Author Archives: William T. Cheek III
Shot gun marriage pretty much sums it up. For distilleries, wineries and breweries, choosing a wholesaler in Tennessee is like marrying your high school sweat heart. She may look great when you are in high school, but as you grow older, you have to ask “Did I find the right partner for life.”
Unlike your high school sweat heart, divorce is not really an option for your Tennessee wholesaler. Tennessee law protects wholesalers and makes terminating the relationship practically impossible.
The Tennessee Department of Revenue recently issued a guideline for terminating a wholesale contract. Download a copy here Guide.
Wholesale termination reminds us of the J. Geils Band tune:
And he loves somebody else you just can’t win
And so it goes till the day you die
This thing they call love it’s gonna make you cry
One thing for sure
In order to start the termination process, a manufacturer has to tell its wholesaler in writing that it wants to terminate the relationship and provide specific reasons why the wholesaler is inadequate. The wholesaler has 30 days to fix the problems.
This is not something any reasonable business person would do. Why tell someone you cannot divorce that you do not like them and tell them why?
We know of no manufacturer that has terminated a wholesaler contract in Tennessee. Although scuffles between manufacturers and wholesalers sometimes result in trading brands, between wholesalers, the brand termination process in Tennessee is heavily weighted in favor of the wholesaler.
We are hearing from lots of folks that are confused about Tennessee ABC infused cocktail policies. The TABC has added a question to the liquor-by-the-drink application about infusing, which must be filled out by every license holder at renewal.
Question 15 asks: “Do you intend at any point during the next license year to produce, store, sell or offer for sale infusions as that term is defined in T.C.A. §57-4-108?” The renewal application is here LBD Renewal.
Tennessee has special rules about infusions, which we blogged about here. In our humble opinion, the Tennessee infusion law is not overly burdensome. But the rules for what constitutes an infusion and the potential penalties for failing to comply create concern in the industry.
We blogged about the difference between pre-mixed cocktails and infusions and some common sense practices here. Based on citations issued by agents, we strongly encourage that restaurants and bars follow our advice about pre-mixed cocktails.
We thank ABC Assistant Director Ginna Winfree for advocating for different treatment of pre-mixed cocktails and infusions. Although the legal technicalities may make little sense to anyone other than lawyers, there is an important distinction.
Conjures up the classic Beastie Boys tune “Brass Monkey”
When it’s time to get ill I pour it on my face
Monkey tastes def when you pour it on ice
Come on y’all it’s time to get nice.”
We find that many licensing professionals think they serve infusions, when in fact they only serve pre-mixed cocktails. Our advice for answering Question 15 for restaurants and bars that serve pre-mixed cocktails is to answer “no, see attached” and disclose on the attachment that the restaurant has pre-mixed cocktails. We also advise labelling pre-mixed cocktails as we describe here.
Given TABC patterns of enforcement and significant penalties, erring on the side of disclosure is a good thing.
We sense that many distillers want to see Tennessee law changed to give distillers similar rights to wineries and breweries. We keep hearing the word “parity.” It is not fair for breweries and wineries to have more privileges than distilleries under Tennessee law.
Many, including us, think there is a bias against laws governing spirits because of a long-held and incorrect presumption that whiskey is more dangerous than wine and beer. Our college days taught us that you can get just as smashed on Miller Lite as on shots of Jose Cuervo.
Jack Daniels Master Distiller Jeff Arnett captured a key sentiment in this very memorable quote:
“There is no drink of moderation – only the practice of it.”
Another consideration is that laws governing manufacturing of spirits date from the 1930’s. Beer and wine manufacturing laws are relatively new, and reflect more-modern sentiments that generally accept alcohol in contemporary society.
Reminds us of the classic Van Halen song “Take Your Whiskey Home”
Well, I think that you’re headed for a whole lot of trouble.
If you take your whiskey…
Well, that liquor in the nighttime leaves strange memories.
In our humble opinion, there is no reason for Tennessee state law to give wineries and breweries more rights than bestowed to distilleries. For example, why can wineries and breweries have a restaurant; but not distilleries? Why are distillery tasting rooms limited to small samples, without mixers and palate cleansers like crackers and cheese?
We encourage lawmakers to remember who butters the bread in Tennessee. Distilleries generate huge tax revenue, jobs and tourism for the state. Jack Daniels gives Tennessee world-wide recognition, more so than country music, Memphis blues or the Tennessee Waltz. Jack is certainly a premier Tennessee product, taxpayer and employer.
Show whiskey some respect and give the industry parity.
Wine in Grocery Stores becomes a reality for Tennessee on July1, 2016. For consumers anxious to purchase wine at Kroger, Wal-Mart and Publix, the wait for July 2016 seems like an eternity.
