One of the peculiarities of New Jersey’s liquor laws is that despite it being illegal for an unlicensed restaurant or dining establishment to sell alcohol, BYOB facilities where patrons can bring and consume their own beer or wine on the premises can be entirely permissible. While such an arrangement often works out to be financially favorable for the consumer, New Jersey business owners without a liquor license suffer financially in comparison to their licensed counterparts. In short, reform advocates allege that the system is mired in post-war – post-World War 2, that is — regulation that has become non-responsive to modern challenges including the disparity in license pricing and the monopolization of licenses in certain municipalities. Other challenges presented by New Jersey’s Alcohol Beverage Control Law include restrictions on the retail distribution of alcohol. Such restrictions are believe to contribute to the lack of expansion by supermarkets, other chain retailers and retail businesses looking to invest in states with a more flexible regulatory framework. In short, reformers charge that New Jersey’s outdated liquor laws hurts entrepreneurs.
Why are New Jersey business owners calling for liquor law reform?
In New Jersey many of the liquor-licensing laws date from 1947. This regulation mandated that one license should exist for every 3,000 people. However over time and due to grandfathered establishments and other reasons, the distribution of these licenses has become inequitable. This inequitable distribution of licenses where cities and inner suburbs have many licenses and outer suburbs have few has contributed to reducing the competitiveness of New Jersey restaurants without a license to serve alcohol. The practical effect of these problems is that cities like Newark and Atlantic City may have numerous inactive licenses while the scarcity of licenses in outer suburbs and exurbs can lead to bidding wars. Contrast that in the City of Clifton a license costs roughly $100,000 while in Short Hills the same license can cost as much as the $2.3 million license purchased by the Cheesecake Factory for use at the Short Hills Mall.
While a national chain did come to New Jersey in the case of The Cheesecake Factory, the unpredictable availability and high costs of licenses can dissuade other companies or start-ups from making similar investments. Industry estimates peg the amount of lost revenue from operating a BYOB at 30 to 60 percent. Facing an uncertainty availability in licenses, high licensing costs, and potential reduced revenues it is understandable as to why some companies have decided to invest elsewhere.
What do proposals to reform the alcohol control laws call for?
Assemblyman John Burzichelli, D-Gloucester, and chairman of the Assembly Appropriations Committee, has stated that he intended to introduce reform legislation by mid-January. Part of the challenge in crafting reform legislation is that current license holders and grandfathered establishments have different concerns from those operating a BYOB establishment or considering opening a business that would serve alcohol in New Jersey. Current license holders are concerned with protecting the value of or receiving compensation for their liquor license “investment”. The president of the New Jersey Restaurant Association, Marilou Halvorsen has expressed these concerns on behalf of her organization’s members stating, “I have concerns about any kind of expansion of liquor licenses, only because of those people who have already invested [in licenses]. Any kind of liquor-license reform would have to come with some sort of compensation to existing licensees, acknowledging the investment that they put in.” With licenses in some municipalities costing more than $2 million, such concerns are understandable. In contrast, business owners who lack a license would likely support an expansion.
As currently explained, the reform legislation is expected to create a new class of liquor licenses. These licenses would be targeted for “mom-and-pop” restaurants and chef-owned eateries. To enforce these goals, it is expected that these new licenses will come with facility size limits and restrictions on their transferability. According to reform advocate George Jacobs who has worked on the bill, “[The reform is] very much geared to supporting a restaurant and will not be applicable to basically a bar.”
Rely on the Jayson Law Group for your business’ regulatory guidance
At the Jayson Law Group, LLC we are dedicated to assisting business owners, developers and restaurateurs navigate the complex legal and regulatory framework in New Jersey. When you work with one of our experienced attorneys you can rest assured that your legal issue will be thoroughly researched and, if appropriate, actionable legal solutions will be presented. To discuss your legal concerns and business goals call the Jayson Law Group at (908) 258-0621 or contact us online.