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Restaurant 101: What Does Club Membership Mean?

OK, kids, today’s lesson is really relevant to those of us who like adult beverages but don’t like having to hand out our driver’s license information in order to buy one. If you’re from Texas you know what I’m talking about: Dallas is comprised of “wet” and “dry” areas. If you drink or dine in a “wet” area, you don’t have to do anything but pay your bar tab. However, if you do the same in a “dry” part of town, you have to “join a club” which now means you have to give them your driver’s license so that the hillbillies who run the Texas Alcohol Beverage Commission can keep records. What you may not know, is the amount of paperwork that restaurants in the “dry” areas have to put up with. Pay attention, it’s good stuff. Here’s Miss Amy.

“Inevitably when dining out with my visiting Spartan-loving siblings, the situation arises where, after ordering drinks, a server asks, “Do you have a membership?” Most out-of-towners are confused and reply with, “Membership? Huh? What’s that?” I grew up in Lansing, Michigan where Oldsmobile’s third shift hit the barstools at 8:00 am for a post-work beer and buy a six pack or liter along to take home with a few necessities like eggs and butter. One neighborhood quick-service chain in Lansing not only produces a popular “homemade” ice cream, they keep shelves of bourbon, vodka, and gin behind the freezer. Do they have more people who drink? I think not. Do they have less? I think not. Jump for more.

What is this “membership” that certain restaurants require when alcohol is ordered? Post 21st Amendment (the one that made booze legal again), governments wanted to maintain some restrictions in the supply chain, setting up a three-tiered system (producer, distributor/wholesaler, retailer), keeping each relationship separate, and requiring licensing on all tiers. This practice is pretty standard for all states. However, some states (like Texas), harnessed growth further and required designated “wet” areas where retail sales could occur. Basically, if you want to open a restaurant in an area that is not “wet”, it isn’t that you can’t serve alcoholic beverages, you just have to be licensed as a club. If your application satisfies all other requirements for a club permit, you may serve libations to members, but the real estate is still not considered “wet”. But for these restaurants it also means a fourth-tier, because “clubs” who are holders of mixed beverage licenses (liquor, beer and wine) can only purchase their inventory from specially licensed package stores, not wholesalers.

Other club rules effect how a restaurant can operate like the ratio of food to alcohol sales and no late-night operations. Financially, though, nothing has a greater impact than the fourth-tier requirement mentioned above. A 2004 Sunset Advisory Commission report on the TABC stated: “As a result, these package stores act as an additional middleman or fourth tier, adding extra cost to the liquor that bar and restaurant owners purchase.” So Business A, located in say, Addison can purchase their product from a wholesaler, but Business B, located in say, the Galleria area has to purchase from a package store. I did a very unscientific price comparison with my friend who owns a restaurant in a “wet” area. While our costs for liquor and beer were nearly identical, the wines compared as follows: Sonoma Cutrer $1.58 increase (10.7% higher cost), Moet et Chandon White Star $5.24 increase (16.8% higher cost), Benziger Cabernet $4.36 increase (34.2% higher cost).

“Clubs” must keep strict member records–this can be their own database or a larger system like Unicard, which supplies information based on drivers license numbers. Having a Unicard does not endow automatic membership at any club, but it does allow identification without divulging your drivers’ license information to your server. In this age of identity theft, it’s amazing how many frazzled parents will whip out their ID to get a frozen margarita. Woe to the server that forgets, misplaces, or fails to get a signature on the slip if it’s an undercover TABC [Texas Alcohol Beverage Commission] agent. If that happens, the business is assessed a significant fine and the server loses their job. Once the slip is correctly signed, it goes into a membership envelope where, at a meeting held every three days, they are approved by the Membership Committee. Then the slip goes into a box for 7 years. TABC agents are sent to double check club membership compliance, both in undercover “stings” and through licensing audits.

The Texas state liquor law has been amended so many times, it looks like the writing portion of my 16 year-old’s SAT test. It’s the dog no one wants to walk. As noted in the Sunset Report: “While the system was certainly appropriate at one point in time, it now seems to be focused on protecting the interest of the various industry segments and not on public safety”. But placing regulatory obstacles and artificially higher costs on a business stifles the creation of new business and the tax revenue it can generate. Several suburbs such as Plano and Grapevine, have had elections to remove the club licensing requirements for restaurants, making it easier for entrepreneurs to start up outside of Dallas. As a Dallas taxpayer, I question the priorities of a system that spends time checking Unicards when they could be finding businesses that serve to minors.”

Class dismissed.

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21 comments on “Restaurant 101: What Does Club Membership Mean?

  1. “Wet” and “Dry” areas are archaic concepts that arose from religious influence. For example, no where in primarily Catholic south Texas is there a dry county. Conversely, in north and east Texas, which have large Baptist influences, such things exist all over the place. This has evolved into a special interest/business/lobbyist thing..which isn’t unusual in this day and age.

  2. RM, funny you say that about areas of Texas. When in Houston last fall, we noticed how many restaurants are located in that city! I asked people (waiters, nurses, ladies in line at CVS), and no one had heard of anything like a “membership” at any restaurants. Everywhere was wet.

  3. That makes my head hurt. I need a drink.

    At someplace where I do not have to show my mebership card. That is what bugs me about Houston’s.

