Restaurant & Hospitality

New Jersey’s liquor license laws have generally remained unchanged for decades and have been a sore spot for municipalities seeking to fuel economic growth and small businesses hoping to open in town centers across the State.  Assemblymen John Burzichelli and Raj Mukherji have heard those concerns and others, and recently sponsored a bill in the New Jersey Assembly, A3494, which proposes reforms to the NJ liquor license system.

Under the current liquor license laws, the State of New Jersey limits the number of maximum liquor licenses within a municipality based on population.  Critics of the existing framework argue that the municipalities are beholden to census numbers that are updated every 10 years and with many of the issued licenses pocketed and not in use, many business owners that are ready and willing to serve cannot because of population density issues and pocketed licenses.  Proponents of reform also note that liquor licenses tend to be very expensive, even topping $1,000,000 in some particularly hot markets, which may give established restaurant groups with deeper pockets an advantage over start-ups.

The bill, in its proposed form, would allow municipalities to issue two new types of liquor licenses to smaller businesses.  One proposed license would permit service at tables, but not at a bar, and another proposed license would allow for only beer and wine service.  The new licenses would have a significantly lower price than the existing liquor licenses.  However, existing liquor license owners oppose the bill because new purchasers would be able to obtain a liquor license at a much lower cost which, in turn, may devalue existing liquor licenses obtained at a high price tag.  To address this concern, the bill contemplates a tax credit to those existing businesses that have paid market value for their licenses, with a portion of the initial fee and renewal fees for new licenses paid to the State to help offset the cost of tax credits that would be issued to existing license holders.

The bill was released from the Assembly Oversight, Reform and Federal Relations Committee on May 17, 2018 and subsequently referred to the Assembly Appropriations Committee.  As Assemblyman John Burzichelli has said, the bill is a work in progress.  For now, supporters of the bill will need to wait and see if the traction persists and in the meantime, continue to BYOB.

 

Cheers!  New Jersey’s Agricultural and Natural Resources Committee voted 5-0 last week in favor of bill A2196.  The bill is designed, among other things, to eliminate the current “mandatory tour” obligation imposed upon New Jersey’s craft brewers.  Under the current state of the law, craft brewers are required to provide a tour of their facilities each and every time a patron enters the premises to purchase the breweries’ products for on-site consumption – whether it is the individuals first or one-hundredth time visiting the facility.  If passed, the pending legislation will alleviate craft breweries of this oft-criticized requirement in the hopes of placing New Jersey brewers on par with their competitors in neighboring states where such tours are not required.

As the bill continues to gain steam among craft brewers, many New Jersey bars and restaurants have expressed opposition.  These groups fear that the bill will provide breweries with an end-run around the steep costs of obtaining liquor licenses and thereby unfairly compete in the market.

At the present time, the bill is awaiting a second reading before the State Assembly.

New York City finally got its groove back.  After 91 years, the Cabaret Law (New York City Administrative Code § 20-359), a Prohibition-era law that has forbidden dancing at some New York City bars and clubs has been repealed.

As it currently stands, the Cabaret Law requires any New York City business where dancing occurs to obtain a cabaret license prior to operating, and if that business is desirous of selling alcohol on premise, it is required to provide a copy of its cabaret license to the New York State Liquor Authority to be licensed to sell or serve alcohol on premises.  Artistic performances, singing, and other forms of entertainment at New York City businesses also require a cabaret license.  In the past, the Cabaret Law stopped singers Billie Holiday, Ray Charles and others from performing in New York City, and caused Frank Sinatra to boycott some of his New York City performances.

