A-1-a. On-Sale Intoxicating Liquor License Food to Liquor Sales Ra - ice .
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CITY Of ClIANIIASSEN
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9 S Chanhassen is a Community for Life-Providing for Today and Planning for Tomorrow
H AS
MEMORANDUM
TO: Todd Gerhardt, City Manager I,
FROM: Kim Meuwissen, Office Manager
DATE: January 9, 2017
SUBJ: Discuss Amendments to Section 10-19(c) and 10-32(f) of
Chanhassen City Code Regarding On-Sale Intoxicating Liquor
Food to Liquor Sales Ratio
BACKGROUND
The 2014 omnibus liquor bill was signed into law on May 14, 2014. MN Statute 340A.404,
subd. 5 removed a requirement that wine licensees serve a certain amount of food to qualify.
The statute also increased the allowable percentage of wine to 24% alcohol. On October 10,
2016 the City Council approved Ordinance 615 increasing the allowable percentage of wine
from 14% to 24% alcohol to match the state's amendment. The food to liquor ratio was not
amended with this ordinance.
The city was recently contacted by a franchise holder for Growler USA, a microbrew pub and
restaurant that serves up to 100 American hand-crafted beverages on tap, regarding locating in
Chanhassen(brewing does not take place on site). The food menu includes appetizers, salads,
and sandwiches. Because the price of craft beers is generally higher than regular beers, they
would not be able to meet the city's current food to liquor sales ratio of 50%.
Currently, Chanhassen city code states:
"Section 10-19(c) Wine licenses. Wine licenses may be issued, with the approval of the
commissioner of public safety, only to restaurants having facilities for seating of at least 25
people at one time for the sale of wine not exceeding 24 percent alcohol by volume and for
consumption on the licensed premises only in conjunction with the sale of food. The holder of
a wine license who is also licensed to sell 3.2 percent malt liquor on-sale and whose gross
receipts are at least 50 percent attributable to the sale of food, may also sell intoxicating
malt liquors at on-sale without an additional license."
PH 952.227.1100• www.ci.chanhassen.mn.us• FX 952.227.1110
7700 MARKET BOULEVARD • PO BOX 147 • CHANHASSEN • MINNESOTA 55317
Mr. Todd Gerhardt
Food to Liquor Sales Ration
January 9, 2017
Page 2
"Section 10-32(f)Restaurants. No on-sale intoxicating liquor license shall be issued unless
at least 50 percent of the gross food and beverage receipts of the establishment will be
attributable to the sale of food. This requirement shall be regulated as follows;
(1) Each on-sale intoxicating licensee shall have the continuing obligation to have at least
50 percent of gross food and beverage receipts from the establishment during the
preceding business year attributable to the sale of food.
(2) In the case of a new restaurant, the applicant must make a bona fide estimation that at
least 50 percent of the gross receipts from the sale of food and beverages of the
establishment during its first year of business will be attributable to the sale of food.
(3) For the purpose of this section, "establishment" shall include the food and beverage
portion of a multi-service establishment. Financial records for the food and beverage
portion must be maintained separately from the records of the remainder of the
establishment.
(4) For the purpose of this section, "sale of food" shall include gross receipts attributable to
the sale of food items, soft drinks and nonalcoholic beverages. It shall not include any
portion of gross receipts attributable to the nonalcoholic components of plain or mixed
alcoholic beverages, such as ice, soft drink mixes or other mixes.
(5) The city may require the production of such documents or information, including but
not limited to books, records, audited financial statements or pro forma financial
statements as it deems necessary or convenient to enforce these provisions. The city
may also obtain its own audit or review of such documents or information, and all
licensees shall cooperate with such a review, including prompt production of requested
records.
(6) In addition to other remedies that it may have available, the city may place the license
of any on-sale intoxicating liquor licensee on probationary status for up to one year,
when the sale of food is reported, or found to be, less than 50 percent of gross food and
beverage receipts for any business year. During the probationary period, the licensee
shall prepare any plans and reports, participate in any required meetings, and take other
action that the city may require to increase the sale of food."
ANALYSIS
Assistant Planner MacKenzie Walters prepared the attached memo investigating local trends in
liquor licensing, and has determined that there is a trend for cities to replace food to alcohol sales
ratio provisions with stricter definitions of what types of establishments qualify as restaurants.
Mr. Todd Gerhardt
Food to Liquor Sales Ration
January 9, 2017
Page 2
RECOMMENDATION
Staff is looking for direction from the City Council regarding amending the city's 50% food to
liquor sales ratio for on-sale intoxicating liquor and wine licenses.
