May 21, 2020
By Rebecca Stamey-White and Erin Kelleher
As California begins the process of easing up on its March 19 Stay-at-Home Order (Order; FAQ Directives), there are a lot of unknowns about how it’s actually going to work for hospitality businesses, which inherently involve interactions between strangers. But don’t worry, we’re California after all, so we will fight the pandemic in the most California way possible. The road will be winding and full of regulatory potholes, buts it’s all designed to keep us safe and our famed hospitality and restaurant industries humming. Below is an overview of the regulatory framework that has been put in place as we ease back into contact with one another, and what it means for your business.
The Resiliency Roadmap – Where We Are Now
We love road trips in California, so our Governor’s carefully thought-out plan that prioritizes public health and fairness is called a RESILIENCY ROADMAP (nice branding!). This roadmap charts out how we can remove the lockdown gradually in four phases, so that we get the desired public health outcomes (six key health and scientific indicators). We’ve even planned for different road conditions in California’s 58 counties (see County Variance Information, and County Attestations) and allowed for backtracks along the way (if cases go up, we go back to the previous phase).
We are currently moving into phase 2 as a state (see Public Health Officer’s May 7 Order), which permits “Dine-in restaurants” to begin to open only subject to the state’s Guidance and Checklist, in counties that have qualified for the phase 2 variance. The map is turning golden as more qualified counties qualify to move further into phase 2 (see County Variance Information, which includes a map of counties).
The state has provided hospitality industry-specific requirements (see Dine-In Restaurant Guidance and Checklist). These requirements generally involve maximum physical distancing, facemasks, frequent handwashing and cleaning and prevention training for employees—it's a lot of compliance considerations to worry about, so businesses will need to weigh the costs of compliance against their expected revenue from reopening and get that balance right for their business capabilities.
Businesses that sell alcohol may also take advantage of ABC’s plethora of regulatory relief provisions, most recently its Fourth Notice of Regulatory Relief and Fifth Notice of Regulatory Relief that let licensees with “on-sale privileges” to both expand their premises (which we covered in a recent post here) and reopen their businesses for on-site and off-site consumption with some guardrails in place.
Still confused about whether this will apply to your business once your county moves further into phase 2? You are not alone! Here is another FAQ on how to implement this new guidance for different types of businesses. Special thanks to Eric Hirata, Robert De Ruyter and Bahaneh Hobel for helping us with directions here and there along our road trip!
1. Who Can Begin to Reopen During Phase 2 and How?
Businesses may “resume modified or full operation” if they offer “sit-down, dine-in meals” and follow the state’s guidance. Read the guidance (Guidance and Checklist) and start thinking about how you’re going to implement the requirements as they require a lot of planning and training to get it right. “Dine-in restaurants” should also continue to “encourage takeout and delivery service whenever possible.” See the ABC’s previous regulatory relief notices for more on takeout and delivery guidelines.
2. What is a “dine-in restaurant”?
A dine-in restaurant is not an alcohol beverage license type, the state has instead used common descriptive terms to describe the kind of business that offers “sit-down, dine-in meals.” This has led to some confusion, as “dine-in restaurants” are a broader group than you might imagine.
ABC has clarified that "dine-in restaurants” includes restaurants and brewpubs, as well supplier licensees that permit tasting and/or private events (such as wineries, breweries, and craft distillers). It also applies to these supplier licenses operating duplicate taprooms or tasting rooms, subject to statutory caps on the number of outlets available. Additionally, the definition also applies to bars, which are typically not permitted to operate bona fide eating places (more on food requirements below in #5).
3. Do grocery stores, liquor stores, and wine shops qualify?
They do not qualify as “dine-in restaurants.” Off-sale retailers cannot serve alcohol on site.
4. Where can I put more tables to accommodate social distancing requirements?
Restaurants, brewpubs, wineries, breweries and craft distillers can now qualify as a “dine-in restaurant” (do NOT forget to check local zoning) and can get a COVID-19 caterer’s authorization (form hot off the presses here) to serve alcohol on a wider footprint. This means that you can expand service into a parking lot, sidewalk, patio area to serve meals with alcohol outdoors to observe social distancing limitations.
5. If I’m a bar or a tasting room, can I open up if I serve meals?
Bars and wineries, breweries and craft distillers that didn’t already serve regular meals, may provide drinks on-site if they contract out meals from a “meal provider” and provide evidence of this contract to ABC when applying for the caterer’s authorization. Note that alcohol can only be sold alcohol “in the same transaction as a meal” so don’t take a creative license here about compliance, you basically have to become a restaurant, not a tasting room or bar. Additional requirements will likely follow, but bottom line, the licensee recording the sale of alcohol and food should buy the food from the “meal provider” to resell to the customer with alcohol.
6. What’s a “meal provider”?
These are businesses regularly engaged in the business of preparing meals to the public (traditional restaurant, fast food, food truck, caterer, etc.) Meal providers can hold retail alcohol licenses, but not hold manufacturing or importer licenses. Watch out for tied-house! Tied-house has not been part of ABC’s COVID-19 regulatory relief, yet. Meals for delivery must be delivered with the alcohol from the licensee’s premises, not delivered from the meal provider directly to the customer separately from the alcohol.
7. Can we share these expanded premises with other licensees?
Yes, but all licensees sharing the area will be jointly responsible for compliance and will share liability, so get clear policies and procedures in place for these shared areas.
This means a bar or tasting room that doesn’t have a kitchen or dining area, but is next door to a “meal provider” could join forces and premises if the transaction for food and drink runs through the alcohol licensee. The “meal provider” may provide food to multiple licensees.
8. This all sounds hard, should we open up under these conditions?
Opening up does not mean going back to the way it was before, that option unfortunately isn’t even on the table. But before you jump boldly into the new economy, think through the compliance that you’re going to want to set up. In conjunction with all of this regulatory relief, there will be enforcement, and a lot of traps for the unprepared licensee. On the positive side, there are a lot of options available to alcoholic beverage licensees today that would have been unheard of just a few months ago.
Traveling along the Resiliency Roadmap will not be easy, but these guidelines and regulatory changes may just make it possible for many businesses to survive, while keeping us all reasonably safe. It’s going to take creative businesses (luckily California is full of them) to come up with solutions to the current market conditions.
This blog is dedicated to occasional (and hopefully interesting) reports of state and national alcoholic beverage regulatory developments that we encounter in our practice. Booze Rules (and any comments below) are intended for informational use only and are not to be construed as legal advice. If you need legal advice please consult with your counsel.