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ABC Board Summer Recess

From ABRA:

The Alcoholic Beverage Control Board (Board) will be on recess during the following dates:

  • Wednesday, Aug. 19
  • Wednesday, Aug. 26
  • Wednesday, Sept. 2

The Board will reconvene on Wednesday, Sept. 9. The Alcoholic Beverage Regulation Administration will remain open and operate during normal business hours while the Board is on recess.

ABRA to Hold ABC Orientation Training on Aug. 27th

From ABRA:

The Alcoholic Beverage Regulation Administration (ABRA) will hold a special training for new and existing ABC licensees from 2-4 p.m. on Thursday, Aug. 27 that will cover:

• District ABC laws and regulations (including recent changes to the law),
• Tips for working effectively with the community,
• Settlement Agreements,
• Expectations of licensees,
• Best practices, and
• Noise abatement and sound management.

Contact ABRA Community Resource Officer Sarah Fashbaugh by Friday, Aug. 21 to register:

Email
• Call (202) 397-3971

Attendance for this class is strongly recommended for new license holders. Requests for interpreters may be made; however, they must be submitted by the registration deadline. Training is free of charge and will be held at ABRA’s office:

• 2000 14th St., NW, Suite 400 South, 4th Floor, Washington, D.C. 20009

Montgomery County Council Backs DLC Reforms

Montgomery County’s public liquor control system requires private restaurants and retail beer/wine stores to purchase alcohol exclusively from the Department of Liquor Control (DLC) warehouse; thus, prohibiting them from obtaining alcohol from private distributors.

DLC maintains a list of approximately 29,000 products that can be purchased by restaurants and beer/wine stores.  Of that number, about 4,500 are stocked in the warehouse for delivery, whereas about 24,500, primarily craft beer and wine, are special order.  Consequently, restaurateurs and store owners are having tremendous problems ordering from the DLC, as too often there is product unavailability combined with low operations and processing performance within DLC.

Unfortunately, Montgomery County’s sales data has shown that county residents are spending their money outside of the county, with the per person in-county sales being about 1/3 less in Montgomery County, compared to Prince George’s, Frederick, and Howard County.  This makes it difficult for restaurant owners and beer/wine stores to operate in a geographic location where customers cannot get their choice of alcoholic beverages that are available in other communities.  Not only does this have a negative economic impact for our restaurants and stores but it also individuals who depend on jobs in these businesses.

With an evolving consumer environment today and an ever-expanding list of specialty beer and wine, the Montgomery County restaurants and stores need to be able to provide adequate customer service as well as adequate selection and choice.

In July of 2015, Councilman Hans Riemer, among other council members of the Montgomery County’s Ad-Hoc Committee on Liquor Control, has backed a resolution that asks Maryland lawmakers to move forward with this historic reform of allowing the 1,000 restaurants and beer/wine store owners in the county to be able to purchase craft beer and fine wines directly from private distributors.  Some restaurants and beer/wine stores today show that up to 90% and even 100% of their beer/wine selections are listed as special order.

The fiscal and employment impact on the county is manageable, especially if the county does an efficient job at running the department in a more profitable manner. In order to achieve that goal, the Ad-Hoc Committee has recommended expanding the number of county liquor stores.  Currently, Montgomery Count y operates 25 stores, and with the committee progress already embraced by the County Council and the DLC, the county will open up 3 more stores in 2016, followed by more in subsequent years as part of a “retail modernization” plan.

The Ad-hoc Committee also recommends that Maryland establishes a small fee on distributors for the rights to sell into the county, which is a simple way for Montgomery County to change how it claims revenue from alcohol sales.

The full Council’s actions  constitute a recommendation to the Montgomery County delegation in the state legislature, which has jurisdiction over liquor laws.  The objective is to advance legislation that will become effective in 2016.

 

 

 

Proposed DC Ban of Powdered Alcohol

A new bill that was introduced in June in the District of Columbia Council, proposes a number of adjustments to the District’s alcohol legislations.

