Alcoholic Beverage Control, Administration

Rule R81-5

Private Clubs

Notice of Proposed Rule

(Amendment)

DAR File No.: 35063
Filed: 07/14/2011 10:16:18 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This rule amendment is being proposed to implement S.B. 314 which was passed in the 2011 General Session. The rule amendment also makes nonsubstantive changes regarding statutory references subsequent to the recodification the Alcoholic Beverage Control Act that replaced Title 32A with Title 32B effective 07/01/2011.

Summary of the rule or change:

This rule amendment is required by and implements a provision of S.B. 314 that requires a rule to implement a procedure allowing a dining club licensee to convert to a different retail license type. The rule also clarifies the procedures for handling dining clubs that do not meet the 60% food requirement and clarifies the "brownbagging regulations". This rule amendment also includes nonsubstantive changes regarding statutory references subsequent to the recodification the Alcoholic Beverage Control Act that replaced Title 32A with Title 32B effective 07/01/2011.

State statutory or constitutional authorization for this rule:

• Section 32B-2-202
• Subsection 32B-6-409(3)

Anticipated cost or savings to:

the state budget:

None--This rule amendment is a result of statutory requirements and clarifies operational procedures that are already in place for existing club licensees. There are no costs or savings involved in this rule amendment.

local governments:

None--The requirements in this rule are regulated by state government and do not affect local governments.

small businesses:

None--Many club licensees are small businesses that are already operating under the operational guidelines established in statute and rule. This rule is one of many that clubs must abide by on an ongoing basis. There will be no additional costs or savings associated with this amended rule.

persons other than small businesses, businesses, or local governmental entities:

None--These rules only affect licensed businesses and there is no affect on other persons.

Compliance costs for affected persons:

This amended rule is one of many regulations that licensees must abide by in the course of their normal business operations. There should be no additional compliance costs for affected persons.

Comments by the department head on the fiscal impact the rule may have on businesses:

The statutory mandate that this rule addresses may result in some dining clubs increasing their food sales percentage to the 60% requirement which may or may not be more profitable for them. Many are over 60% already so the fiscal impact will be minimal.

Dennis Kellen, Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Alcoholic Beverage Control
Administration
1625 S 900 W
SALT LAKE CITY, UT 84104-1630

Direct questions regarding this rule to:

• Neil Cohen at the above address, by phone at 801-977-6800, by FAX at 801-977-6889, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

08/31/2011

This rule may become effective on:

09/22/2011

Authorized by:

Dennis Kellen, Director

R81. Alcoholic Beverage Control, Administration.

R81-5. [Private Clubs]Club Licenses.

R81-5-1. Licensing.

(1) Club liquor licenses are issued to persons as defined in Section [32A-1-105(44)]32B-1-102(74). Any contemplated action or transaction that may alter the organizational structure or ownership interest of the person to whom the license is issued must be submitted to the department for approval prior to consummation of any such action to ensure there is no violation of Sections [32A-5-102(4), 32A-5-103 and 32A-5-107(26)]32B-5-310.

(2)(a) At the time the commission grants a club license the commission must designate whether the club qualifies to operate as an equity, fraternal, dining, or social club based on criteria in [32A-5-101]32B-6-404.

(b) [During the June 2009 renewal period, a class C private club licensee or class D private club licensee may request to convert to a different type of club license effective July 1, 2009. Also, after]After any club license is granted, a club may request that the commission approve a change in the club's classification in writing supported by evidence to establish that the club qualifies to operate under the new class designation based on the criteria in [32A-5-101]32B-6-404.

(c) The department shall conduct an investigation for the purpose of gathering information and making a recommendation to the commission as to whether or not the request should be granted. The information shall be forwarded to the commission to aid in its determination.

(d) If the commission determines that the club has provided credible evidence to establish that it meets the statutory criteria to operate under the new class designation, the commission shall approve the request.

