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Editorial: ABC adjustment is a well-deserved break for restaurants
Liquor Licenses

Editorial: ABC adjustment is a well-deserved break for restaurants

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Throughout the COVID-19 pandemic, small businesses have had to make significant adjustments to stay afloat.

In a late June fact sheet, the U.S. Small Business Administration (SBA) explained how restaurants and bars have been “staggered” by the COVID-19 pandemic. Stay-at-home orders shattered “leisure and hospitality” businesses, with “food services and drinking places” accounting for 73% of group employment in that sector. During April and May — months when indoor seating was either closed altogether or severely restricted — bar and restaurant employment was down 48% and 37%, respectively, compared to April and May of 2019.

Fewer jobs were a symptom of fewer customers. Two of the most effective practices against mitigating the spread of coronavirus — masks and social distancing — fail to marry well with eating and drinking. Exceptions were made, but in mid-September, as part of Virginia’s Phase 3 reopening, bar areas still are closed and restaurants continue to sacrifice space to keep tables 6 feet apart.

After months of hurdles, a recent adjustment by the Virginia Alcoholic Beverage Control (ABC) Authority to mixed beverage license fees is a well-deserved break for restaurants. A recent report by Colleen Curran of The Times-Dispatch broke down the dilemma. Each year, Virginia restaurants pay various annual fees to serve alcoholic beverages. Some rates are flat, including beer ($145), beer and wine ($300), or takeout and delivery service for one or both ($600).

But yearly costs for licenses to serve mixed drinks — the liquors and cocktails that really can boost profits — are determined by seating capacity. The fees are $560 for one to 100 spots, $975 for 101 to 150 and $1,430 for 150 or more. The rule is part of the Code of Virginia and a fresh round of fees recently was sent out to restaurants, without initial recognition of COVID-19 safety protocols affecting normal operations.

After The Times-Dispatch’s report this past weekend, Virginia ABC showed grace, with a spokesperson clarifying that businesses could request an adjustment. “When a mixed beverage licensee renews or pays the initial mixed beverage license fee, the fee is for the maximum number of seats at that time. If that number decreases, the licensee advises ABC at the time of renewal and the fee is adjusted once the new seating capacity has been verified,” Virginia ABC spokesperson Valerie Hubbard told the RTD.

This is the right call. For starters, Virginia ABC is far from struggling. At the start of September, the agency reported a record-high $1.2 billion in revenue for fiscal year (FY) 2020. But due to the pandemic, the drivers of that growth evolved away from physical settings.

First, online sales surged. In a Sept. 2 statement, Virginia ABC said the volume rose from 23 orders per day at the start of FY 2020 to 419 per day by July. Second, stores were able to implement curbside pickup options, with 370 locations installing that service. Third, with bars shuttered, Sunday sales kept churning, with an 18% increase in FY 2020 to just under $94 million.

“While we saw even greater growth as the pandemic took hold, we also had to meet the challenges of keeping our customers and employees safe,” Virginia ABC CEO Travis Hill said in a statement.

Also, the data is there to demonstrate how hard restaurants have been hit. In a normal year, Virginia ABC said sales to licensees account for 18% of revenue. Throughout the pandemic though, that figure has hovered between 0% and 10.6%. In addition to existing businesses struggling to stay open, the normal flow of new businesses opening has been slowed. Overall, licensee sales were down 19% compared to the previous fiscal year.

Liquor licenses are just one example of a usual revenue stream that has become less reliable amid COVID-19. After six months of adapting, we hope all state agencies take a hard look at these kinds of perennial fees. The normal fine print needs to fairly line up with the realities of a pandemic.

Chris Gentilviso

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