Establishing a successful restaurant or package store is fraught with many challenges. While formulating a business plan is important, understanding and navigating the legal and regulatory hurdles is equally important. While often the main focus is on obtaining the liquor license, there are other issues to consider.
Entity Selection and Structure. There are five major categories of business entities. Among the factors one must consider in selecting the type of entity are:
Founders’ Agreement. In every case with multiple founder, consideration should be given to the issues of management control, death or disability of a founder and the “exit plan”, among others. Not preparing such an agreement results in a “default” to statutory provisions. Assessing the impact of the defaults on the business is important. Often addressed by such an agreement are:
Tax and Labor Registration. Once established the business must register with both the federal and state to obtain tax identification numbers as well as registering for a sales and use tax certificate. For those businesses that will have employees, they will need to obtain a registration number with the state Department of Labor in order to file the necessary unemployment returns. One should not forget to make the necessary personal property tax filing with the municipal tax assessor (due every October) and, if applicable the Annual Income and Expense Report (due June 1 0f each year).
Zoning Approval. Local municipalities have the authority to regulate the uses of properties within the town. Uses may be permitted as of right, with special permission from the zoning commission or prohibited. Many towns restrict the distances between retail liquor licenses especially package stores and/or require special approval by the zoning commission for each location. Inquiring of the local zoning office will help fret out any issue that must be addressed.
Health Department Approval. All on-premises locations require local health department approval. Just because an establishment previously operated in a location does not mean that approvals will automatically issue. When investigating a particular location speaking with the sanitarian who is familiar with the location will yield lots of information.
Sewer Connection. Connecticut’s health code currently requires “grease traps” be installed for those locations serving food. There are two basic types, one which is located in the establishment or alternatively underground outside of the premises. For existing locations the health department records should be reviewed to determine if there are any current issues or any past malfunctions of the system. Also, the system should be inspected by a reputable service company to ensure that the stem is properly functioning and was previously maintained.
Building Department Approval. Any time modifications are made to the building or the mechanical systems of the premises, building department approval is required. It is important to have any plans for improvements or modifications approved. If the prosed work is anything but minor, one should anticipate having to comply with the current code.
Fire Marshal Approval. Similar to building department approval, one should be prepared to obtain prior approval of the fire marshal.
For all but the simplest of project having a team of professionals will make navigating the process easier and will keep it on track. Accounts are helpful in developing forecasts and addressing tax issues. Architects and engineers provide great assistance in building, health and fire code compliance. Attorneys guide decisions on entity selection and structure, zoning and licensing. A little careful planning up front often saves significant time and money down the road.
]]>One of the most troubling letters a retailer can receive is a letter from a lawyer advising the retail that a “dram shop” claim will be made against the retailer. This article will discuss what the retailer should do when receiving such a notice, what liabilities a retailer may face for the sale/service of beverage alcohol and how to best protect against such claims.
What to do with a “dram shop” notice?
What is the basis for a “dram shop” claim?
Six years ago, Governor Malloy rolled out the proposal “Modernizing Connecticut’s Laws” –Bill 5012. One of the major objectives of the proposal was to eliminate the definition of “cost” and the prohibition of package stores selling below “cost” – often referred to as ‘minimum bottle” from Connecticut liquor law. When the legislature failed to fully adopt this proposal, Total commenced the legal challenge to overturn this same law. Though the proposal and Total’s challenge have failed to date, it appears that the Governor will again attempt to eliminate the “cost” prohibition from Connecticut pricing, or at least revise its definition.
The key elements of the Governor’s former proposal included:
Many of these elements were adopted in one form or another with the major exception being the prohibition of selling below “cost”, which is defined as the price at which a wholesaler offers to sell a bottle of wine or spirits.
The historical reason for this restriction was to prohibit predatory pricing. The provision allows for the easy regulation of retail pricing by the state’s regulators, law enforcement officials and competitors. When initially enacted, many package stores would purchase products in less than full-case quantities. At that time, the unit cost, when purchased by the case, was close to the posted bottle price. As the market developed, the discrepancy between these prices grew as did the “discount” to package stores who purchased in full-case lots, especially during “post off” months.
