Category archives for “Business Considerations”

Dan Kramer Featured in The San Francisco Examiner!

February 03, 2014

Strike & Techel’s own Dan Kramer was featured in an article in Sunday’s San Francisco Examiner. Dan was interviewed for the article “Want to be in the booze business in SF? Better know the law” in which he discusses his experience in the alcoholic beverage industry, including the complications and expenses of obtaining a retail license in San Francisco, California promotional issues, as well as distribution and direct shipping. As Dan pointed out, alcoholic beverage legal issues can not only be complicated, but they are often not on people’s radar as they venture into the industry. If you’re just getting started in the industry or have any questions about retail licensing, distribution, direct shipping, or just about anything else in the industry, call Dan or one of the other attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved


Getting Started in the Business: Licensing

December 12, 2013

This blog entry is part of a continuing series discussing important steps to get started in the alcoholic beverage industry. Once you have pinpointed a location for your business (discussed in a previous post, here), you will need to obtain a license, or a combination of licenses, before you commence operations. To determine what type(s) of license(s) you need, here are some answers to questions you may be asking:

* Do the Tied-House Laws Permit Me to Hold the Licenses I Want? Federally and across all states, “tied house” laws generally prohibit the same person or entity from having an ownership interest in alcohol beverage businesses in more than one of the 3 tiers -manufacturing/importing, distribution and retail. (To learn more about tied house laws, review this post.) However, that restriction is far from absolute. Many statutory exceptions have been carved out of the 3-tier system to permit cross-tier licensing and the resulting patchwork of exceptions can be difficult to comprehend. For example, in California, wineries can also own restaurants (subject to restrictions) and certain off-sale retail stores. Small breweries (less than 60,000 barrels/year) can own on-sale retailers but large breweries cannot. Beer and wine wholesalers cannot also be retailers, unless they sell only wine through the retail store. Other states have their own set of hard-to-explain exceptions.

* What Does My License Permit Me to Do? The general rule is that manufacturers sell to wholesalers; wholesalers sell to retailers; and retailers sell to consumers. But this, too, is riddled with exceptions. California wineries and breweries can sell their products directly to retailers and consumers without using a distributor, but distilled spirits manufacturers can sell only to distributors and cannot themselves hold a distributor license. Rectifiers, on the other hand, can act as their own distributor and sell their products – and spirits products made by anyone else – directly to retailers. Moreover, you may need more than one license to operate your business. For example, if you are going to be operating a distillery, you will need a Type 4 (Distilled Spirits Manufacturer’s license), and a Type 6 (Still) license. If you are importing distilled spirits from outside of California and distributing them to retailers you’ll need a Type 12 (Distilled Spirits Importer), and a Type 18 (Distilled Spirits Wholesaler). California issues dozens of different licenses so it is important to know exactly what you want to do, which licenses are needed to accomplish it, and whether you are eligible to hold them.

* What are the Processing Times to Obtain a License? In California, it takes about 90-120 days to process an application for a new license, and slightly less time to transfer an existing license at a premises that is already licensed. It will take longer to process an application that is incomplete, contested by neighboring residents or the local authorities, or filed incorrectly. Also keep in mind that the ABC cannot issue a license until it has received confirmation from the City/County that all required use permits have been obtained. Each applicant will be assigned a local ABC investigator to handle the application until the process is completed. Currently, U.S. Alcohol Tobacco Tax Trade Bureau (“TTB”) licenses are processing in about 90 days, similar to California licenses.

* May I Obtain a Temporary Permit? Provided that you are transferring an existing license at an already licensed premises, the California ABC may grant a temporary permit so you may operate your business while the license transfer application is being processed. A temporary permit is not available in connection with applications for new licenses or applications to transfer existing licenses to a premises that has not been previously licensed.

* What Are the Costs Involved? Depending on what type(s) of license(s) applied for, the cost can vary considerably. A schedule of license costs is available here. Some retail licenses are limited in numbers and must be purchased on the open market. Prices for these licenses vary greatly by type and location. For instance, a Type-47 (On-sale general eating place) may sell for $200,000 in San Francisco, whereas the same type of license in Fresno County currently only costs $12,000.

In conjunction with your ABC application, you may also need to obtain other federal, state or local licenses/permits. In California this may include, for example: federal licenses through the TTB; a certification from the Secretary of State that you are qualified to do business in the state; and a sales tax permit from the State Board of Equalization.

Contact one of the attorneys at Strike & Techel if you have questions about applying for a license to get started in the alcohol beverage business.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·


Getting Started in the Business: Location

December 02, 2013

This blog entry is part of a continuing series discussing important steps to get started in the alcoholic beverage industry. If you intend to obtain an alcoholic beverage license for your business, you’ll need to have a location for the business before you apply. In selecting a location, you should consider the following factors.