We wonder how much Tom Petty makes on royalties from playing The Waiting is the Hardest Part at countless arenas and stadiums:
Baby, we know better than to try and pretend
No one coulda ever told me ’bout this
I said, yeah, yeah
The waiting is the hardest part
Savvy grocers and big box retailers are chomping at the bit to have local certificates of compliance, ABC licenses, training, manger permits, cashier permits and other logistics in place to be able to sell wine on day one of WIGS. We believe that many wine drinkers will be elated to buy wine beginning July 1 at their favorite grocer.
We also think that grocers that fail to have all the permits in place to sell wine by July 1 could lose valuable customers. WIGS sets up an opportunity to gain market share.
Although WIGS is a very detailed law, there are crucial practical issues that are not spelled out in WIGS. We applaud the Tennessee ABC for proposing rules to help guide industry members looking to obtain wine licenses and legally market and sell wine. The proposed regs are here WIGS Regs
We encourage industry members, particularly food stores, to review the proposed regs thoroughly, as there are a number of important requirements. Perhaps the most significant proposal in the regs is specifying that certificates of compliance expire in 180 days. The certificate of compliance is essentially city or county approval for obtaining a WIGS license. Previously, certificates of compliance were valid for 2 years.
With grocers anxious to qualify for WIGS, we have heard that many stores are already obtaining certificates of compliance. If the new ABC reg becomes a rule, the early birds will not get the worm. Their certificates of compliance will expire before the ABC can approve wine in food store licenses.
The proposed 180 day rule does not specify when in the ABC application process that the certificate of compliance expires. We suspect that the ABC will require that the certificate of compliance be valid as of the tine of issuance of the licensee.
We encourage applicants to carefully plan timing of WIGS applications. The process is fraught with traps.
Nonprofits have seen a number of changes in recent months with the requirements for special occasion liquor licenses, which is the main way charitable events are licensed and the only way that donated alcohol can be served on premises. Although a surprise to many nonprofits, the rules are manageable, if the event knows of the new rules early enough.
A new rule we discovered this month involves compliance with charitable solicitation laws. Although not terribly burdensome, complying with charitable solicitations takes time.
Calls to mind “Sun City” by Artists United Against Apartheid, a multi-celebrity benefit song featuring Steven van Zandt, Miles Davis, Peter Gabriel, Bono, Springsteen, Lou Reed, Herbie Hancock, Bob Dylan, Peter Garrett, Run DMC and Joey Ramone:
We’re rockers and rappers
United and strong
We’re here to talk about South Africa
We don’t like what’s going on
Many nonprofits learn of the new ABC requirements days before the event, which is not enough time to register. Among the requirements is a bond, which normally takes several days to process.
With all the changes, we strongly encourage nonprofits to focus on Tennessee liquor licensing well in advance of the event. We are seeing too many well-intentioned fundraisers scrambling to comply with the new liquor laws.
We are huge fans of the Tennessee distilleries that are working together as the Tennessee Distillers Guild. Fierce competition among distilleries has been set aside for the better good of promoting distilling in Tennessee. Industry leaders Jack and George have joined forces with new distillers to support the Tennessee Distillers Guild.
Yesterday, the Tennessee Distillers Guild website went live. Check it out here.
The Tennessee Distillers Guild could be a magnet for Millennial and other highly desirable tourism in Tennessee. A Tennessee whiskey trail could be a huge draw.
Although Kentucky’s bourbon trail is well established, Tennessee’s whiskey trail has a marquee brand known world-wide. Jack Daniels is one of the most-recognizable U.S. brands – like Coca-Cola. Unlike most of the bourbon purveyors in Kentucky, most of the distilleries in Tennessee’s guild are truly small artisan businesses with fabulous stories to tell.
George Jones immortalized the famous illegal Tennessee moonshine tradition:
Well I asked my old pappy why he called his brew
White lightning ‘stead of mountain dew
I took a little sip and right away I knew
As my eyes bugged out and my face turned blue
Lightning started flashin’ and thunder started crashin’
Shhhoooh… white lightnin’
This summer, we expect many of the purveyors of moonshine to have aged Tennessee whiskey for tasting and sale. The Tennessee Whiskey Trail will offer craft spirits that are unique to Tennessee and made in limited quantities that are available in very limited quantities.
Stay tuned for progress from our home-grown distilleries.
For as long as we can remember, the Metro Nashville Beer Board has imposed an automatic formula for penalties for sales to minors. First offense is a fine, second offense is a 14 day suspension, and third offense is a 30 day suspension.
It mattered not how hard you are trying to prevent sales to minors or how large is your venue.
The mathematical application of penalties calls to mind a classic School House Rock Song, Three is a Magic Number:
Every triangle has three corners,
Every triangle has three sides,
No more, no less.