The proposed law would make powdered alcohol illegal in the District of Columbia, following the trend in other states across the nation with similar laws. Should the bill become law, manufacturers, retailers, and wholesalers in the District would be banned from selling, importing, and shipping the product. Retailers would be prohibited from refilling, tampering with, or diluting alcoholic beverages bottles or containers. ABRA licensees would be banned from removing or changing labels from alcohol bottles, facing still fines and penalties if found to be in violation.

Other proposals contained in the bill include allowing full-service grocery stores to sell growlers of wine, hard cider and mead, as well as allowing pub-crawl organizers to participate in the reimbursable detail subsidy program, with the purpose of improving security at such events.

The federal government approved the sale of powdered alcohol earlier this year; nonetheless, the sale of powdered alcohol remains subject to local regulations.

The bill is contingent upon the approval of the Council of the District of Columbia, Mayor Muriel Bowser and a 30-day Congressional review period.

The copy of the proposal can be reviewed online in its entirety. As the bill moves through the legislative process, ABRA will inform license holders about the updates as they continue along the lines.

Alcohol Manufacturers are now Allowed to Apply to Operate Outdoor Patios

Under new legislation that took effect on Monday, July 27th, wineries, breweries, and distillers are now allowed to apply for permits to serve alcohol on outdoor patios.

In accordance with the legislation, alcohol manufacturers that conduct on-site sales and are owners of consumption permits can now apply through the Alcoholic Beverage Regulation Administration (ABRA) for side walk café and summer garden endorsements.

Alcohol manufacturers are allowed to operate permitted outdoor areas from 1:00 p.m. – 9:00 p.m., seven days a week. Applications for the outdoor endorsements can be found on ABRA’s website.

Proposal to modify the West Dupont Circle Moratorium

The Alcoholic Beverage Control Board (Board) will conduct a hearing at 10 a.m. on Wednesday, July 22, 2015 to receive public comment on Advisory Neighborhood Commission 2B’s proposal to modify the West Dupont Circle moratorium. Review the proposal online.

Members of the public that want to comment at the hearing should contact ABRA General Counsel Martha Jenkins by 5 p.m. on Monday, July 20, 2015. Provide the full name, title, and organization, if applicable, of the person(s) testifying.

  • Email
  • Call – (202) 442-4456

Testimony may be limited to five minutes in order to allow every person an opportunity to be heard. Those providing input should bring nine copies of their testimony to the hearing.

Members of the public that are unable to testify in person can submit written statements to the Board until 5 p.m. on Friday, July 24, 2015. Written statements must include the full name, title, organization, if applicable, and signature of the person(s) submitting comment. Written comment may be submitted by:

  • Email
  • Mail: Alcoholic Beverage Control Board, 2000 14th Street, NW, Suite 400 South, Washington, DC 20009

The hearing will be held at the Alcoholic Beverage Control Board Hearing Room:

2000 14th Street, NW
Suite 400 South, 4th Floor
Washington, DC 20009

 

Attend ABRA’s ID Compliance Training: July 17, 18 and 19

The Alcoholic Beverage Regulation Administration (ABRA) is hosting a special ID Compliance Training for ABC licensees and their staff from July 17-19. Training will review:

  • Techniques for properly verifying IDs
  • Tips for spotting fake IDs
  • Information on ABRA compliance checks

You will only need to attend one, two-hour training session. Training will be held:

Friday, July 17

  • 9-11 a.m.
  • 11:30 a.m.-1:30 p.m.
  • 3-5 p.m.

Saturday, July 18

  • 9-11 a.m.
  • 11:30 a.m.-1:30 p.m.
  • 3-5 p.m.

Sunday, July 19

  • 9-11 a.m. (Korean interpreter available)
  • 11:30 a.m.-1:30 p.m. (Spanish interpreter available)
  • 3-5 p.m.