(e)(i) Pursuant to 32B-6-409, a dining club licensee may convert its dining club license to a different type of retail license for which the dining club licensee qualifies. However, the conversion must occur between July 1, 2011 and June 30, 2013.

(ii) The dining club licensee shall request the conversion in writing supported by evidence to establish that the club qualifies to operate under the new retail license based on the statutory criteria for that type of license.

(iii) The department shall conduct an investigation for the purpose of gathering information and making a recommendation to the commission as to whether or not the request should be granted. The information shall be forwarded to the commission to aid in its determination.

(iv) If the commission determines that the club has provided credible evidence to establish that it meets the statutory criteria to operate under the new retail license, the commission shall approve the request.

(v) After the conversion, the licensee must then operate under the provisions relevant to the type of retail license to which the club converted. If the dining club is converted to a full-service restaurant, limited-service restaurant, or beer-only restaurant, the bar structure of the dining club is considered a seating grandfathered bar structure for purposes of a full-service restaurant or limited-service restaurant license, or a grandfathered bar structure for purposes of a beer-only restaurant license.

(vi) Such conversions will not be counted against any quota for the type of retail licensee to which the club converted.

(3)(a) A dining club must operate as described in [32A-5-101(3)(a)(ii)(C)]32B-6-404(3), and must maintain at least [50%]60% of its total [private] club business from the sale of food, not including mix for alcoholic beverages, and service charges[, and membership fees]. Any dining club that was licensed on or before June 30, 2011, may maintain 50% food sales until July 1, 2012, but must then maintain 60%.

(b) A dining club shall maintain records separately showing quarterly expenditures and sales for beer, heavy beer, liquor, wine, set-ups and food. These shall be available for inspection and audit by representatives of the department, and maintained for a period of three years.

(c) If any inspection or audit discloses that the sales of food are less than [50%]the required percentage for any quarterly period, [an order to show cause shall be issued by the department to determine why the license should not be immediately reclassified by the commission as a social club. If the commission grants the order to show cause, the reclassification shall remain in effect until the licensee files a request for and receives approval from the commission to be classified as a dining club. The request shall provide credible evidence to prove to the satisfaction of the commission that in the future, the sales of food will meet or exceed 50%.]the department shall immediately put the licensee on a probationary status and closely monitor the licensee's food sales during the next quarterly period to determine that the licensee is able to prove to the satisfaction of the department that the sales of food meet or exceed the required percentage. Failure of the licensee to provide satisfactory proof of the required food percentage within the probationary period shall result in issuance of an order to show cause by the department to determine why the license should not be revoked by the commission, or alternatively, to determine why the license should not be immediately reclassified by the commission as a social club. If the commission grants a reclassification to a social club, the reclassification shall remain in effect until the licensee files a request for and receives approval from the commission to be reclassified a dining club. The request shall provide credible evidence to prove to the satisfaction of the commission that in the future, the sales of food will meet or exceed the required percentage.

 

R81-5-2. Application.

A license application shall be included in the agenda of the monthly commission meeting for consideration for issuance of a club license when the requirements of Sections [32A-5-102,-103, and -106]32B-1-304, 32B-5-201, -204 and 32B-6-405 have been met, a completed application has been received by the department, and the club premises have been inspected by the department.

 

R81-5-3. Bonds.

No part of any corporate or cash bond required by Section [32A-5-106]32B-5-204 and 32B-6-405(5) may be withdrawn during the time the license is in effect. If the licensee fails to maintain a valid corporate or cash bond, the license shall be immediately suspended until a valid bond is obtained. Failure to obtain a bond within 30 days of notification by the department of the delinquency shall result in the automatic revocation of the license.

 

R81-5-4. Insurance.

Public liability and dram shop insurance coverage required in Subsections [32A-5-102(1)(i) and (j)]32B-5-201(2)(j) must remain in force during the time the license is in effect. Failure of the licensee to maintain the required insurance coverage may result in a suspension or revocation of the license by the commission.