The Governor, seizing upon this seemingly “built in profit” for package stores, argued that Connecticut consumers were over-paying for wine and spirits. The industry countered that it was the cost of doing business in Connecticut, especially the higher excise taxes, that caused Connecticut’s slightly higher prices for some products. In 2012, the legislature established a task force to study the issue. Its findings were inconclusive.
It is true that Connecticut has more than twice the number of package stores on a per capita basis than Massachusetts. While one might conclude that the cost to consumers could be reduced by forcing the consolidation of these businesses, no macro-level studies exist that support that conclusion. Since the vast amount of wine and spirits sold in Connecticut (approximately 70-80%) reach consumers through a relatively small number of stores (less than 200) any added costs of the additional stores is inconsequential.
One also might be tempted to conclude that small and large package stores are on equal footing as to their ability to acquire wine and spirits at the same price. While true for many products, especially major national brands, there is a burgeoning “private label” market where these pricing laws do not apply. As small and independent stores simply do not have access to these “private label” products, which are often similar, if not identical in quality to national brands. Moreover, for their part, Connecticut package stores argue that it is important to support their businesses because their revenues and profits are more likely to remain in the Connecticut economy when compared to large national retailers.
The purpose of this article is not to advocate for the maintenance of or the elimination of the “cost” provision of Connecticut law, but to provide the history and context needed to assess the merits of the arguments of the stake holders in this important debate. As the legislature likely considers this issue, it will need to contemplate the larger question of consolidation at the retail level, and how it may ultimately affect Connecticut businesses and consumers.
]]>Much attention has been paid to the impact on the lowering of corporate rates with the passage of the Tax Cuts and Jobs Act of 2017 (TCJA). The TCJA also has several provisions that will impact the beverage alcohol industry. While an in-depth analysis of the nearly 1000 page bill is beyond the scope of this article, below are the key highlights of changes to the federal excise tax, treatment of deprecation and the capitalization of interest requirements.
Excise Tax Reductions
The reductions to the alcohol excise tax rates applicable for wine, beer and spirits is the most direct and industry specific benefit of the TCJA.
Craft brewers will see a significant reduction with rates for malt beverages being slashed in half, from $7.00 per barrel to $3.50 for the first 60,000 barrels. Larger producers will see a reduction from $13.50 per barrel to $13.34 for production from 100,000 to 6 million barrels. Additionally, the rules of tax free transfers between brewers have been relaxed to include transfers where there is no common ownership, but the receiving brewer takes responsibility to pay the excise tax.
Wine producers and importers will also benefit through a reclassification of wine rates. Under prior law wine with an alcohol content of 14% or less was taxed at the rate of $1.37 and wine with alcohol content over 14% was taxed at $1.57 per gallon. Under the TCJA the allowable alcohol content for the lower rate is increased to 16%. More significantly, the credit against the wine excise tax was modified to all wine producers and importers, including sparkling wine, to utilize the credit. The credit amount is no longer phased out. The credit is $1.00 for the first 30,000 gallons, $0.90 for the next 100,000 gallons and $0.535 for the next 620,000 gallons.
Spirit manufacturers were not left behind, with a significant benefit for small producers. The TCJA reduces the tax rate from $13.50 to $2.70 for the first 100,000 proof gallons and $13.34 for all proof gallons in excess of that amount but less than 22,130,000 proof gallons. Bulk manufacturers may now transfer spirits in approved containers other than bulk containers in bond without the payment of the excise tax.
For all three categories, the TCJA imposes certain “control group” rules to thwart circumvention of the reduced rates by dividing production among multiple entities.
The applicability of these provisions is limited to tax years 2018 and 2019.
