Virginia’s infamous food-beverage ratio prioritizes cronyism over consumers
The commonwealth is home to some of America’s worst alcohol laws. Up until 2008 sangria was treated as contraband and restaurants are still forbidden from advertising their happy-hour specials. But there’s no more infamous state law than the food-beverage ratio, which mandates that restaurants must make $45 in food sales for every $55 they make selling liquor-based drinks.
Hugely popular businesses – such as cocktail speakeasies, martini lounges, music clubs and whiskey bars – have trouble satisfying the ratio, given that their customers often go there for the high-end liquor. So they’re forced to change their service models or never do business in the state to begin with.
The food-beverage ratio is a legal zombie: it just won’t die. Time and time again, efforts to reform or repeal the ratio have unceremoniously petered out in the Legislature. This year proved no different, as two different reform bills were watered down in committee and then tabled until at least 2017.
The damage from the ratio law increases each year. The high-end liquor and craft cocktail movement is exploding across the nation, but Virginia is losing out. For instance, an elite cocktail lounge like New York City’s famed Death & Co.—which only serves small-plate appetizers to go along with its pricey cocktails—likely couldn’t operate in Virginia. In fact, McCormack’s Whisky Grill and Smokehouse, Virginia’s only bar specializing in high-level distilled spirits, was slapped with a $1,000 penalty and a 15-day suspension of its liquor license for violating the ratio. As McCormack’s owner pointed out, it takes an awful lot of food to offset just one $350 shot of Pappy Van Winkle’s Family Reserve 23-year bourbon.
Even if restaurants have enough food sales to balance their liquor sales, they must still pay for the bookkeeping to track and calculate every sale (excluding beer and wine) and then prove they actually meet the ratio. These calculations can be so complex and time-consuming that some Virginia law firms specialize in guiding restaurant clients through the compliance process. Because government-run ABC stores control the price of liquor in Virginia, restaurants often have to raise food prices on their customers when liquor prices rise—as they did in 2014 in order to plug the state’s budget gap.
Like so many bad drinks laws, this patently paternalistic policy emerged post-Prohibition. After repeal in 1933, Virginia continued to prohibit restaurants from selling alcoholic beverages at all. In 1968, the Virginia Legislature passed the Mixed Beverage Act, empowering counties and municipalities to decide for themselves (via voter referendums) whether to permit restaurant liquor sales.
The act also created the state’s first version of the ratio. At the time it was a 50/50 ratio, meaning that restaurants were not allowed to make more money selling alcohol than they made from selling food. The law was amended numerous times over the years, reducing the ratio to 45/55. Arbitrarily and irrationally, beer and wine were eventually exempt from the ratio, allowing restaurants to sell them in unlimited quantities. (Nevermind that a 12-ounce beer and a 4-ounce glass of wine has as much alcohol as a 1-ounce shot of liquor.)
And because even more arbitrary decisions seemed to be in order, the Legislature eventually also carved out exceptions for a few favored venues (such as select racetracks and concert venues).
The ratio lives on because of a powerful group of established Richmond restaurateurs. They are quick to invoke the absolute horrors of bars and nightclubs dotting every Virginia street corner, alleging that repeal of the ratio would lead to an abundance of seedy, alcohol-infused, crime-infested neighborhoods. Some elected officials unabashedly peddle this hooey. Sounding more like a character from the Old West than a modern day Virginia legislator, Senate Minority Leader Richard Saslaw, D-Fairfax County, declared: “If you can’t meet that ratio, you ain’t running a restaurant, you are running a bar. If you want saloons in Virginia, say so.” Of course, the Legislature cannot “say so” if its barons refuse to permit a bill to be voted upon.
Needless to say, it’s hard to believe the restaurant lobby and their supportive legislators really believe alcohol-fueled mayhem will ensue from allowing dive bar “saloons” to open. If they did, they would also demand beer and wine to be included in the ratio. Rather, they want to keep upstart competitors out of their territory. The ratio ensures that a new high-end cocktail bar won’t open next door to an existing restaurant and drain its now-captive nighttime drinking crowd.
Thus are Virginians shut out of the nightlife scene. There’s often nowhere they can go to enjoy venues like late-night jazz clubs or craft cocktail bars. The Virginia economy is also left out of the booming growth of the cocktail movement and remains trapped in the Prohibition Era by a few protectionist insiders. As the defenses of the food-drink ratio ring ever more anachronistic, hesitant Virginia legislators should finally take up this bar fight and put the ratio on ice for good.
Guest blogger C. Jarrett Dieterle is an attorney and policy writer in the Washington, D.C. area.