 

R81-5-5. Advertising.

(1) Authority. This rule is pursuant to the commission's powers and duties under [32A-1-107]32B-2-202 to act as a general policymaking body on the subject of alcoholic beverage control and to set policy by written rules that prescribe the conduct and management of any premises upon which alcoholic beverages may be sold, consumed, served, or stored.

(2) Purpose. This rule furthers the intent of [32A-5-107(1)]32B-6-407(13) that equity and fraternal clubs advertise in a manner that preserves the concept that such clubs are private and not open to the general public.

(3) Application of Rule.

(a) Any public advertising by an equity or fraternal club, its employees, agents, or members, or by any person under contract or agreement with the club shall clearly identify the club as being "a [private] club for members". In print media, this club identification information must be no smaller than 10 point bold type.

(b) An equity or fraternal club, its employees, agents, or members, or any person under a contract or agreement with the club may not directly or indirectly engage in or participate in any public advertising or promotional scheme that runs counter to the concept that such clubs are private and not open to the general public such as:

(i) offering or providing complimentary club memberships to the general public;

(ii) offering or providing full or partial payment of membership fees or dues to members of the general public;

(iii) offering or implying an entitlement to a club membership to members of the general public; or

(iv) offering to host members of the general public into the club.

 

R81-5-7. Club Licensee Operating Hours.

Allowable hours of liquor sales shall be in accordance with Section [32A-5-107(14)]32B-6-406(4). However, the licensee may open the liquor storage area during hours otherwise prohibited for the limited purpose of inventory, restocking, repair, and cleaning.

 

R81-5-8. Sale and Purchase of Alcoholic Beverages.

(1) A patron may pay for an alcoholic beverage at the time of purchase, or, at the discretion of both the licensee and the patron, the price charged may be added to the patron's tab.

(2) Liquor dispensing shall be in accordance with Section [32A-5-107]32B-5-304; and Sections R81-1-9 (Liquor Dispensing Systems) and R81-1-11 (Multiple Licensed Facility Storage and Service) of these rules.

 

R81-5-13. Brownbagging.

When private [social functions or privately hosted] events, as defined in [32A-1-105(47)]32B-1-102(77), are held on the premises of a licensed club, the proprietor may, in his or her discretion, allow members of the private group to bring onto the club premises, their own alcoholic beverages under the following circumstances:

(1) When the entire club is closed to regular patrons for the private [function or] event, or

(2) When an entire room or area within the club such as a private banquet room is closed to regular patrons for the private [function or] event, and members of the private group are restricted to that area, and are not allowed to co-mingle with regular patrons of the club.

 

R81-5-14. Membership Fees and Monthly Dues.

(1) Authority. This rule is pursuant to the commission's powers and duties under [32A-1-107]32B-2-202 to act as a general policymaking body on the subject of alcoholic beverage control and to set policy by written rules that prescribe the conduct and management of any premises upon which alcoholic beverages may be sold, consumed, served, or stored.

(2) Purpose. This rule furthers the intent of [32A-5-107(1)]32B-6-407 that equity and fraternal clubs operate in a manner that preserves the concept that they are private and not open to the general public.

(3) Application of Rule.

(a) Each equity and fraternal club shall establish in its by-laws membership application fees and monthly membership dues in amounts determined by the club.

(b) An equity or fraternal club, its employees, agents, or members, or any person under a contract or agreement with the club, may not, as part of an advertising or promotional scheme, offer to pay or pay for membership application fees or membership dues in full or in part for a member of the general public.

 

R81-5-15. Minors in Lounge or Bar Areas.

(1) Pursuant to [32A-5-107(2)]32B-6-406(5), a minor may not be admitted into, use, or be on the premises of any lounge or bar area of an equity, fraternal, or dining club. A minor may not be on the premises of a social club except to the extent allowed under [32A-5-107(2)(d)]32B-6-406.1, and may not be admitted into, use, or be on the premises of any lounge or bar area of a social club.

