DAR File No. 37617

Alcoholic Beverage Control, Administration

Section R81-5-1

Licensing

Change in Proposed Rule

DAR File No.: 37617
Filed: 07/30/2013 02:32:25 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

H.B. 228, passed in the 2013 General Legislative Session, amended Section 32B-6-407 to allow fraternal clubs to be open to the general public in certain instances. This section is being amended to incorporate this change. This rule is being amended at the request of the ABC Commission to allow fraternal clubs to meet 60% food sales after they have notified the department of the intent, rather than making it be a qualification prior to classification.

Summary of the rule or change:

This section outlines the requirements for compliance with Section 32B-6-407 which now allows fraternal clubs to allow guests that are over 21 without a host as long as the practice is allowed in the bylaws of the fraternal club and the fraternal club maintains at least 60% of its total business from the sale of food pursuant. (DAR NOTE: This change in proposed rule has been filed to make additional changes to a proposed amendment that was published in the June 1, 2013, issue of the Utah State Bulletin, on page 8. Underlining in the rule below indicates text that has been added since the publication of the proposed rule mentioned above; strike-out indicates text that has been deleted. You must view the change in proposed rule and the proposed amendment together to understand all of the changes that will be enforceable should the agency make this rule effective.)

State statutory or constitutional authorization for this rule:

• Section 32B-6-407
• Section 32B-1-607

Anticipated cost or savings to:

the state budget:

None--This rule filing simply makes the Department of Alcoholic Beverage Control (DABC) rules consistent with state statute.

local governments:

None--This rule filing simply makes DABC rules consistent with state statute.

small businesses:

None--This rule filing simply makes DABC rules consistent with state statute.

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

None--This rule filing simply makes DABC rules consistent with state statute.

Compliance costs for affected persons:

None--This rule filing simply makes DABC rules consistent with state statute.

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

None--This rule filing simply makes DABC rules consistent with state statute.

Salvador D. Petilos, 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:

• Nina McDermott at the above address, by phone at 801-977-6805, by FAX at 801-977-6888, or by Internet E-mail at nmcdermott@utah.gov

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:

09/16/2013

This rule may become effective on:

09/23/2013

Authorized by:

Sal Petilos, Executive Director

R81. Alcoholic Beverage Control, Administration.

R81-5. Club Licenses.

R81-5-1. Licensing.

(1) Club liquor licenses are issued to persons as defined in Section 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 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 32B-6-404.

(b) 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 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 32B-6-404(3), and must maintain at least 60% of its total club business from the sale of food, not including mix for alcoholic beverages, and service charges.

(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 the required percentage for any quarterly period, 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.

(1) Club licensees with a Fraternal Club classification as of July 1, 2013 may allow guests that are over 21 without a host as long as long as the practice is allowed in the bylaws of the Fraternal Club and the Fraternal Club maintains at least 60% of its total business from the sale of food pursuant to Section 32B-6-407(10)(c)(i-iii).

(a) The Fraternal Club shall notify the department of the intent to allow guests without a host by providing a copy of the bylaws[ and proof that the Fraternal Club meets the 60% food requirement].

(b) The Fraternal 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 60% for any quarterly period, 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 60%. 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 if the Fraternal Club may continue to allow guests without a host.

 

KEY: alcoholic beverages

Date of Enactment or Last Substantive Amendment: 2013

Notice of Continuation: May 10, 2011

Authorizing, and Implemented or Interpreted Law: 32B-1-607; 32B-2-202; 32B-5; 32B-6-401 through 409