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.”