Cost Recovery Provisions
While not specific to the alcohol beverage industry, the TCJA increases the benefits of accelerated deprecation under Section 179 of the Tax Code. Expenditures for capital items are usually subject to deprecation rules which require that the expense be apportioned over the useful life of the item. Prior law provided an exception that allowed taxpayers to elect to deduct the cost of qualifying property with an annual limit of $500,000 (adjusted for inflation for years after 2015), subject to reduction for property costing more than $2 million. The TCJA increases these amounts to $1 million and $2.5 million respectively for tax years after 2017. Further, the TCJA expands the definition of qualified real property to include improvements to nonresidential real property such as roofs, heating, ventilation, air conditioning, fire protection, and security systems
The benefit of electing Section 179 deprecation is that the deduction for capital expenses can occur in the same year the cash outflow occurs (subject to the limitations above); thus accelerating the tax savings. The expended limits will certainly assist craft producers and the expended definition of qualified real property will benefit all tiers including retailers who desire to make physical improvements to their premises.
Tax Accounting Method Provisions
The uniform capitalization (UNICAP) rules require certain interest expenses to be included in the costs of goods. Prior to the TCJA aging was included as part of the period of production. The TCJA excludes aging from the production period for the purposes of the UNICAP interest capitalization rule, allowing producers to deduct interest expenses attributable to a shorter production period. Like the excise tax reduction period, this change applies only to the tax years 2018 and 2019.
While the reduction in excise taxes has the most direct impact on the beverage alcohol industry, one must also become familiar with the myriad of changes affecting businesses in general to understand the impact on one’s own business.
]]>“We host a happy hour every Friday at work – we want to make sure we are not violating any laws.”
As a lawyer, I am often asked to assess issues of compliance with the law and the risks associated with certain activities. This question was somewhat unique because it raised issues not just of liquor law compliance but also of “social host liability” and work place/employer liability. After reviewing the issue with the client, we were able to suggest a simple and straightforward solution – hire a licensed caterer.
The first issue for consideration was how to deliver the alcohol to the premises. Arguably the company could simply go to a package store, purchase the alcohol and then provide it to the employees. After all, there was no plan to charge for the alcohol. However, the Liquor Control Act does raise concern since it not only restricts the sale of beverage alcohol, but also the distribution and dispensing of beverage alcohol with a permit in a place used by a “club, association, social or fraternal society …”
Second, there was the specter of social host liability. While historically Connecticut courts held that the responsibility for intoxication rested on the one consuming the beverage alcohol, the Supreme Court reversed that policy in the case of Craig v. Driscoll. The Connecticut legislature quickly overturned that decision when it abrogated a common law negligence claim in favor of strict liability under the Dram Shop Act by enacting PA 03-91. However, the holding in Craig –that the consumption of beverage alcohol does not break the chain of causation— remains good law. The net result is that a “social host” may be liable for the negligent service of alcohol.
Hiring a licensed caterer appeared to be the best way to solve the delivery problem and minimize exposure for negligent service. Caterers possess the lawfully permitted mechanism to distribute beverage alcohol, and also the trained professional staff to provide the service. Such would be the case not only for this employer, but also for anyone looking to host a party.
Are you looking to provide a solution to individuals and business with a similar problem? Here is a primer on the caterer’s permit.
What are the requirements of a caterer’s permit? Must be “regularly engaged in the business of providing food and beverages to others.”
What types of events are covered? Any activity, event or function for which a caterer is hired to sell and serve alcoholic liquor.
What is the permit fee? $450.00 annually.
Who may hold caterer’s permit? Almost all other permit holders, including a Manufacturer for Beer and a Manufacturer for Beer and Brew Pub permit. The only prohibition is a caterer may not otherwise hold manufacturer’s permit.
Where may a caterer serve? Any location not constrained by another permit.
Notice of location requirement. The holder of a caterer liquor permit shall, on a form prescribed by the Department of Consumer Protection or electronically, notify the department, in writing, of the date, location and hours of each event at which alcohol is served under such permit at least one business day in advance of such event.
What if I forgot to provide the notice or I received a last minute commitment? If the holder of a caterer liquor permit is unable to provide the required written notice due to exigent circumstances, such holder may provide notice by telephone of the date, location and hours of each event at which alcohol is served.
What exemptions apply?
No posted notice requirement pending application.
