How Virginia's Ratio Works for Mixed Beverage Licensees
Settle in, friend. This is going to take a minute.
Virginia requires anyone who wants to sell, manufacture, or distribute any alcohol to obtain a license from the Virginia Department of Alcoholic Beverage Control (ABC). There are a dizzying number of different license types available, including for “Equine Sporting Events,” “Canal Boat Operators,” and “Art Instruction Studios,” with different rights and privileges, along with rules and restrictions.
The type in question here, defined by §4.1-210 of the Code of Virginia, is what Virginia calls the “Mixed Beverage License,” which permits restaurants to sell distilled spirits and drinks made with such. While separate from a Beer License, Wine License, or Beer and Wine License, an establishment may not hold a Mixed Beverage License without also holding a Beer and Wine license.
As a condition of maintaining a Mixed Beverage License though, restaurants must meet a standard not required for holding a Beer and/or Wine License. While being a restaurant and holding any of these licenses obligates you to sell a certain minimum dollar amount of food, set by the ABC Board, every month, holding a Mixed Beverage License also requires food and nonalcoholic beverage sales to make up at least 45% of gross receipts from the gross sales of mixed beverages and food. “Sales” here currently means the price a restaurant sells the item for, not the profit on it or the amount they pay for it wholesale.
Let’s break it down to a very oversimplified example. Joe only sells three items at his restaurant: a beer for $5, a whiskey for $5, and a Smithfield ham sandwich with a side of french fries for $8. As long as Joe sells 500 sandwiches in a month, he can sell as many beers as his customers will buy. Smithfield ham is famously salty, so Joe sells 1,000 beers to customers to help wash down the 500 sandwiches he sells every month. For some strange reason, nobody orders his whiskey:
44.5% from food, 55.5% of it from beer, 0% from distilled spirits. Joe is fully compliant with Virginia law under this scenario. In fact, he would still be compliant if he sold 1,500 (65% receipts from beer), 2,000 (71% receipts from beer), or even 5,000 (86% receipts from beer) beers to go with his ham sandwiches. As long as he sells $4,000 worth of the right kind of food, he’s made in the shade, because there is no ratio requirement for wine and beer.
Turns out though, nobody ordered Joe’s whiskey because he left it off the menu board. He chuckles to himself as he picks up a marker and writes “Whiskey $5” at the bottom, and the response is instant. This month, he sells 1,000 whiskeys, 500 ham sandwiches, and no beers because everyone is so excited about the new whiskey offering. Now suddenly, even though he sold exactly as much alcohol and food as he did last month, Joe’s little enterprise is in serious trouble under Virginia law just because that alcohol was spirits instead of beer:
44.5% from food, 55.5% from distilled spirits, 0% from beer. When he fills out his monthly Mixed Beverage Annual Review (MBAR) form to submit to Virginia ABC, the fact that people chose to buy that much whiskey this month makes him guilty of a misdemeanor. Joe is subject to steep fines and having his license to sell any alcohol suspended or even revoked.
The problem here is clear. Under existing Virginia law, you can get in trouble because of what your customers want to buy.
It doesn’t have to be this severe though. If HB219 is signed into law, the ratio drops by 44% from its present level to 25%, giving restaurant operators more freedom to decide how much whiskey, beer, and ham they want to sell without running afoul of ancient rules.