(2) "Lounge or bar area" includes:

(a) the bar structure as defined in [32A-1-105(4)]32B-1-102(7);

(b) any area in the immediate vicinity of the bar structure where the sale, service, display, and advertising of alcoholic beverages is emphasized; or

(c) any area that is in the nature of or has the ambience or atmosphere of a bar, parlor, lounge, cabaret or night club.

(3) A minor who is otherwise permitted to be on the premises of an equity, fraternal, or dining club may momentarily pass through the club's lounge or bar area en route to those areas of the club where the minor is permitted to be. However, no minor shall remain or be seated in the club's bar or lounge area.

 

R81-5-18. Age Verification - Dining and Social Clubs.

(1) Authority. [32A-1-303 and 32A-1-304.5]32B-1-402, -405, and -407.

(2) Purpose.

(a) [32A-1-304.5]32B-1-407 requires dining and social club licensees to verify proof of age of persons who appear to be 35 years of age or younger either by an electronic age verification device, or an acceptable alternate process established by commission rule.

(b) This rule:

(i) establishes the minimum technology specifications of electronic age verification devices; and

(ii) establishes the procedures for recording identification that cannot be electronically verified; and

(iii) establishes the security measures that must be used by the club licensee to ensure that information obtained is used only to verify proof of age and is not disclosed to others except to the extent authorized by Title [32A]32B.

(3) Application of Rule.

(a) An electronic age verification device:

(i) shall contain:

(A) the technology of a magnetic stripe card reader;

(B) the technology of a two dimensional ("2d") stack symbology card reader; or

(C) an alternate technology capable of electronically verifying the proof of age;

(ii) shall be capable of reading:

(A) a valid state issued driver's license;

(B) a valid state issued identification card;

(C) a valid military identification card; or

(D) a valid passport;

(iii) shall have a screen that displays no more than:

(A) the individual's name;

(B) the individual's age;

(C) the number assigned to the individual's proof of age by the issuing authority;

(D) the individual's the birth date;

(E) the individual's gender; and

(F) the status and expiration date of the individual's proof of age; and

(iv) shall have the capability of electronically storing the following information for seven days (168 hours):

(A) the individual's name;

(B) the individual's date of birth;

(C) the individual's age;

(D) the expiration date of the proof of age identification card;

(E) the individual's gender; and

(F) the time and date the proof of age was scanned.

(b) An alternative method of verifying an individual's proof of age when proof of age cannot be scanned electronically:

(i) shall include a record or log of the information obtained from the individual's proof of age including the following information:

(A) the type of proof of age identification document presented;

(B) the number assigned to the individual's proof of age document by the issuing authority;

(C) the expiration date of the proof of age identification document;

(D) the date the proof of age identification document was presented;

(E) the individual's name; and

(F) the individual's date of birth.

(c) Any data collected either electronically or otherwise:

(i) may be used by the licensee, and employees or agents of the licensee, solely for the purpose of verifying an individual's proof of age;

(ii) may be acquired by law enforcement, or other investigative agencies for any purpose under Section 32A-5-107;

(iii) may not be retained by the licensee in a data base for mailing, advertising, or promotional activity;

(iv) may not be retained to acquire personal information to make inappropriate personal contact with the individual; and

(v) shall be retained for a period of seven days from the date on which it was acquired, after which it must be deleted.

(d) Any person who still questions the age of the individual after being presented with proof of age, shall require the individual to sign a statement of age form as provided under [32A-1-303]32B-1-405.

 

KEY: alcoholic beverages

Date of Enactment or Last Substantive Amendment: [June 24, 2009]2011

Notice of Continuation: May 10, 2011

Authorizing, and Implemented or Interpreted Law: [32A-1-107; 32A-1-304.5(5); 32A-5-107(18); 32A-5-107(23)]32B-2-202; 32B-6-409(3)