ATTACHMENT
1. Local Trends in Liquor Licensing memo from MacKenzie Walters dated January 9, 2016.
g:\admin\liquor\_code amendments\cc work session staff report 01-0902017 food vs liquor sales.docx
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A CITY OF ClIANHASSEN
N II A S S Chanhassen is a Community for Life-Providing for Today and Planning forTomorrow
MEMORANDUM
TO: Mayor& City Council
FROM: MacKenzie Walters, Assistant Planner
DATE: January 9, 2016
SUBJ: Local Trends in Liquor Licensing
Cities in Minnesota have limited the proliferation and location of bars and the negative
externalities that can be associated with alcohol-oriented venues by restricting alcohol licenses to
restaurants, hotels, clubs, entertainment venues, exclusive liquor stores, and similar entities. In
order to prevent restaurants from serving as de facto bars, many cities placed conditions on
liquor and wine licenses that required restaurants to have a minimum ratio of food to alcohol
sales. Some of these ratios were established by state statutes or modeled on state restrictions.
Since the passage of the "Surly Law"in 2011 which allowed for breweries to have onsite tap
rooms and growler sales, Minnesota's craft beer industry has rapidly expanded, with the number
of breweries more than doubling in the last five years, and many communities have adopted
ordinances to take advantage of state laws allowing cities to license brewery taprooms and
brewpubs. While these business can bring economic growth, they can also compete with
restaurants for customers. Brewpubs in particular serve a similar market and are often not subject
to sales ratio provisions.
As consumer preferences shift towards more expensive craft beers, restaurants are finding it
increasingly difficult to operate within the ratio requirements placed on liquor licenses. For
example, a patron ordering two five-dollar beers with a ten-dollar burger would meet
Chanhassen's 50-50 ratio; however, the same patron ordering two eight-dollar craft beers with a
ten-dollar burger would not. With an ever increasing share of consumers favoring higher price
craft beers, restaurants are struggling to meet their sales ratio requirements while providing the
type and variety of drinks expected by their patrons. In response to the changing market, the state
legislature removed Minneapolis and Saint Paul's required 60-40 food to alcohol sales ratio in
2013. Many adjacent communities have similarly amended their liquor licenses to remove or
loosen the sales ratio restrictions on their restaurants.
Although many cities have removed sales ratio clauses from their liquor licenses, the concerns
which originally prompted these ordinances remain. A large number of cities have created
definitions of restaurants which require full-service kitchens, the preparation and service of non-
PH 952.227.1100• www.ci.chanhassen.mn.us • FX 952.227.1110
7700 MARKET BOULEVARD • PO BOX 147 • CHANHASSEN • MINNESOTA 55317
Mayor& City Council
January 9, 2016
Page 2
prepackaged food,wait staff, minimum seating area or floor space, limits on the percentage of
floor area which can be bar space, or other standards that ensure the entities are food rather than
alcohol-oriented establishments.
In order to determine how peer cities have responded to these changes in the state's alcohol
regulations and market, staff examined the city codes of our Key Financial Strategy(KFS) cities
and Edina, which recently amended their code in response to this issue. Of the 12 cities
examined, only Chanhassen and Rosemount applied sales ratio limits to restaurants with on-sale
intoxicating liquor licenses. Half of the cities required wine to be served in conjunction with
food, and one city required that 51%of sales come from food for an on-sale wine license. Nine
of the cities required that alcohol be served with food for on-sale Sunday license. Provisions
associated with an on-sale 3.2%license where not typically linked to food service. All 12 cities
chose to further refine the state's definition of a restaurant for at least one category of alcohol
license,most commonly for on-sale wine and on-sale Sunday licenses. Eight cities chose to
further restrict the state's definition for on-sale liquor licenses. Of these eight cities, four
tightened the definition by stipulating minimum seating, and the other four stipulated minimum
seating and placed additional requirements, for example minimum kitchen facilities, on
establishments wishing to be classified as restaurants.
From the available data, staff has concluded that there is a trend for cities to replace food to
alcohol sales ratio provisions with stricter definitions of what types of establishments qualify as
restaurants.
ATTACHMENT
1. KFS Cities Survey of relevant liquor license restrictions.
g:\plan\mw\issue papers and reports(drafts)\liquor license attch\liquor licence attachment.docx
Survey of relevant liquor license restrictions
City Name/Class Number of On Sale Alcohol to Food Sales Definition of Restaurant Notes:
Chanhassen On sale intoxicating liquor No local limit 50-50 State's
On sale 3.2% No local limit Must prep and serve food State's
On sale wine No local limit Conjunction with food State's,25+seats With 50%food also can sell intoxicating malt liquors.