    That and you can not do “call in” or “pick up” service there.

    You can sit at the bar, order you food, when it comes, “Change your mind” and get it to go, but you can not order a salad, ribs, whatever, from home to drive over and pick it up.

    Sorry. Off the subject.

    Need a drink.

  4. If you drive east on Samuell Blvd from E. Grand, along the southern boundary of Samuell Grand Park, you cannot count the number of liquor stores and beer vendors between E. Grand and White Rock Creek, but as soon as you pass the bridge, you never see another one through the rest of Dallas, Mesquite, and points east. Before RLT (I-30) was built, Samuell was U.S. 80, stretching all the way through East Texas to Louisiana and points east. And White Rock Creek was (and still is) the eastern boundary of “wet” Dallas. At one time, once you passed that bridge, you wouldn’t see another beverage store until you reached Shreveport, about 200 miles, because all of East Texas between here and there was dry. Now, you can find wet areas along the highway, but back then (even in the latter part of the 20th Century, as I remember) the proliferation of beverage stores at White Rock Creek meant “get it now or do without.”

  5. At the most basic level, a restaurant’s initial cash outlay for a “private club” license is much more expensive than those that can obtain a traditional “liquor license.”

    It also involves starting a nonprofit entity, getting a minimum of 50 members’ signatures, and more hoop-jumping than is appropriate to discuss here.

    It’s silly. Now I’m thirsty, too.

  6. I really don’t mind the card thing. Just never have thought about it! It was just always part of living here in HP.

    Also, where I grew up, countries were “wet” or “dry” and they still had “liquor by the drink”. Did I just date myself?? ha ha ha

  7. I like to use my “Club Membership” when I buy alcohol for the night at Sam’s or Costco.

  8. mlh: Don’t worry, I’m dating myself. I remember “liquor by the drink”. When I lived in Denton 200 years ago, we had to drive to Dallas to get a beer. Even though you can now buy beer and wine in Little D, you can’t buy hard liquor. And every restaurant or club in town requires a membership. I think you could make the argument that the law makes us all drink more. (Or is that just a desperate cry for a rationalization?)

  9. Nancy… I can kinda top that… we used to drive college in Norman, OK to Denton to buy beer at the Sack and Save because what you could get in OK (still the case, I think)was only 3.2 alco. content. Texas beer was 7.0 or something like that.

    Also, OK did not have Corona, so we would get cases and cases of it and drive BACK to Norman in the same night.

    Nice. Now that I think about it, that was totally illegal, not to mention unsafe! But boy was it fun!!

  10. Great commentary Amy! However, in the attempt to ‘wet up’ the surrounding cities with wet/dry elections, a new problem has presented itself: the creation of the “restaurant mixed beverage” (RM) permit.

    This permit is touted as the functional equivalent of a ‘wet area’ bar permit for dry cities. But, it limits alcohol sales to 50% or less of a restaurant/bars total gross receipts. Fine if you have a restaurant, bad if you are a bar…. or a restaurant that has a particularly good booze service.

    Plano, for example, has effectively zoned bars out of its city (the only option for a bar in a city that has voted for “RM” permits is a private club). The Plano city council has recently put a restriction on private clubs (they are allowed only 30% alcohol receipts) so bars/pubs have no option but to close, fudge their numbers or not locate in Plano at all.

    I hope this is not an indication of things to come in cities in a similar situation (Lewisville, Flower Mound, Richardson, Garland, etc) in yet another attempt to control alcohol sales in Texas. Cumbersome as it is, the private club system works. In trying to circumvent (rather than eliminate) the dry areas, voters in TX have unwittingly opened the door to cities (like Plano) to dispense with bars in total.

    FYI – Utah, Arkansas and Alabama are just a few states with wet/dry laws similar to ours.

  11. “Clubs” are limited to 1/3 of sales being alcohol by state law. Not that different from Plano, but it can hurt restaurants that sell more “high end” wines and liquors.

  12. OMG! J Ivy – How the he*k are you! If anyone knows their liquor laws…… well you helped us get our license! I defer to anything you say regarding this. Hope you are doing well friend.

  13. I’m great! I think my dad is getting ready to post something here. Talk about coming from the horse’s mouth – he wrote the books (literally) on wet/dry laws.

  14. No “card” foolishness in Fort Worth, as long as you stay safely south of Loop 820.

  15. Can anyone shed a light on BYOB laws as well?

    It seems that some places allow BYOB while also having a beer/wine permit, but some cannot. It also seems like certain areas of town don’t allow it?

  16. Amy forgot to mention the 14% Mixed Beverage Tax that all licensed premises must remit to TABC on their gross drink sales.

    Does this apply to private clubs also?

  17. Does Centennial still have the solitary liquor store on Preston just south of Northwest Hwy.? I always wondered how Centennial pulled that off.

  18. DA – I have always been told that if you have a liquor license, BYOB is prohibited (which isn’t to say it doesn’t happen). Any restaurant that does not have a liquor license may allow guests to bring their own drinks.

    Bill – Clubs also pay the 14% gross receipts tax on beverages.

    Don – If memory serves, they are just inside the city limits of University Park, which designated that one spot as “wet”.