Title of Regulation: 3VAC5-50. Retail Operations (amending 3VAC5-50-110).

Statutory Authority: §§ 4.1-103 and 4.1-111 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: July 23, 2020.

Effective Date: August 8, 2020.

Agency Contact: LaTonya D. Hucks-Watkins, Legal Liaison, Virginia Alcoholic Beverage Control Authority, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4698, FAX (804) 213-4574, or email latonya.hucks-watkins@abc.virginia.gov.

Basis: Section 4.1-103 of the Code of Virginia authorizes the Board of Directors of the Alcoholic Beverage Control Authority to adopt regulations in accordance with the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia) and § 4.1-111 of the Code of Virginia. Section 4.1-111 provides the board with the authority to adopt reasonable regulations to carry out the provisions of the Alcoholic Beverage Control Act (§ 4.1-100 et seq. of the Code of Virginia), including the authority to promulgate regulations that require mixed beverage licensees to have food, cooked or prepared on the licensed premises, available for on-premises consumption until at least 30 minutes prior to an establishment's closing and that such food shall be available in all areas of the licensed premises in which spirits are sold or served.

Purpose: The purpose of this amendment is to be in compliance with the Code of Virginia as well as provide mixed beverage licensees with guidance as to the food availability requirements associated with their license. The amendment is essential to protect public health, safety, or welfare because it corresponds to the provisions of the Code of Virginia and reinforces the correlation between consumption of food and mitigating the intoxicating effects of alcohol as well as helping to ensure that mixed beverage licensees are meeting minimum food sales requirements.

Rationale for Using Fast-Track Rulemaking Process: The action is expected to be noncontroversial because it aligns exactly with § 4.1-111 B 22 of the Code of Virginia, which has been in force since 2018. Licensees have been complying with this standard now for some time already and therefore promulgating this regulation should not be controversial.

Substance: Subdivision D 4 is added to 3VAC5-50-110 and states that mixed beverage licensees shall have food, cooked or prepared on the licensed premises, available for on-premises consumption until at least 30 minutes prior to an establishment's closing and that such food shall be available in all areas of the licensed premises in which spirits are sold or served.

Issues: The primary advantage to the public and to the agency of this regulation change is that it will fulfill the requirements of the legislative mandate and ensure that the regulations are consistent with statute. There are no disadvantages to the public or the Commonwealth by promulgating this regulation.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Virginia Alcoholic Beverage Control Authority Board of Directors (Board) proposes to require that mixed beverage restaurant licensees have food, cooked or prepared on the licensed premises, available for on-premises consumption until at least 30 minutes prior to an establishment's closing. Such food would have to be available in all areas of the licensed premises in which spirits are sold or served.

Background. Mixed beverage restaurant licensees must already serve food that is prepared on the premises. The proposed amendment defines when the food must be available. The proposed text is essentially identical to Chapter 744 of the 2017 Acts of Assembly, which required the Board to promulgate this regulation.¹

Estimated Benefits and Costs. Of the 5,347 restaurants in the Commonwealth that have a mixed beverage restaurant license, it is not known how many already regularly serve food cooked or prepared on the premises until at least 30 minutes prior to closing. To the degree that costs or benefits result from this regulation, they are largely attributable to the 2017 legislative mandate.

Costs. Restaurants that have a mixed beverage restaurant license and do not already serve food cooked or prepared on the premises until at least 30 minutes prior to closing would have to either pay for food preparers or cooks to work longer, or close (and stop selling alcohol) earlier. Employing food preparers or cooks longer would increase costs for the restaurants, while closing earlier would reduce revenue.

Benefits. Food consumed in close proximity to drinking can lower the peak blood alcohol concentration.² To the extent that there are licensees that do not meet the current requirement and would meet it once the rule is in effect, and to the extent that patrons choose to take advantage of the availability of food when or near when they are drinking, the proposed amendment could lead to some patrons leaving the premises and driving with a lower blood alcohol concentration than they otherwise would have. Decreasing the degree of driver impairment would be beneficial.