Over the years, the Cabaret Law survived several attempts at repeal, but not this time.   On October 31, 2017, the New York City Council voted overwhelmingly to pass legislation (Int. 1652) that repeals the Cabaret Law, finally allowing the city that never sleeps to dance the night away.   Proponents of the new legislation say the process to obtain a cabaret license is time-consuming, difficult, and costly.   This sentiment is reflected through the numbers – currently, only 97 out of approximately 25,000 New York City food and beverage establishments have a cabaret license, according to the New York Times.  Under the current laws, applicants are required to get electrical inspections and fill out several applications through the New York City Department of Consumer Affairs, who submits the applications to the Community Board where the premises are to be located, and to the Fire Department of New York for approval.  The license fee is determined by room capacity and could costs hundreds of dollars to up to $1,000 (for a two-year license term), and additional money for each additional room or floor.

Despite repealing the Cabaret Law in its entirety, the new legislation is expected to retain certain security requirements at large entertainment venues from the old law. Owners and operators of some large entertainment spaces (as defined by the New York City zoning laws), will be required to maintain security cameras and certified security guards.  These rules will be codified under new section 10-177 § 2, Title 10 of the Administrative Code of the City of New York.  Once the new legislation goes into effect, owners and operators of New York City venues where dancing occurs will not have to apply for a cabaret license at all.

The lead sponsor of the new legislation is Rafael L. Espinal (D-Brooklyn), a City Council Member and Chairman of the Council’s Committee on Consumer Affairs.  Councilman Espinal comes from a district where bars and unique venues have advocated repealing the Cabaret Law for decades.  Also on board is Mayor Bill de Blasio, who is expected to sign Int. 1652 into law soon.

“It’s over,” Councilman Espinal told the New York Times.  So, in the words of the late David Bowie, “Let’s Dance!”

As New Yorkers enjoy their pumpkin spice lattes, the fact that a Grande (16oz) serving will cost them about 380 calories (including 2% milk and whipped cream, because why not?) is becoming common knowledge.  Calorie information has been conspicuously posted on menus at “covered establishments” in New York City for nearly a decade, but on August 28, 2017, New York City agreed to postpone enforcement of its rule requiring restaurants, convenience stores and other establishments to post calorie counts for prepared food in response to a law suit brought by the food industry and supported by the Federal government.

In 2008, New York City became the first jurisdiction in the United States to require chain restaurants to post calorie information on menus and menu boards.   Shortly thereafter in 2010, the Federal government adopted similar laws by way of the Affordable Care Act.  The Federal government’s implementation of such laws has continually been delayed over the years, but now the Food and Drug Administration (“FDA”) plans to provide additional guidance on menu labeling requirements in May 2018.  New York City did not want to wait for the Federal guidance to begin enforcement of its Rule 81.50, New York City’s nearly identical version of its federal counterpart.

New York City’s most recent version of Rule 81.50 tracks its federal counterpart and applies to “covered establishments”, which means “a food service establishment or similar retail food establishment that is part of a chain with 15 or more locations nationally doing business under the same name and offering for sale substantially the same menu items, or a food service establishment that is not party of such a chain that voluntarily registers with the United States Food and Drug Administration to be subject to the federal requirements for nutrition labeling of standard menu items pursuant to 21 CFR 101.11(d), or successor regulation”.   For any such covered establishment, “[m]enus and menu boards must provide the number of calories contained in each standard item.”

While the FDA plans to provide guidance in May 2018, New York City nonetheless wanted to move forward with its enforcement of Regulation 81.50 beginning on August 21, 2017, but on July 7, 2017, the Food Marketing Institute and the National Restaurant Association teamed with several other food-service industry groups to file suit against the City of New York for what it said was premature enforcement of nutritional disclosure guidelines for food-service establishments. The National Association of Convenience Stores and the New York Association of Convenience Stores also joined in the suit, which was filed in the U.S. District Court for the Southern District of New York.

Court documents claim that that the local New York City rules are not identical to the impending FDA rules because they are effective immediately which would clash with the Federal government’s plan to delay compliance for one more year.  The plaintiffs asked the court to stop New York City from enforcing the regulations on the local level prior to the nation-wide rollout in May 2018 and argued that New York City’s Rule 81.50 was preempted by Federal law. The FDA filed court papers in support of the lawsuit.