No storage facility is required.
The location at which the caterer may serve beverage alcohol is not “defined”.
Caterers do not have to hang their permits in plain view.
Caterers are a value-added service. When properly established, a caterer can provide professionally trained servers who are skilled in helping to limit exposure for their clients and the insurance to cover negligence.
]]>On June 6, just several weeks ago, U.S. District Court Judge Janet C. Hall dismissed all of Total Wine & Spirits claims in its case seeking to upend Connecticut’s regulation of the beverage alcohol industry. Nearly one year ago Total filed a lawsuit against the state of Connecticut seeking to invalidate three key provisions of the Connecticut Liquor Control Act, alleging they violate the Sherman Antitrust Act. Specifically, Total sought to invalidate the laws and regulations that establish “post and hold”, prohibit sales below the “minimum bottle” and price discrimination among retailers. The major Connecticut trade associations (The Wine & Spirits Wholesaler of Connecticut, the Package Store Association, the Connecticut Beer Wholesalers Association and the Connecticut Restaurant Association) moved to be made parties to the case to support the current laws. The State and the trade associations quickly sought dismissal of the suit, asserting that even if facts alleged by Total were true, they were not entitled to win judgment under the law. The Court sided with the State and the Trade Associations, finding that, even while giving Total every benefit of the doubt, the state’s requirements surrounding price filings, minimum bottle and prohibition against price discrimination do not violate the Sherman Antitrust Act.
The Court’s decision preserves, at least for now, Connecticut’s statutory scheme.
The Court’s decision clearly spells out its reasoning. The area of antitrust law is complex and evolving. Not every restraint of trade, no matter how anti-competitive its effect may be, automatically violates federal antitrust law. Whether the law by itself (unilateral), or the actions of private citizens in combination with the statue or regulation (hybrid), results in a restraint of trade determines whether such restraint is lawful (unilateral) or possibly lawful (hybrid). After determining the method of restraint, the court then applies the appropriate standard—a per se violation or a Rule of Reason analysis. Per se violations are actions which clearly have no justification and are automatic violations of the Sherman Antitrust Act. Where restraints might be justifiable, the Rule of Reason analysis looks at the relationship of the actors. Restraints which impact actors within the same tier (horizontal) automatically violate the Sherman Antitrust Act; while those that impose restraints between actors in different tiers (vertical) may well be lawful.
The Court determined that while Connecticut’s post and hold requirement may restrain trade among wholesalers, a prior Second Circuit case, Battipaglia, compelled it to apply the Rule of Reason analysis and therefore concluded the provision is lawful. The Court noted that recent cases from other federal circuits determined similar restrictions were unlawful under a per se analysis, notably TFWS (a similar action brought by Total in Maryland and decided in 2001).
Similarly, the Court determined that Connecticut’s Minimum Retail Price requirement, often referred to as minimum bottle, is a not a per se violation of the Sherman Anti-Trust Act. The Court, finding the restraint was vertical, applied the Rule of Reason analysis and held the provision does not violate the Sherman Antitrust Act.
The Court quickly dismissed Total’s price discrimination allegations on the basis that the restriction is not a hybrid restriction and as such does not violate the Sherman Antitrust Act.The June 6 decision, however, will likely not be the end of the story. By the time this article is printed, Total may have already initiated steps to challenge the decision through an appeal to the Second Circuit Court of Appeals. This would be the first stop before the United States Supreme Court. Significantly, the court’s holding in this case seems at odds with the holdings in two other relatively recent beverage alcohol cases, TFWS (another case brought by Total challenging Maryland’s statutory scheme) and Costco v Washington (a case brought by Costco challenging certain provision of Washington’s statutory scheme). Should the Second Circuit Court of Appeals follow the holdings of prior cases and uphold this decision, the case would then be ripe for consideration by the US Supreme Court to resolve the differing opinions among the circuits.