On sale Sunday No local limit Conjunction with food State's,50+seats
Chaska On sale intoxicating liquor 15* None Unspecified(presume state's) *Veteran's clubs don't count towards this
On sale 3.2% No local limit None Unspecified(presume state's)
On sale wine 15* None Unspecified(presume state's) *Veteran's clubs don't count towards this
On sale Sunday 15* Conjunction with food Medium/Large establishment food license,or 25+seats for wine *Veteran's clubs don't count towards this
Cottage Grove On sale intoxicating liquor 18+1 per 2.5k over 45k None State's
On sale 3.2% No local limit None State's
On sale wine No local limit Conjunction with food State's,25+seats Automatic On sale Sunday,gets on sale intoxicating if they have On sale 3.2%and 60%revenue is food.
On sale Sunday No local limit Conjunction with food State's,30+seats
Elk River On sale intoxicating liquor No local limit None State's,30+seats
On sale 3.2% No local limit None State's,30+seats
On sale wine No local limit Conjunction with food State's,25+seats Automatic On sale Sunday(unless council says otherwise),gets on sale intoxicating if have 3.2%and 60%revenue is food.
On sale Sunday No local limit Conjunction with food State's,30+seats
Inver Grove Heights On sale intoxicating liquor No local limit* None State's,50+seats and 750 sq.ft.,print menu,licensed,more than microwave *Limited to 18 for exclusive liquor store.
On sale 3.2% No local limit None State's,50+seats and 750 sq.ft.,print menu,licensed,more than microwave
On sale wine No local limit Conjunction with food State's,50+seats and 750 sq.ft.,print menu,licensed,more than microwave Automatic On sale Sunday,gets on sale intoxicating if they have On sale 3.2%and 60%revenue is food.
On sale Sunday No local limit Conjunction with food State's,50+seats and 750 sq.ft.,print menu,licensed,more than microwave
Lino Lakes On sale intoxicating liquor No local limit None State's,state license,food besides prepackaged warmed up
On sale 3.2% No local limit None State's,state license,food besides prepackaged warmed up
On sale wine No local limit Conjunction with food State's,state license,food besides prepackaged warmed up,25+seats Automatic On sale Sunday,gets on sale intoxicating if they have On sale 3.2%and 60%revenue is food.
On sale Sunday No local limit Conjunction with food State's,state license,food besides prepackaged warmed up,30+seats
Prior Lake On sale intoxicating liquor No local limit None State's,20+seats
On sale 3.2% No local limit None NA* Does not restrict entities that can have this license by business category.
On sale wine No local limit None State's,25+seats Automatic On sale Sunday,gets on sale intoxicating if they have On sale 3.2%.
On sale Sunday No local limit Conjunction with food State's,20+seats
Rosemount On sale intoxicating liquor(A) 2 None Unspecified(presume state's)
On sale intoxicating liquor(B) No local limit 51/25* Unspecified(presume state's) 51%if general restaurant,25%if restaurant attached to entertainment venue
On sale 3.2% No local limit None Unspecified(presume state's)
On sale wine No local limit 51%from food Unspecified(presume state's) Gets on sale intoxicating if they have On sale 3.2%
On sale Sunday No local limit None Unspecified(presume state's),30+seats
Savage On sale intoxicating liquor No local limit None State's,3,500 sq.ft.,wait staff,menus,food license,30+seats
On sale 3.2% No local limit None State's
On sale wine No local limit Conjunction with food State's Automatic malt liquor if wine,3.2%,and 60%sales from food.
On sale Sunday No local limit Conjunction with food State's
Shakopee On sale intoxicating liquor No local limit None State's,30+seats
On sale 3.2% No local limit None State's,30+seats
On sale wine No local limit None State's,30+seats Automatic malt liquor if wine,3.2%,and 60%sales from food.
On sale Sunday No local limit None State's,30+seats
Stillwater On sale intoxicating liquor No local limit None State's,25+seats
On sale 3.2% No local limit None State
On sale wine No local limit None State's,25+seats Automatic malt liquor if wine,3.2%,and 60%sales from food.
On sale Sunday No local limit Conjunction with food State's,30+seats
Edina On sale intoxicating liquor No local limit None State's,full service kitchen,30+seats,max 15%seating is bar,kitchen open
On sale 3.2% No local limit None State's,full service kitchen,30+seats,max 15%seating is bar,kitchen open
On sale wine No local limit None State's,full service kitchen,30+seats,max 15%seating is bar,kitchen open Automatic malt liquor if wine and 3.2%
On sale Sunday No local limit None State's,full service kitchen,30+seats,max 15%seating is bar,kitchen open