Businesses and Other Entities Affected. The proposed amendment affects the share of the 5,347 restaurants in the Commonwealth that have a mixed beverage restaurant license and do not already regularly serve food cooked or prepared on the premises until at least 30 minutes prior to closing. These restaurants would have to either pay for food preparers or cooks to work longer, or close (and stop selling alcohol) earlier. Since adverse impact is indicated if there is any increase in net cost or reduction in net revenue for any entity, even if the benefits of the proposal exceed the costs for all entities combined, adverse impact is indicated for this action.

Small Businesses³ Affected: Types and Estimated Number of Small Businesses Affected. As stated above, the proposed amendment affects the share of the 5,347 restaurants in the Commonwealth that have a mixed beverage restaurant license and do not already regularly serve food cooked or prepared on the premises until at least 30 minutes prior to closing. Data are not available to determine how many meet the statutory definition of a small business.⁴

Costs and Other Effects. The affected small restaurants would have to either pay for food preparers or cooks to work longer, or close (and stop selling alcohol) earlier.

Alternative Method that Minimizes Adverse Impact. There are no clear alternative methods that both reduce adverse impact and meet the intended policy goals.

Localities⁵ Affected.⁶ The proposed amendment does not disproportionately affect any particular localities or introduce costs for local governments.

Projected Impact on Employment. The proposed amendment may moderately increase work hours for food preparers and cooks at restaurants that have a mixed beverage restaurant license and do not already serve food cooked or prepared on the premises until at least 30 minutes prior to closing.

Effects on the Use and Value of Private Property. The proposal would require affected restaurants to either pay for food preparers or cooks to work longer, or close (and stop selling alcohol) earlier. Employing food preparers or cooks longer would increase costs for the restaurants, while closing earlier would reduce revenue. Consequently, the value of these businesses may be moderately reduced. The proposed amendment does not affect real estate development costs.

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¹See http://leg1.state.va.us/cgi-bin/legp504.exe?171+sum+SB1216

²See https://www.bgsu.edu/recwell/wellness-connection/alcohol-education/
factors-that-affect-intoxication.html

³Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

⁴Ibid

⁵"Locality" can refer to either local governments or the locations in the Commonwealth where the activities relevant to the regulatory change are most likely to occur.

⁶§ 2.2-4007.04 defines "particularly affected" as bearing disproportionate material impact.

Agency's Response to Economic Impact Analysis: The Virginia Alcoholic Beverage Control Authority concurs with the Department of Planning and Budget's economic impact analysis.

Summary:

Pursuant to Chapter 744 of the 2017 Acts of Assembly, the amendment adds a provision requiring a mixed beverage licensee to have food available for on-premises consumption until at least 30 minutes prior to the establishment closing.

3VAC5-50-110. Definitions and qualifications for retail on-premises and on-premises and off-premises licenses generally; mixed beverage licensee requirements; exceptions; temporary licenses.

A. The following definitions shall apply to retail licensees with on-premises consumption privileges and mixed beverage licensees where appropriate:

1. "Bona fide, full-service restaurant" means an established place of business where meals are regularly sold to persons and that has adequate facilities and sufficient employees for cooking, preparing, and serving such meals for consumption at tables in dining areas on the premises.

2. "Counter" means a long, narrow surface with stools or chairs along one side for the patrons, behind which refreshments or meals are prepared and served.

3. "Designated area" means a room or an area in which a licensee may exercise the privilege of his license, the location, equipment and facilities of which room or area have been approved by the board. The facilities shall be such that patrons may purchase food prepared on the premises for consumption on the premises at substantially all times that alcoholic beverages are offered for sale therein.

4. "Dining area" means a public room or area in which meals are regularly sold at substantially all hours that alcoholic beverages are offered for sale therein.

5. "Meal" means a selection of foods for one individual, served and eaten especially at one of the customary, regular occasions for taking food during the day, such as breakfast, lunch, or dinner, that consists of at least one main dish of meat, fish, poultry, legumes, nuts, seeds, eggs, or other protein sources, accompanied by vegetable, fruit, grain, or starch products.

6. "Table" means an article of furniture supported by one or more vertical legs or similar supports and having a flat horizontal surface suitable for the service of meals, not immediately adjacent to the area where refreshments or meals are prepared.