]]>While Connecticut’s Dram Shop Act applies to “sellers” of alcoholic beverage it does not apply to social situations. In Connecticut the general common law is that there no cause of action against one who furnished, whether by sale or gift, intoxicating liquor to a person who then voluntarily became intoxicated and in consequence of his intoxication injures another. The rule, from the 1967 Connecticut Supreme Court case of Nolan v. Morelli, was based on the obvious fact that one could not become intoxicated by reason of liquor furnished him if he did not drink it, based on the idea that intoxication is the choice of the consumer, not the person furnishing of the liquor. Based upon this reasoning, actions against the social host have been limited, but attitudes about responsibility are evolving.
Minors; an evolving standard.
The law evolves to address modern problems. After Nolan, Connecticut Courts created the “minor” exception, which was intended to ensure that a social host or purveyor of alcohol remains liable for injuries to intoxicated minors or any innocent third parties they injure.. In a 1988 case captioned Ely v. Murphy, the Connecticut Supreme Court recognized that minors do not possess the best judgment in the context of the consumption of alcohol, so one who provides alcohol a minor could be held responsible for any injuries the minor causes. The Court remarked: “These and similar statutes [criminal statute concerning providing alcohol to minors] reflect a continuing and growing public awareness and concern that children as a class are simply incompetent by reason of their youth and inexperience to deal responsibly with the effects of alcohol. This growing public awareness, as reflected by the legislature’s frequent, recent amendments to the applicable statutes, causes us to conclude that common law precepts in this area also warrant reexamination.”
The consumption habits of minors changed in response to higher drinking ages and stricter enforcement moving them from on-premises establishments to “house parties.” To combat this shift in consumption practices, in 2012 Connecticut Legislature enacted a revised and greatly enhanced social host law in Connecticut. The act was entitled: “AN ACT PROHIBITING CERTAIN PERSONS FROM ALLOWING MINORS TO POSSESS ALCOHOLIC LIQUOR IN DWELLING UNITS AND ON PRIVATE PROPERTY.” This act prohibits anyone who owns or controls private property, including a dwelling unit, from recklessly, or with criminal negligence, permitting anyone under age 21 to illegally possess alcohol in the unit or on the property. The act also requires any such person who knows that a minor possesses alcohol illegally to make reasonable efforts to stop it. The act extends liability for failure to halt possession to a person who acts recklessly or with criminal negligence. The act increased the penalty for a violation to a class A misdemeanor, punishable by a maximum one year imprisonment or up to a $2000 fine.
Where do adults fit in?
In 2003 the Connecticut Supreme Court moved away from the underlying assumption that the consumption of alcohol by an adult is a truly voluntary act .In the case of Craig v. Driscoll, the Supreme Court held that a Seller of alcohol could be liable for injuries caused by its negligent service of alcohol. The Court reasoned that the Dram Shop Act was not the exclusive remedy for one who was injured by an intoxicated person. This departure from the common law rule was short lived as the legislature moved quickly to amend the Dram shop Act to prohibit negligence actions against sellers of alcohol. However, the amendment to the Dram Shop act did not seek to prohibit causes of action asserting more culpable conduct such as reckless act or intentional acts, thus leaving open the possibility of these types of actions being brought against sellers of alcohol.
More significantly though is the Court’s underlying reasoning it relied on in reaching its conclusions in the Craig case. The Court acknowledged the “the horrors that result from drinking and driving” and “adaptability of the common law to the changing needs of passing time” when it made the policy decision to hold sellers liable for their negligent sales to intoxicated persons.
The unanswered question is whether or not the Courts will move to hold a social host liable for damages caused by (or to) an intoxicated adult. Though there is no such case pending in Connecticut, the demonstrated willingness of our Courts to consider expanding liability for the negligent service of alcohol should alert permitees of all types to be mindful this evolving issue.
]]>One of the first questions that I often ask clients who are applying for liquor licenses is: Who is going to be the permittee? The client often rhetorically replies: “What is a “permittee”?. The answer is neither clear, nor straight forward.
Strangely enough, Connecticut’s Liquor Control Act does not define “permittee.” One is left to peruse the 115 state statues and nearly an equal number of regulations to determine the responsibilities and duties of a permitee to the Department of Consumer Protection. Even more difficult, however, is to assess the legal liability the permittee may face under Connecticut’s Dram Shop Act when there is a sale to an intoxicated person.
