LANSING – MLBA provided testimony on Senate Bill 942, introduced by Senator Nesbitt, at today’s Regulatory Reform Committee hearing at 2:30 p.m. The legislation aims to provide liquor license holders with further financial relief and allows necessary acts that will help bars and restaurants throughout the state moving forward.
“The bill includes a number of important items for industry, including: cocktails to go, social drinking zones and allowing on-premises licensees to purchase an unlimited quantity of spirits from an off-premises retailer, said MLBA Executive Director Scott Ellis. “Our industry is ready to reopen safely and we will need some help to get the hospitality industry back on its feet.”
The legislation also expands the spirits discount for on-premises licensees, expands outdoor service areas, requires wholesalers to replace or refund expired products and allows for two-for-one pricing on alcoholic beverages.
“While public sentiment about the shutdown may differ depending on who you talk to, I think everyone, from the halls of the legislature to small communities throughout the state, understands the importance of helping those who need it most,” Ellis said. “Bars and restaurants were among the first businesses shuttered and will likely be some of the last to reopen. However, that eventual reopening does not mean things will go back to normal. It may take months or years to reach some sense of normalcy again. With that in mind, the items in Senate Bill 942 will surely help us get there.”
There are currently about 8,500 on-premises licensees throughout the state that range from bars to bowling alleys that have been adversely impacted by the COVID-19 shutdown. The hospitality industry is Michigan’s second largest economic sector in terms of employment and is estimated to be experiencing a loss of between $500 million and $1 billion per month.
ITEMS IN THE BILL:
- SEC. 205: Allowing on-premises licensees to purchase an unlimited quantity of spirits from an off-premises retailer temporarily and increase the allowable amount after the unlimited period ends.
- As you all know, we have endured spirits delivery problems for a long time prior to this pandemic and we were working to change this. The current purchasable amount is allowed by law is 9 liters (1 case of 12 fifths) per month from a retailer with no reporting required. However, licensees must present purchase documents to MLCC if requested. Adding the items in the bill does not violate the three tier system, as purchasing spirits from a retailer is already allowed via statutory exemption (similarly to how a manufacturer paying for the painting of a distributors truck is allowed via statutory exemption).
- It should also be noted that this is not a viable business model in the long-term for bars and restaurants. Bars that purchase from a retailer pay sales tax, the full 65% mark-up from the state, receive no 17% discount within that 65% and have to make a special trip to the store to purchase the spirits.
- Once bars and restaurants are allowed to reopen, they will likely face cash flow issues and will need to purchase smaller quantities of spirits when necessary. This flexibility will help many businesses, particularly small ones, stay in business and remain afloat upon reopening.
- SEC. 537(A): Allowing cocktails to go.
- Many states throughout the country have already passed similar legislation to allow this. Not only will it help businesses that are currently closed, but it will help all bars and restaurants boost their sales when they open. Many bars and restaurants are known for their specialty cocktails – it’s a creative aspect of the industry that patrons seem to love. So, if customers can’t get that experience in-house, we believe they should still get the chance to experience from their homes.
- Although we are an industry that prides itself on hospitality, we also understand the grim reality: many people will be hesitant to return to their local bars and, sadly, we may never see the crowds we used to see.
- There has been some pushback on this from those who deem cocktails to go unsafe, but purchasing a sealed cocktail to go is no different than purchasing a beer to go from a gas station. At the end of the day, our industry is heavily regulated and we know how to abide by the rules. As such, we should be treated as professionals. If we can safely serve people in our businesses, I think we can figure out how to safely serve them to drinks to go.
- SEC. 233: Expanding the spirits discount for on-premises licensees.
- Currently, on-premises licensees receive a 17% discount on spirits purchased from the state, which acts as the wholesaler and profits from a 65% mark-up on all spirits sold in the state. We are seeking to expand this discount to 30% until December 31, 2021 as a form of financial relief for bars and restaurants. The state’s liquor revolving fund has increased in revenue substantially every year for many years.
- Despite the closure of on-premises establishments, liquor sales have spiked considerably. In March, sales were up $14.7 million from the previous year – a 13% increase. The state can afford to give back to businesses that were closed without notice. In this scenario, the discount could help establishments make an extra dollar per drink – which is important when every penny counts.
- SEC. 551: Social Drinking Zones.
- This section allows for local governmental units to establish and designate social districts between on-premises licensees to create a commons area via permit where bars and restaurants can sell alcoholic drinks with some stipulations.
- These commons areas would not only help increase business for on-premises licensees but would also create safe open-air drinking areas for patrons. Bars and restaurants that receive a permit and participate with other bars and restaurants could also split entertainment costs to help attract customers.
- SEC. 538: Expanding outdoor service.
- Outdoor service areas like patios and decks have always been a draw for patrons who want to take their experience outside. These same areas will be even more important when establishments are allowed to reopen because they are generally deemed safer in terms of social distancing.
- Allowing businesses to establish and expand these areas without all the red tape that comes with the formal approval process from MLCC and local governing units, will help many businesses survive. Allowing the expansion of safe outdoor areas where guests can feel at ease would also give our industry professionals a sense of relief.
- SEC. 609(C): Wholesalers replacing/refunding expired beer and wine.
- Many wholesalers have already chosen to do this, however, we have received calls from members who are unaware of what is going to happen because they are not getting answers about pickups, replacements or refunds from their distributors.
- Many bars and restaurants purchased large quantities of product before St. Paddy’s Day and were then subsequently shutdown. Throughout the shutdown, wholesalers and off-premises licensees have remained open and in business. They have been negatively impacted, but not to the extent that on-premises licensees have. We strongly believe that all wholesalers should replace or refund out-of-date beer and wine for their on-premises accounts. Licensees will want to provide fresh product to their customers when they reopen – an extremely crucial time for impressing patrons.
- SEC. 1014: Two-For-One Pricing.
- Currently, on-premises licensees are not allowed to sell two-for-the-price-of-one drinks. The item in this senate bill would allow for two-for-one drinks, but not any higher number of drinks to be sold together for the same price.
- Allowing two-for-one deals will help on-premises licensees attract more patrons upon reopening.