State: Each state has different licenses available, charges different fees for its licenses, and applies different rules to its licensees. Further, some states move faster than others in issuing licenses. Once you’ve settled on a business model, you should choose a state that is favorable to your model and where you can get licensed on a schedule that works for your launch plans.

Zoning and Lease: Check with the local planning department to make sure the location that you are considering is properly zoned for the proposed activity. If it is not properly zoned, the process to obtain an exception can be long, expensive and unpredictable, so proceed with caution. If you must enter a lease before applying for an alcoholic beverage license, be sure to include a provision that allows you to vacate the lease if you are unable to obtain the desired alcoholic beverage license at the location.

Limited Availability: In some localities and for some license types, the number of available licenses is limited. If you cannot obtain a new license from the alcohol regulatory agency and have to buy one on the open market, prices may vary widely depending on supply and demand. This is particularly common in densely populated areas. Be aware that a slight change in location can have a large impact on the availability and cost of the license you need.

Consideration Points: Though each state is different, most states do not want alcohol businesses to be close (within 500 ft.) to churches or schools. If there are residential neighbors near your proposed location, they will also be given an opportunity to oppose your license application. Try to determine if your business will be welcomed by the local police department and residents. If local law enforcement does not support your project, you may face an uphill licensing battle. Moreover, sometimes an active anti-alcohol neighborhood group can delay or even derail a licensing project. Typically, a large poster-sized notice announcing your application will be posted while the license is pending, so if you elect to license your home, be prepared for curious neighbors.

The most important consideration in choosing a location for your business is deciding where you want/need to be located. For example, where do you want to spend your time? Where do you want to make most of your sales? Do you need to have access to a warehouse or will an office suffice? What sort of staffing will you need to operate the business and is it available within the local labor pool? Are economies of scale possible by sharing warehousing or production facilities?

Contact one of the attorneys at Strike & Techel if you have questions about things to consider when choosing a location to get started in the alcohol beverage business.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·


Texas ABC Releases Advisory on Third Party Marketers

June 23, 2013

The Texas Alcoholic Beverage Commission (“TABC”) just released Marketing Practices Advisory MPA056, available here, which addresses the use of third party advertisers and payment processors by out-of-state wineries that hold permits to ship direct to Texas consumers (“Direct Shippers”). The Advisory provides similar guidelines to those provided by the California ABC in its 2011 Industry Advisory, which we commented on here. The use of third party providers by wineries has been a hot topic since the release of the California advisory, but few states have provided guidance on the issue. Now that Texas has weighed in, it will be interesting to see if other states follow suit.

The TABC’s Advisory allows Direct Shippers to use third party service providers provided that certain conditions are met. As in California, the TABC’s touchstone is that the Direct Shippers remain in control. Key points include:

- Direct Shippers are always responsible for compliance with the TABC code and regulations, payment of taxes, and must remain “in control of the product and every stage of the transaction.”

- A third party provider may advertise wines and prices for a Direct Shipper.

- A third party provider may process an order for wine placed by a Texas consumer by redirecting the order to a Direct Shipper. The Direct Shipper may then accept or reject the order.

- Fulfillment should be managed by the Direct Shipper, and single packages containing bottles from multiple Direct Shippers are not allowed. Note: the TABC disfavors models where a third party provider acts as both an advertiser or payment processor and a warehouseman.

- A third party provider may collect payment once an order is accepted by the Direct Shipper, but the Direct Shipper must maintain control over the funds.

- There should be a written agreement between all Direct Shippers and their third party providers in order to demonstrate that the Direct Shipper remains in control. The TABC will ask a Direct Shipper for a copy of its agreement in the event that it has reason to investigate an arrangement with a third party provider.

We’ll keep you posted on any further developments on third party providers in Texas and other states. Call one of the attorneys at Strike & Techel if you have any questions about direct shipping or the use of third party providers.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·


Don’t Forgot About Zoning and the Local Planning Code

March 11, 2011

Starting a wine bar, or any other type of alcoholic beverage business, is more complicated that starting most businesses in California. There are dozens of different kinds of alcoholic beverage licenses, entity formation and ownership issues, key notification requirements and what can feel like a million other boxes to check. Sometimes, all the ABC regulations become so overwhelming that people forget about the basics—like making sure there are no zoning or planning restrictions that would prevent one from operating the planned business in the place one hopes to open. Like all companies, alcoholic beverage businesses are subject to local requirements. If a space is not zoned correctly, or the planned use is not allowed in the space, the problem will take time and money to fix, if it can even be fixed at all. In San Francisco, neighborhoods like the Mission, the Haight and North Beach have extra restrictions relevant to businesses that sell alcohol. To avoid a dilemma, it’s best to ensure that the initial business plan includes an analysis of this issue before a lease is secured.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·


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