-alcohol ratios based on volume rather than profit percentages.

The bill’s volume system, according to Albo, stated that for “every gallon of 80 proof, you would have to sell $X of food, [and for] every gallon of 100 proof, $Y of food.”

The bill states restaurants participating in the pilot program must generate at least $350 in food sales per gallon of spirits purchased from the ABC.

“You have to sell the same amount of food for every gallon of alcohol whether it’s cheap alcohol or expensive alcohol,” Albo said.

Under the percentage-profit ratio, when restaurant owners would sell a beverage with higher-quality vodka that doubled the drink’s cost, the restaurateur would have to sell twice as much food.

The pilot project will conclude with a report delivered by July 1, 2011, to both the House Committee on General Laws and the Senate Committee on Rehabilitation and Social Services.

But the pilot program may be more exciting theory than in practice. Expensive liquors are falling out of tomliskfavor as consumers look to order a round from the cheaper shelf. And perhaps more importantly, there many not be enough incentive to join the pilot program because restaurants are not free from complying with the regular law, said Tom Lisk, an attorney at LeClairRyan (pictured left) who lobbies for the Virginia Hospitality and Travel Association.

Lisk also said that the state is one of the biggest beneficiaries for higher liquor sales. “The state has raised the markup (on liquor, which must by law be purchased from ABC). If the restaurant passes on that cost, then as the law stands now, things got out of whack even tough the state is the recipient of higher revenue.”

Other ABC-related bills include House Bill 2597, requiring off-premises vendors to place alcoholic energy drinks with wine and beer, and Senate Bill 1414, allowing nonprofits special-events licenses.

HB 2597, sponsored by Delegate G. Glenn Oder, R-Newport News, specifies that certain premixed alcoholic energy drinks must be in the same location as wine and beer when available for sale. These include all energy drinks that have 0.5 percent or more of alcohol by volume.

SB 1414, sponsored by Sen. Linda T. Puller, D-Mount Vernon, creates a license for nonprofit corporations to serve or sell alcohol on the state-fair complex in Caroline County.

For nonprofits that apply for this license – to sell alcohol at rural events or in entertainment parks – the expected cost will be a minimum of $560 per license on top of a $65 deposit fee.

To read more about the 45% rule, click here.

Editor Aaron Kremer contributed to this story.

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