Generally speaking, the permittee is a person who is vested with the responsibility for overseeing the sale and distribution of beverage alcohol on a permitted premises. The permittee need not be the owner of the business, as the “backer” is the “proprietor” of the business that holds the license. The Liquor control Act, however saddles the permit with the responsibility to ensure the proper and lawful distribution of beverage alcohol. Several examples include:
Yet despite these weighty obligations, the permittee has no pecuniary interest in the permit, as it is the Backer who owns the licensed business. In fact, a review of the sections of the Liquor Control Act which establish the various licenses types reveals that the authorization to sell alcohol refers to the permit type not the permittee. By example the section relevant to package stores provides: “A package store permit shall allow the retail sale of alcoholic liquor…”
Furthermore, a permittee can be replaced at-will by the backer. When discharged the permittee is prevented from removing “his permit” from the permit premises (Conn reg. § 30-6-A6a). Rather, the permittee (and the backer) are to notify the Department of the permittee’s removal and within 60 days the Backer must make application to the department for a substitute permittee.
While the Liquor Control Act imposes clear liability on the permittee for regulatory violations of the Act, violations of the Dram Shop Act are not as clear. The Dram Shop Act CGS §30-102, imposes liability on “any person…[who] sells any intoxicated liquor to an intoxicated person …” This imposition of liability is different from all that under the Liquor Control Act in that liability is imposed on the seller and does not refer to the permittee at all.
The Courts, however often take a remedial view of this statute. In one case the Connecticut’s Appellate Court allowed a case to proceed against a permittee where the plaintiff provided the statutorily required notice only to the corporate backer and not the permittee.
Current law is unclear as to whether or not a permittee will be held liable for violations of the Dram shop Act by mere virtue of holding the title of permittee. The Connecticut Superior Court in Shafer v. Sullivan (41 Conn. L. Rptr. 403, 404), declined to find “that a permittee, sued only in the capacity of permittee, is personally liable for the establishment’s reckless behavior [in serving alcohol to the decedent].” On the other hand, in Swift v. My Brother’s Place, (14 Conn. L. Rptr 317, 320) the Superior Court found that a permittee was liable for the reckless actions of his employees.
In short, holding the position of “permittee” on a liquor license carries with it certain liability for violations of the Liquor Control Act in the sale of beverage alcohol. It also may result in the imposition of personal liability under the Dram Shop Act. While financial exposure under the Dram shop Act can be limited through the use of insurance, the selection of the permittee is a significant decision requiring careful consideration.
]]>I recently received an advertising mailer from a large retailer. It was professionally prepared, with lots of color photos and all the hype of a good political campaign piece. But it made me wonder, does the mailer comply with the law?
While the Federal Alcohol Administration Act vests the Alcohol and Tobacco Tax Trade Bureau with jurisdiction over advertising by manufacturers, suppliers and wholesalers, the states have primary jurisdiction over advertising by retailers.
The Connecticut General Statues contain two brief prohibitions on advertising. The first is that no electric or neon sign advertising any registered brand shall be on the outside of the permit premises. The second prohibits any advertising which might deceives a customer as to the nature, quality or quantity of the beverage alcohol.
The statute also authorizes the Department of Consumer Protection to adopt regulations to enforce these provisions. The regulations are very detailed. Like the Federal regulations, Section 30-6-A30 of the Connecticut Regulations set forth certain mandatory statements which must be included in any advertisement. They include:
Advertisements by retailers that only refer to the availability of alcoholic liquor and do not specifically mention an alcohol brand do not have to comply with the mandatory statements.
The mandatory statements required by the Regulations must be conspicuous and readily legible. The regulations further specify the mandatory statement shall:
The Regulations go on to, in Section 30-6-A31a, to set forth certain restrictions. The regulation prohibits:
The Regulation further prohibits any cooperative advertising as between a producer, manufacturer, bottler, importer or wholesaler and a retailer of alcoholic liquor.
