How does the food and drink ratio work under current Virginia law?
Thanks to decades of regulatory soup, it’s no straightforward matter. Read this post for a full description of how the ratio works.
Why is the 45% ratio unfair?
It pointlessly discriminates between different kinds of alcoholic beverages. Restaurants are not penalized in any way for offering very expensive, high-end wines or beers to their customers and charging commensurately, but if they choose to offer unusual spirits and creative cocktails, they run the risk of breaking Virginia law through no fault except having products that customers want to buy. That’s wrong. Reducing the food ratio just a bit gives restaurant operators substantially more breathing room to innovate and create exciting destinations within Virginia.
Do other states have laws like Virginia’s which require food sales to make up a proportion of receipts?
Virginia is the only state in the nation which does not offer any sort of standalone bar or tavern license and requires food to make up a percentage of receipts. Some like Kansas have varying rules for food by locality, and some other states, like Colorado and North Carolina, require that food make up a percentage of receipts for restaurant licensees, but also offer alternative licenses that require no food sales. Even Utah offers club licenses that don’t require any food sales. Virginia’s way of regulating alcoholic beverages is completely out-of-step with the rest of the nation.
When did this 45% food requirement come into play?
In 1980. Yes, 1980. Blondie’s “Call Me” topped the charts, Sissy Spacek won the Best Actress Oscar for playing Loretta Lynn in “Coal Miner’s Daughter,” and the Virginia General Assembly set the terms for how much liquor restaurants in the Commonwealth could sell, just 12 years after selling liquor by the drink even became legal in Virginia. So it was quite a long time ago.
We explain some of the tortured history of the law in a blog post.
Why is this only a problem now, when the current ratio has been in place 35 years?
This ratio has been a problem for the entirety of its existence. A March 1979 story in the Washington Post, when the ratio was a slightly higher 50%, chronicled the frustrations of restaurant owners in grappling with the bureaucratese of meeting the arbitrary food sales target, and even defining what is and is not “food:”
“A mixed-beverage license application by Fritzbe’s […] was initially turned down by the ABC on grounds that most of the place’s food consisted of sandwiches, not meals. With the help of two dietitions who spoke highly of Fritzbe’s “meals between bread,” the owners finally prevailed and got their license.”
The issue is becoming much more urgent today, however, because of the changing tastes of consumers. Much as restaurant customers have clamored for pricier craft and micro brewed beers at their tables in recent years, they also have become more discerning drinkers of spirits, and are much more likely than they were in 1980 to prefer premium liquors. Restaurants face no potential downside in serving more expensive beers and wines to their clients, but their diners’ choice to purchase branded spirits can put the operator’s license and livelihood in jeopardy. That isn’t right, and it needs to change.
Isn’t it safer to have food available while people are drinking alcohol?
The food sales requirement for restaurants would only be reduced, not eliminated. That said, there is no economics, public health, or other published literature suggesting that local regulations requiring food availability have any impact on alcohol consumption whatsoever. The genesis of the food requirement was a moralistic attempt by the drafters of Virginia’s first liquor-by-the-drink regulations to severely circumscribe the number of operators that could be eligible. The same act even specified that mixed beverages could not be sold to patrons who were standing up. The ratio was not conceived as, and is not, a safety measure.
Why does HB219 also change the way the receipts are calculated from retail to wholesale?
Licensees should be the ones setting the prices they charge based on what’s best for their business, not what they have to charge to meet a useless regulatory goal post.
What if a business is causing problems in my neighborhood?
Local governments and Virginia ABC already have vast powers they can – and do – use to help bring bad actors into compliance, or even shut them down if no remedy is possible. The food sales requirement does nothing to help ensure the safety and peace of Virginia citizens.
Could this lead to more people drinking irresponsibly?
Virginia law, ABC regulations, and local ordinances all agree strongly that serving alcohol irresponsibly – to people that are intoxicated or underage, just for instance – must come with steep penalties. ABC already enforces these provisions of the Code of Virginia robustly.
Is the existing ratio even enforced by ABC currently?
Yes. Because current law says they must, Virginia ABC charged over 200 restaurants and assessed over $9.6 million in civil penalties for violations of the existing 45% rule between FY2007 and FY2014 (source). That’s a lot of money small business owners could be investing in their restaurants, their employees, and their communities.
Do we really need a new law to fix this problem?
Yes. The 45% requirement is written into §4.1-210 of the Code of Virginia. Virginia ABC must enforce this requirement as codified until this code section is altered.
Does cutting the ratio pave the way to traditional bars in Virginia, which would not be required to serve any food at all?
No, that’s not on the table. HB219 is about giving restaurants more freedom to give their customers what they want – not to legalize bars with no food service. That would require a separate piece of legislation.
Could reducing this ratio hurt existing Virginia restaurant owners and operators?
No. Restaurants that provide excellent customer experiences should thrive in Virginia, as they do in every other state in the union.
Is there any other pending legislation that might help relax the burden on mixed beverage licensees?
Yes. At the time of this writing, Delegate Albo has introduced HB171, which would keep the 45% ratio intact, but add the receipts from sales of non-alcoholic beverages like coffee, soda, and tea to the definition of “food” for the purposes of calculating the ratio. This would be helpful, but not nearly as helpful as reducing the ratio from 45 to 25 percent.
Could relaxing the ratio lead to more undesirable establishments in my town, county, or city?
Unlikely. Localities currently have, and will continue to have, extensive powers to regulate what kinds of businesses – especially those with ABC licenses – are permitted at what locations. In fact, you shouldn’t be surprised to see more of your existing restaurants experimenting with really clever cocktail programs when given the breathing room to do so, which is great news for Virginians that appreciate innovative food and beverages.
Isn’t this just a “giveaway” to restaurant owners?
Let’s be clear: restaurants are some of the lowest-margin, highest-risk ventures out there. Your local businesses, even the successful ones, are often scraping to make basic payments every month, yet the good ones are signature features of communities that make them attractive to live in and visit. It’s right to give them more freedom to operate how they choose.
Still have questions? Send us an email at firstname.lastname@example.org and we may add them as a FAQ entry here.
On board with cutting the required license ratio? Join us in taking action to start fixing this right now.