RSVP for training by contacting ABRA Operations Manager Jackie Richardson at:

Training will be held at ABRA’s office:

  • 2000 14th St., NW, Suite 400 South, 4th Floor, Washington, D.C. 20009

Four ABC Restaurant Licenses Becoming Available in Georgetown

(WASHINGTON, D.C.) – Four alcoholic beverage licenses will be open for application this summer for restaurants in Georgetown. Applications can be submitted to the Alcoholic Beverage Regulation Administration (ABRA) beginning at 8:30 a.m. on Thursday, June 25.

Restaurant licenses in Georgetown are limited due to a cap that exists on the number that can be issued in the neighborhood. Under the Georgetown Moratorium Zone regulations, a maximum of 68 restaurants are permitted to be licensed in the area. The soon-to-be-available licenses are the result of four license cancellations in Georgetown.

Applications for the licenses are available online but must be submitted in person. Any applicant must be the actual owner of the business. Businesses interested in applying can do so beginning at 8:30 a.m. on Thursday, June 25 at ABRA’s office:

  •  Frank D. Reeves Municipal Center, 2000 14th St., NW, Suite 400 South, 4th Floor, Washington, DC 20009

Completed license applications will be reviewed on a first-come, first-served basis and are subject to the consideration of the Alcoholic Beverage Control Board. Members of the public that have questions can contact ABRA by emailing or calling (202) 442-4423. 

Message from District Of Columbia Government

Dear Licensee:

The Alcoholic Beverage Regulation Administration (ABRA) is notifying you of a new District law that limits alcoholic beverage advertisements in the windows of your establishment.

Effective, May 2, 2015, all advertisements relating to alcoholic beverages can only be displayed in the windows of a licensed establishment if the total area covered by the advertisements does not exceed 25 percent of the window space.

ABRA investigators will be enforcing the new law immediately; however, licensees will be granted a warning for a first-time offense of the new law.

The law, known as the Omnibus Alcoholic Beverage Regulation Amendment Act of 2014 (20-902), went into effect after the Congressional review period expired.  Mayor Muriel Bowser signed the bill on January 26, 2015.

If you have any questions, please contact ABRA at (202) 442-4423 or [email protected]

Sincerely,

Fred P. Moosally

Risky Business – Tips on how to Buy or Sell your Restaurant Business

Buying or selling a business, like any major financial transaction, is complicated and requires competent counsel. Careless mistakes can have very serious financial consequences for both parties. Take, for example, the recent sale, subsequent bankruptcy and pending lawsuit between the former and current owners of the storied Capitol Hill restaurant, Hawk n’ Dove.

Earlier this month, The Washington Business Journal reported on a law suit filed by William Sport, one of the former owners of a group that owned nine District of Columbia restaurants including The Chesapeake Room, Park Tavern, Boxcar Tavern, Hawk n’ Dove, Molly Malone’s, Pacifico, Senart’s Oyster and Chop House, and Willie’s Que and Brew. See the WBJ article here.

Sports and his partners agreed to sell the nine restaurants to Barracks Row Entertainment Group LLC in December 2012 for $19.3 million. According to his complaint, which was filed in federal district court in October of 2013, Sport is alleging that the Defendants falsely represented the ownership of the company making the purchase and fraudulently inducing Sports into a sales contract where he accepted a $4.63 million promissory note as partial payment. Sports also agreed to personally guarantee $5 million in bank debt carried by the restaurants, as well as to continue to personally guaranty the nine commercial restaurant leases. The named Defendants are Richard Cervera, Michael Hoi-Mingh Cheung, William J. Nimmo, and Halpern, Denny & Co., a private equity and venture capital firm. See the filed complaint here – Case 114-cv-01783-JEB.

