Liquor-license rules for restaurants eased

Yvette Armendariz The Arizona Republic Mar. 15, 2006 12:00 AM

Arizona restaurant owners may no longer be at risk of losing their liquor licenses if their food sales fall below 40 percent of overall sales.

The House voted 32-28 late Monday to relax the rules for revoking a restaurant's liquor license. Under House Bill 2740, a restaurant whose food sales fall below 30 percent can lose its license immediately.

Restaurants with at least 37 percent of their revenue from food sales will have a year to bring up their food sales. If they don't, they may seek permission to continue to serve liquor if they meet other conditions.

Restaurants with food sales between 30 percent and 37 percent also would be permitted to seek permission to continue serving alcohol under specific rules. The bill now goes to the Senate.

The added time to increase food sales is considered a huge win for restaurant owners, but some community groups are worried.

In these days of $12 martinis and $300 bottles of wine, it's not uncommon even in a pricey restaurant for the alcohol bill to exceed the food bill, said Bill Weigele, president of the Arizona Licensed Beverage Association.

"To make a restaurant a bar is silly," he said.

Steve Chucri, president and chief executive officer of the Arizona Restaurant and Hospitality Association, said owners have passed along higher alcohol prices, but they haven't been able to increase food costs much because of price sensitivity and intense competition. The result is that more restaurateurs are finding it difficult to make the minimum 40 percent in food sales.

The bill would give them time to increase their food sales rather than lose their license or pay for a more expensive bar license, he said.

"When you look at an industry with razor-thin profits, it means a lot," he said.

Steve Dreiseszun, president of the F.Q. Story Preservation Association in Phoenix, said relaxing the food-sale ratios can change a neighborhood's feel. Too much of a break essentially turns a restaurant into a bar.

"We really don't need a lot more bars in neighborhoods," he said.

But he is most disappointed that the legislation changed drastically with nearly no input from neighborhoods. "We really don't know what is being voted on," he said.

"It was a way to help some small businesses out," said Rep. Michele Reagan, R-Phoenix, who sponsored the bill.

She said the bill upset some cities because of concerns that it would lead to large numbers of new bars but that the intent is to create a temporary break for restaurants clearly focused on serving food that might otherwise go out of business.

Currently, restaurateurs who fail to meet the food-sales requirement are fined and given three to six months to buy a bar license if they plan to continue serving alcohol, said Sgt. Wes Kuhl, a spokesman for the state's Department of Liquor Licenses and Control.

Those Series 6 bar licenses cost as much as $95,000 in Maricopa County, compared with $2,000 for a Series 12 restaurant license.

Restaurateurs can challenge the state's food-sales audit. If the restaurant loses the challenge, it loses its liquor license, Kuhl said.

Generally, the state allows a restaurant a year of operation before it is audited, he said. An audit may be triggered by complaints that the restaurant isn't making 40 percent of its sales from food.

About 7,400 restaurant liquor licenses are in the state's database. Bar owners have long tried to qualify for restaurant licenses because they cost less. Industry officials say the relaxed provisions of HB 2740 won't lead to a flood of new bars.

To keep their liquor licenses, restaurants will be required to have food sales of at least 30 percent, a menu consistent with a restaurant operation, dance floors of no more than 10 percent of public floor space, and pool tables, arcade games, bar stools and similar seating of no more than 20 percent of public floor space. The establishment also may not use words such as "bar," "tavern," "pub," "lounge" or "cantina" in its name.

If local governments object to a business continuing as a restaurant, the liquor board will hold a hearing.

The original bill pushed for the creation of a separate grill license, which would have required at least 27 percent of sales from food.

The liquor and restaurant associations opposed it, saying it would dilute the value of a bar license.