You don’t have to guess.
When it’s three, you can see
It’s a magic number.
Last night, Wednesday September 23, 2015, the beer board offered a $2,500 fine to several restaurants charged with a second sale to minor. Previously, a 14 day suspension was the only option.
As best we can understand the rationale, the Metro Nashville Beer Board will consider a fine for a second sale to minor if the restaurant or bar can demonstrate that it has policies and training in place to prevent sales to minors.
The Tennessee ABC used to follow a similar policy for sales to minors. If you are doing a good job trying to prevent sales to minors, you got a fine instead of a suspension.
Any restaurant or bar owner knows that no matter how much you train and how good your carding procedures are, you are at the mercy of your servers. A simple mistake by a server can lead to a disastrous suspension of your liquor license.
Although we agree that sales to minors is a huge issue for the industry, we applaud the Metro Nashville beer board for recognizing the efforts of law-abiding liquor license holders.
We have heard from restaurant and bar owners in Memphis, Nashville, Chattanooga and Knoxville about what folks say is an ABC sting for sales to minors. Several folks have described a sting where 3 or 4 ABC agents sit at a table and order food. Folks over the age of 21 order alcoholic beverages, but an agent under the age of 21 does not try to order alcohol.
After the meal, the server presents the check and the under age cadet pays the tab.
The ABC charges the restaurant with a sale to minor because the meal, including alcoholic beverage, is paid for by the minor.
We have been in close communication with leadership at the ABC over the past several months. In our humble opinion, the ABC would not engage in a sting like described above. We have checked with a trusted source at the ABC, and the sting is not employed by ABC agents.
Clash’s hit Police on My Back seems appropriate:
Yes, I’m running down the railway track
Could you help me? Police on my back
They will catch me if I dare drop back
Won’t you give me all the speed I lack
We think license holders can beat a charge from a sting like the rumor mill describes. SAC Melvin Brown and other law enforcement at the ABC certainly understand that they will loose these cases. We chalk this alleged “sting” up to the rumor mill.
After our post, Jeff from Black Horse Pub in Clarksville commented about the unpredictable practices of local police. Jeff notes:
I agree the abc may not execute that sting. But local municipalities playing the game are not under the same guidelines as the tabc. The Montgomery county sheriffs office just had a bunch of drug possession cases tossed because the deputies set up on I-24 and were stopping cars that just looked like they were packed for bonnaroo. They actually stated that they were using “going to bonnaroo” as probable cause to stop the cars. Their dashboard cams showed them standing on the side of the interstate watching for cars with “hippies” in them and then jumping in their cars and chasing down kids cars. You can never underestimate them.
Tennessee professes to be a business-friendly bastion. But like many states, business-friendly advocates in Tennessee also support laws that aim to curtail the rights of immigrants.
A law passed in 2015 raises the bar for immigrants seeking to obtain beer permits, which are necessary to open markets in Tennessee. The new law requires:
After July 1, 2015, a city or county shall not issue a permit under this chapter unless the applicant has been a citizen or lawful resident of the United States for not less than one (1) year immediately preceding the date upon which the application is made to the city or county.
Previously, a handful of beer boards required proof of rights to work in the U.S, like a green card, before issuing a beer permit. For example, Nashville has required documentation for a couple of years.
The new state law requires a one year waiting period – meaning that someone that legally immigrates to the U.S. cannot qualify for a beer permit for one year after being granted permission to work in the U.S. Based on our informal experience, the vast majority of non-chain markets are independently owned by immigrants.
There may be U.S. constitutional issues with the new state residency law and waiting period, but that will require expensive litigation and several years to resolve. We see the new law unfairly impacting immigrants for years to come,and although it may ultimately be declared unconstitutional, relief is not going to be snappy.
Rock icon Led Zeppelin sang about immigration in a very different time and about a very different group of immigrants:
We come from the land of the ice and snow,
From the midnight sun where the hot springs blow.
The hammer of the gods
Will drive our ships to new lands,
To fight the horde, singing and crying:
With the passage of wine in grocery stores, which we affectionately call WIGS, the Tennessee ABC has made a commitment to on-line paperless filings for WIGS applicants.
At the August ABC meeting, the Commission was updated about the progress of the new on-line system. The report projects that the paperless system will go “live” on May 18, 2016. The report indicates that design for the system is complete and that the system is being implemented.
The goal is to make WIGS applications entirely electronic. The ABC also hopes to have the electronic filing system ready for retail liquor stores and wholesalers.
We appreciate how difficult it is for the ABC to go paperless. We went paperless in 2006, but we only had a few hundred files to digitize. The ABC has tens of thousands of files.
Johnny Paycheck knows all about it:
Take this job and shove it
I ain’t working here no more
My woman done left and took all the reasons
I was working for