]]>As American’s waist lines have bourgeoned in recent decades and the impact on American’s health care costs become ever more evident, public health officials have attempted to respond. One early response was the Nutrition Labeling and Education Act passed in 1990 which resulted in the now familiar nutritional fact label required on certain packaged food items.
What does food labeling have to do with alcoholic beverage you may ask? The answer is somewhat convoluted –Obama Care. The Patient Protection and Affordability Act of 2010 (more commonly referred to as Obama Care) expanded the FDA’s nutritional labeling authority and expanded it to include foods sold in chain restaurants and vending machines. As required by Act, the FDA in 2011 embarked on the rule making process to implement nutritional labeling requirements for “chain restaurants.” The proposed rule was published on April 6, 2011 and the official comment period ended 90 days later on July 5, 2011. After roughly a 3.5 year review, the final labeling rule appeared in the December 1, 2014 Federal Register. In summary the new rules require that all “chain restaurants” provide certain nutritional information for all regular menu items – including alcoholic beverages. Compliance with these new rules is delayed, however, until December 1, 2015. This article will brief summarize those requirements.
Yet, not all restaurants are covered. These new federal rules only apply to “a restaurant or similar retail establishment must be part of a chain with 20 or more locations doing business under the same name (regardless of the type of ownership of the locations) and offering for sale substantially the same menu items.” However, a restaurant or similar retail food establishment that does not satisfy these criteria may choose to be covered by the rule by registering with FDA using a process established in the rule. Equally as significant is that individual states are free to impose similar, or even different requirements on uncovered establishments – that is restaurants with less than 20 locations and those who have not chosen to voluntarily comply with the new rules.
The new rules treat alcoholic beverage as a “food.” As the FDA stated in response to the comments it received: “The final rule does not provide a general exemption for alcoholic beverages. As we stated in the proposed rule, alcoholic beverages are ‘food’ under the FD&C Act. Section 201 of the FD&C Act defines “food” to include ‘articles used for . . . drink for man,’ ‘for the purposes of this Act.’”
While alcohol beverages are covered by the new rule, not all drinks will require the nutritional content disclosures. The reason for this is that the new rule only applies to “standard menu items” and “self-serve” items. However, not all beverage alcohol drinks are created equal. The new rule does not apply to a beverage alcohol drink ordered by a customer, but not list on a “menu.” Thus, by example a “specialty margarita” listed on a “standard menu” of drinks must have the nutritional facts disclosed on the menu, but a “margarita” ordered by a customer does not. In making this distinction, the FDA reasoned that “…it is unclear whether covered establishments could provide nutrient content disclosures for alcoholic beverages on display behind a bar that would assist consumers in making informed and healthful order selections.” The FDA continued, “… establishments often serve such beverages in mixed drinks, and the amount of each alcoholic beverage and other mixers they serve to consumers may vary depending on the drink ordered.” Yet, the disclosure of the nutritional information is not required for temporary menu items appearing on the menu for less than 60 days per calendar year.
The new rules require that the calorie information for a serving of an alcoholic beverage must be provided next to the corresponding item. Additional nutrient information must be made available on request and each menu or menu board must state “additional nutrition information available upon request.” Furthermore, the menu must also provide the following statement on the bottom of each page regarding recommended daily caloric intake: “2,000 calories a day is used for general nutrition advice, but calorie needs vary.” A separate statement is required for menus/menu boards targeted at children.
Significantly the new rule covers “beverage lists.” Further guidance as to the scope of what is encompassed by “beverage lists” was not provided by the FDA. However, the application of this new rule to “table tents”, wine lists and “drink lists” seems to be contemplated by the FDA based upon its general discussion of the inclusion of beverage alcohol within the requirement for this new rule.
This article is a brief general, summary of a complex and significant piece of new regulation. The reader should refer to the regulation itself for the exact requirements and for specific advice should consult an attorney or other appreciate consultant.
© Peter A. Berdon, Esq. peter.berdon@bymlaw.com www.bymlaw.com
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