New York City has now agreed to honor May 2018 as the start date due to the preemption of Regulation 81.50 by the similar provisions contained in the Affordable Care Act. As such, “covered establishments” will have more time to comply and the FDA will be able to set forth guidance as it planned in May 2018.

As the nation awaits the FDA’s guidance, food establishments in New York City should begin to think about whether or not they are a “covered establishment” and the steps they will need to take in order to avoid eventual enforcement action.

Mobile food vending is now a billion dollar industry. The hospitality subset has experienced a major boom since the economic downturn of 2008. Food trucks nationwide are expected to bring in $2.7 billion in revenue this year alone according to Priceonomics. This meteoric growth is attributable to a confluence of changing consumer demands and a relatively easy start-up process.

In New York City, home to an estimated 12,000 mobile food vendors, legislators are struggling to find balance between regulation and sustained growth.  The issues are many and range from permitting to parking to health and safety concerns.  Here’s a closer look.

For that estimated 12,000 mobile food vendors, there are only 5,100 valid food vendor permits currently allotted by the city’s Department of Health.  That number has not increased since the 1980s. The lack of permits has created a black market whereby permit owners can attain as much as $20,000 per permit as reported in the New York Times.

In addition, more vendors equates to more competition for brick and mortar restaurants. Having a large number of vendors operating illegally has restaurant proponents fuming about unfair competition, lost profits, and inadequate regulation.

Further, unpermitted vendors may put consumers’ health at risk. City health inspectors cannot inspect nor regulate what they do not know exists.

Proposed Legislative Solutions

The New York City council has proposed the Street Vending Modernization Act (“SVMA”) to expand the number of available permits to 8,000 by the year 2023. Proponents of the SVMA see mobile food vending as a legitimate industry and want the city to cultivate an environment where these businesses can flourish. In addition to increasing the number of permits, the SVMA intends to improve mobile food vendor compliance with local regulations and create an independent office of street vendor enforcement.

Despite the apparent benefits, the SVMA has been met with opposition from brick and mortar restaurant proponents. Restaurateurs are concerned with the effect an increased number of permits will have on their businesses, and concerned consumers detest the idea of further congesting already overcrowded New York City streets and sidewalks with more food trucks and carts. The SVMA has yet to pass.

On another front, mobile food vendors may face increased regulations regarding where they can conduct business. Today, New York City has fairly lax regulations addressing where a mobile food vendor may park. Vendors are only banned from occupying areas in and around crosswalks, fire hydrants, bus stops, building entrances, and the like. The New York City council has received pressure from local restaurant owners to further restrict the location of food trucks to address what they see as unfair competition. As an example of the conflict, some point to the area around the Second Avenue subway station.  When the station was under construction, several restaurants in the vicinity suffered a decline in sales. Now that the subway has opened, mobile food vendors are setting up directly outside the subway entrance and in front of brick and mortar restaurants. Currently there is no pending legislation that restricts the proximity to which a mobile food vendor may park from a brick and mortar restaurant.

New York legislators have also struggled with the regulation of health and safety for mobile food vendors. Until just recently, there was no requirement for displaying food inspection grades for mobile food vendors. In May 2017, Mayor de Blasio signed into law a bill that requires mobile food vendors to display health inspection grades. A similar bill is currently active in the New York State Senate which would require inspection grades to be displayed and also require vendors to submit their routes to the health commission for tracking purposes.  This bill is viewed as a win-win for both brick and mortar restaurants and mobile food vendors. The bill holds mobile food vendors to the same health and sanitation standards as brick and mortar restaurants, while those vendors displaying satisfactory food grades can attract more business by assuring consumers of a sanitary product.

Given that the mobile food vending industry now accounts for close to 18,000 jobs in New York City and it has become a part of the city’s fabric, we do not expect to see city or state legislators significantly curtail such business. However, with increased pressure from consumers, food vendors and brick and mortar restaurants, we do believe that legislators will act on the issues discussed above.