As with most contentious litigation, it will be some time before this case is resolved. It nonetheless serves to highlight important issues that both sellers and buyers should keep in mind when entering into a sales contract. Below we’ve provided a general overview of the due diligence restaurateurs and entrepreneurs should undertake in any sales transaction. The list is by no means exhaustive and we highly recommend that each party consult with an experience business attorney when entering into any complex legal agreement.

Business for Sale – A Seller’s Prospective

1. Type of Sale – Asset sale or Stock Sale?

An owner can sell the company’s assets outright, or can sell stock in the corporation or membership interests/units if it is a limited liability company. Buyers will always want to structure the deal as an asset sale to protect itself against prior claims and liabilities of the business, as well as receiving a new tax basis in the assets, and higher depreciation and amortization deductions in the future. For the Seller, however, there are advantages to doing a stock sale. If the Seller’s company is a corporation, a stock sale usually results in a lower overall total tax bill than an asset sale. If necessary or the tax bill justifies it, the Seller may wish to consider adjusting the purchase price in order to persuade the buyer to accept a stock transaction rather than an asset sale.

2. Valuation – How to value equipment, inventory, and good will of your business

Whenever a sale of a business produces a capital or ordinary gain, the IRS will expect to receive its share and business owners need to take the potential tax bill into account when entering into a sales contract. In addition to the structure of the deal (asset v. stock sale), another factor the IRS will consider when evaluating the potential tax assessed for the sale of the business is the specific values assigned in the sale of the company’s assets. The gain or loss on the sale of different categories of business assets are taxed differently. Under the Internal Revenue Code, sellers and buyers must assign a specific value to each asset or groups of similar assets, and report a gain or a loss from the sale of each asset to the IRS. The sale of capital assets results in a capital gain or loss; the sale of real property or depreciable property used in the business and held longer than one year results in a gain or loss from a Section 1231 transaction; and the sale of inventory results in ordinary income or loss. It is important that a Seller value its assets accordingly to avoid higher tax classifications.

3. Tax Implications – Understanding capital gains tax and other tax consequences

The tax consequences of buying or selling a business can vary significantly depending on a number of factors, including the issues discussed above. Business owners should meet with legal and tax professionals beforehand to discuss tax strategies for making the company attractive to buyers, while minimizing their own tax liabilities.

4. Solvency of Buyer – Do you know who your buyer is?

In the sales transaction for Hawk n’ Dove, the buyer of the restaurants could not afford the full asking price of $19.3 million dollars so the seller accepted a $4.63 million promissory note as partial payment for the balance. Unfortunately, within a year, the Buyer filed for Chapter 11 bankruptcy which halted payments to the Seller on the note. The Seller also alleges that he did not know the true owners of the corporate entity that bought his restaurants. The circumstances of this case are a cautionary tale and reminder to any Seller that he or she must do sufficient due diligence when selecting a suitable buyer. At a minimum, the Seller should review the Buyer’s financial statements, Buyer’s credit history, the Buyer’s resume and business plan, and if possible, seek references or third party input with individuals or businesses who have dealt with the Buyer in the past.

5. Financing Issues – Seller/Owner Financing has advantages and risks

It is not uncommon for a portion of the purchase price to be paid over time, in the form of a promissory note. In essence, the Seller is financing part of the sales price for the Buyer. There are certain tax advantages to deferring payment but there are also substantial risks that the Buyer may default, file bankruptcy or otherwise fail to meet its obligations under the note. Therefore, it is important for the Seller to negotiate personal guarantees from the Buyers, file security interests on the business assets to be sold, or draft strong default provisions to prepare for worst-case scenarios.

These are just a few issues the Seller must consider when selling its business, and we highly recommend that each party consult with experienced legal and tax professionals when entering into a sales agreement. In a later post, we will discuss issues Buyers must consider when purchasing a business.

Doyle, Barlow & Mazard has experiences representing buyers and sellers in the sale of a business. For more information, contact

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Rosemarie Salguero, Esq.
[email protected]
(202) 589-1836