For decades, Virginia has forced bars and restaurants in the commonwealth to jump through a costly and pointless hoop. It's time to give them a break.
The antiquated rule requires establishments to make up at least 45 percent of their revenue from food and nonalcoholic beverages. On top of that, they have to bring in at least $4,000 a month in food sales, and half of that must be from "substantial entrées."
Restaurateurs (along with caterers and private clubs) have not been happy with these requirements—and shouldn't be. The rules impose a huge paperwork burden. Every year the establishments have to submit a Mixed Beverage Annual Review to the state proving they're in compliance. They also have to submit an inventory list of all the booze they have on hand at the end of the year.
This is irksome enough. But now restaurants are feeling squeezed and discriminated against. The rise of microbreweries and brew pubs has introduced another competitor class to the marketplace. Recently Virginia Beach exempted craft breweries from the food-ratio rule.
You might think the food-beverage ratio rule helps curb drunken driving, public inebriation, and other social ills. In fact it might do just the opposite: Because the ratio is based on gross receipts, it creates an incentive to sell cheap booze. As state Sen. Bill DeSteph points out, a restaurant that sells a $30 martini has to sell $25 worth of food to offset it.
Cheap drinks, on the other hand, make it easier to meet the state's ratio. Cheap drinks also make it easier to get drunk fast. And what a restaurant loses in profit margin on each individual drink, it can always make up on volume.
(If you think the food-beverage ratio requirement is questionable, you should take a look at the state's rules governing happy hours. For a long time, a joint could not announce drink discounts anywhere except inside its own doors. In 2010 the state deigned to let restaurants advertise happy hours on a sign attached to the exterior, so long as the sign was 17 inches by 22 inches. Two years ago the state finally let restaurants advertise happy hours on their websites and in social and traditional media outlets. But it still limits what they can say: "Happy Hour 4-7" is acceptable, but "discounted margaritas," "beer and wine specials daily" and "Thirsty Thursday" are not, because you can't use the word discount or name specific types of beverages or use alcohol-related promotional phrases. Other than that, you can say whatever you want!)
In addition to the misguided public-safety rationale, there is another, less lofty, theory to explain the food-beverage ratio: It might have started out as a way to protect restaurants from competition. Forcing sellers of mixed drinks to sell a large amount of food closes the market to saloons where people go just to drink. That's just a guess—but it would be well in keeping with other market-entry barriers in the commonwealth, from the Certificate of Public Need for medical facilities to the various occupational licensing rules that make it harder to start a skilled-trade business.
DeSteph has introduced legislation to give restaurants some relief. It would lift the rule for any establishment that sells more than $10,000 worth of food. Those selling less than that would face a ratio of only 35 percent. That's progress.
Ideally, the food-ratio rule would disappear altogether. There's little evidence that it serves an important public purpose—or that the same public purpose is not served equally well by other policies, such as tough drunken-driving laws. All the food-ratio requirement does is make a lot of work for restaurants.
Well, and for ABC bureaucrats too. Virginia's Department of Alcoholic Beverage Control has a friendly message for proprietors: "Your special agent is ready to help you avoid the costly consequences of not meeting the food-beverage ratio… Agents should be able to order a menu item anytime during your operating hours to ensure food sales are being conducted in the proper way… When your special agent arrives for his or her visit, be prepared to discuss various points of your business. Keep regular, accurate records on site, that are immediately available for review."
They're from the government, you see—and they're here to help.
This column originally appeared in the Richmond Times-Dispatch.