B. Wine and beer. Retail on-premises or on-premises and off-premises licenses may be granted to persons operating the following types of establishments provided that meals or other foods are regularly sold at substantially all hours that wine and beer are offered for sale and the total monthly food sales for consumption in dining areas and other designated areas on the premises are not less than those shown:

1. "Boat" (on premises only). A common carrier of passengers for which a certificate as a sight-seeing carrier by boat, or a special or charter party by boat has been issued by the State Corporation Commission, habitually serving food on the boat:

Monthly sales .........................................................$2,000

2. "Restaurant." A bona fide dining establishment regularly selling meals with entrees and other foods prepared on the premises:

Monthly sales .........................................................$2,000

3. "Hotel." Any duly licensed establishment, provided with special space and accommodation, where, in consideration of payment, meals and other food prepared on the premises and lodging are habitually furnished to persons and which has four or more bedrooms:

Monthly sales .........................................................$2,000

In regard to both restaurants and hotels, at least $1,000 of the required monthly sales must be in the form of meals.

4. "Gourmet Oyster House." Any duly licensed establishment, located on the premises of a commercial marina and permitted by the Department of Health to serve oysters and other fresh seafood for consumption on the premises, where the licensee also offers to the public events for the purpose of featuring oysters and other seafood products:

Monthly sales of oysters and other seafood….....$1,000

C. Beer. Retail on-premises or on-premises and off-premises licenses may be granted to persons operating the following types of establishments provided that food is regularly sold at substantially all hours that beer is offered for sale and the total monthly food sales for consumption in dining areas and other designated areas on the premises are not less than those shown:

1. "Boat" (on-premises only). See subdivision B 1 of this section:

Monthly sales .........................................................$2,000

2. "Restaurant." An establishment regularly selling food prepared on the premises:

Monthly sales .........................................................$2,000

3. "Hotel." See subdivision B 3 of this section;

Monthly sales .........................................................$2,000

D. Mixed beverage licenses. Mixed beverage restaurant licenses may be granted to persons operating bona fide, full-service restaurants.

1. Service of food in a bona fide, full-service restaurant shall consist of serving the food to the table on plates or appropriate dinnerware, accompanied by appropriate tableware. The board may approve the issuance of a mixed beverage restaurant license to a buffet restaurant if (i) both alcoholic and nonalcoholic beverage service is provided at the table and (ii) actual sales show that the requirements of subdivision D 2 of this section are met.

2. Monthly sales of food prepared on the premises of a mixed beverage restaurant licensee shall not be less than $4,000, of which at least $2,000 shall be in the form of meals.

3. A mixed beverage restaurant licensee must have at least as many seats at tables as at counters.

4. A mixed beverage restaurant licensee shall have food, cooked or prepared on the licensed premises, available for on-premises consumption until at least 30 minutes prior to an establishment's closing. Such food shall be available in all areas of the licensed premises in which spirits are sold or served.

E. The board may grant a license to an establishment not meeting the qualifying figures in this section, provided the establishment otherwise is qualified under the applicable provisions of the Code of Virginia and this section, if it affirmatively appears that there is a substantial public demand for such an establishment and that the public convenience will be promoted by the issuance of the license.

F. Notwithstanding the above subsections A through E of this section, the board may issue a temporary license for any of the above retail operations in subsections A through E of this section. Such licenses may be issued only after application has been filed in accordance with § 4.1-230 of the Code of Virginia, and in cases where the sole objection to issuance of a license is that the establishment will not be qualified in terms of the sale of food or edible items. If a temporary license is issued, the board shall conduct an audit of the business after a reasonable period of operation not to exceed 180 days. Should the business be qualified, the license applied for may be issued. If the business is not qualified, the application will become the subject of a hearing if the applicant so desires. No further temporary license shall be issued to the applicant or to any other person with respect to the establishment for a period of one year from expiration and, once the application becomes the subject of a hearing, no temporary license may be issued.

G. An outside terrace or patio, the location, equipment, and facilities of which have been approved by the board, may be approved as a "dining area" or as a "designated area" in the discretion of the board.

H. Limited mixed beverage licenses may be granted to persons operating restaurants as defined in § 4.1-100 of the Code of Virginia, provided that food is regularly sold at substantially all hours that alcoholic beverages are offered for sale, and the total monthly food sales of food cooked or prepared on the premises for consumption in dining areas and other designated areas on the premises are not less than $2,000.