The Daily Pulse:

No, TABC Says, There Were No New Laws That Made the Valarium Close

On Friday, the Valarium announced it would be closing its doors on Nov. 24, after five years of offering a stage for national acts and electronic dance nights. Club owner Gary Mitchell posted a letter on the Valarium's website stating that the closure was for legal reasons:

Due to new rule changes from the TN Alcoholic Beverage Commission concerning the minimum percentage of food an establishment must sell in relation to its gross sales, our venues will be closing. We also cannot comply with the minimum number of days they require us to be open per week. Since we cannot meet their requirements, we will relinquish and not renew our ABC license when it expires November 24th, 2012.

The KNS reported on the story yesterday, saying "At issue is legislation passed last May by the Tennessee General Assembly creating a new limited service license, which requires that 15 percent of the gross revenue is derived from the service of food."

The only problem? Almost everything about that is wrong.

We talked with TABC's attorney, Ginna Winfree, for a while yesterday -- she was patient enough to answer all our dumb questions -- and here's what we learned. Up until 2010, if you wanted to be a bar serving liquor in Tennessee, you had to also be a restaurant. At least 50 percent of your revenue had to come from food sales, and you had to be open at least five days a week. There are innumerable exceptions to this rule -- hotels, private clubs, and places like the Tennessee Theatre, which has its own special exception codified into law as a historic theatre -- but the majority of bars in the state had this specific type of TABC license. (Bars that only serve beer, and not wine or liquor, do not need an TABC license, just a permit from the beer board, and so are governed by different laws.) 

In 2010, the state legislature passed a law changing these regulations. While restaurant licenses (obviously) continue to exist, the state now began to offer "limited service restaurant" licenses for entities that had less than 50 percent food sales. According to Winfree, businesses with this particular license are required to have at least 15 percent food sales and be open three days a week instead of five. (This latter requirement was also changed for all restaurants.) The intent of the law was to make it easier for bars to scrape by, not harder. And, indeed, this is the kind of license the Valarium had. 

Here's the law, which you can look up for yourself in the Tennessee Code - it's TCA 57-4-102-21.

   (21) "Limited service restaurant" means a facility possessing each of the following characteristics:

      (A) Is a public place which has a seating capacity for at least forty (40) patrons and that is kept, used, maintained, advertised and held out to the public as a place where during regular hours of operation:

         (i) Alcoholic beverages, beer or wine are served to patrons;

         (ii) A menu of prepared food is made available to patrons;

         (iii) The gross revenue from the sale of prepared food is fifty percent (50%) or less than the gross revenue from the sale of alcoholic beverages and beer; provided, however, that gross revenue of more than fifty percent (50%) from the sale of prepared food shall not prevent a facility from receiving a "limited service restaurant" license or subject such facility to a fine from the commission for having gross revenue of more than fifty percent (50%) from the sale of prepared food. For purposes of determining the gross revenue from the sale of prepared food, chips, popcorn, pretzels, peanuts and similar snack items shall not be included in gross revenue from the sale of prepared food sold;

         (iv) The facility affirmatively establishes, to the satisfaction of the commission, that it has complied and will comply with the requirements of § 57-4-204;

         (v) The facility provides adequate security during the regular hours of operation; and

         (vi) Sleeping accommodations are not provided;

      (B) Is located within the jurisdictional boundaries of a political subdivision which has authorized the sale of alcoholic beverages for consumption on the premises as provided in § 57-4-103; and

      (C) Is located in an area which is properly zoned for facilities authorized to sell alcoholic beverages for consumption on the premises;

So what changed this year? According to Winfree, nothing. She said "minor language" was added to the law this past session but she could not point out anything that would fit what Mitchell had stated were his reasons for closing. Again, the two points he lists -- the minimum percentage of sales and the minimum number of days to be open -- had already been in effect since 2010 and had actually become less onerous than when the club first opened in 2007.

We called Mitchell to try to figure out if there was something we had gotten wrong, some piece of legislation that we had missed, but he declined to talk to us, stating that his lawyer was already mad at him for sharing too much in his post on the Valarium website. Mitchell said he plans to sue, but when we asked if that meant he plans to sue TABC, and for what, he wouldn't say. The only thing we could get out of him was the problem was that "they took beer off of food sales." But according to an e-mail from Winfree, "Beer sales have never been allowed to count towards the food percentage. Food percentages are determined by comparing the gross sales of prepared foods to the gross sales of alcoholic beverages, excluding low gravity beer."

Thus, to the best of our knowledge, the Valarium's closure probably had very little to do with any TABC regulations. As Mitchell told our editor Matthew Everett this spring, the club was already in financial trouble. "We're operating on a wing and prayer, hoping that the economy will be viable again," Mitchell said. We're certainly sad to lose the venue, but we are more than a little doubtful that Mitchell's conjecture in his farewell letter -- "Our attorneys predict that a large portion of the nightclub venue licensees in TN will not be able to comply with these regulations" -- will come true, since the laws have already been in effect for two years. But if you know more than we do, and there is some change that Winfree missed telling us about, please do let us know, so we can set the record straight.

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