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Category: Hospitality & Liquor Control

Ohio Sports Gaming – Looming Pitfall for Ohio Liquor Permit Holders

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June 22, 2022

John NealWith legal sports gaming set to begin on January 1, 2023, the Ohio Lottery Commission and Ohio Casino Control Commission are rushing to approve final regulations and license sports gaming businesses. As matters stand, there is still uncertainty as to a multitude of issues surrounding the roll-out of the programing and various types of licensing, due to the fact regulations and applications have not been finalized. Of particular importance is to recognize a critical timing requirement with regard to the Type C Sports Gaming Host licenses: An applicant for a Type C Sports Gaming Host license must first obtain an Ohio Lottery retailer license, per a recent Ohio Casino Commission ruling. With the short window for gaming licenses to be filed, this is a significant hurdle if the lottery license has not been obtained already.

“Type C” Sports Gaming Host (“Type C Host”) licenses were designed by the legislature to ensure that Ohio’s D-class liquor permit holders have an opportunity to participate in the sports gaming industry. Type C Hosts will partner with Type C Sports Gaming Proprietors to offer sports gaming at the Hosts’ premises. Sports gaming must be conducted using self-service or clerk-operated terminals provided by the Proprietor. Each Host will be compensated by their Proprietor pursuant to a written contract between the two parties.

Interested businesses that wish to obtain a Type C Host license must apply with the Ohio Casino Control Commission. While the application period for most of the other categories of sports gaming license opened on June 15th (and closes on July 15th), the Casino Control Commission has set a separate period of July 15 – August 15 for Type C Host applications. Interested businesses should move quickly, as completing the application process takes time, and the window during which the Casino Control Commission will accept applications is extremely short.

To successfully obtain Type C Host licensure, applicants must meet all of the criteria below:

  • Hold a D-1, D-2, or D-5 liquor permit issued by the Ohio Division of Liquor Control;
  • Hold a valid lottery sales agent (retailer) license issued by the Ohio Lottery Commission;
  • Have a current recommendation for licensure by the Lottery Commission (“pre-qualification”); and,
  • Operate as a for-profit business (cannot be a non-profit).

As laid out above, obtaining a Type C Host license is a two- or three-step process. Interested businesses must first obtain a lottery retailer license from the Lottery Commission, if they do not already possess such a license. Next, applicants must apply with the Lottery Commission for a recommendation/pre-qualification. Once both of those steps are completed, an applicant may then apply with the Casino Control Commission for Type C Host licensure.

D-class liquor permit holders who are not currently a lottery retailer should begin that application process as soon as possible, as the Lottery Commission estimates the process will take 4-6 weeks to complete. Registering as a lottery retailer is fairly easy and inexpensive: applicants must pay a $25.00 application fee, obtain a surety bond (typically between $10,000 and $15,000), and be fingerprinted for a criminal background check. Because the background check requirements for the Lottery Commission differ from those of the Division of Liquor Control, applicants will not be able to use their previous background check results from the liquor permitting process and must be re-fingerprinted.

After an applicant has been licensed as a lottery retailer, they must then obtain a recommendation for licensure from the Lottery Commission, referred to as “pre-qualification.” Applicants must have completed the initial retailer application and obtained a retailer number prior to requesting pre-qualification. Fortunately, the Lottery Commission estimates that requests for pre-qualification will generally be completed within 5-7 days, as opposed to several weeks. As of June 21st, there were 616 pre-qualified applicants approved by the Lottery Commission.

The third and final step to obtaining a Type C Host license is applying for licensure with the Casino Control Commission. Notably, Type C Host licenses are mandatory issuance: the Casino Control Commission is required by law to issue a license to any applicant who submits a complete application and meets all criteria for qualification. While there is no limit on the number of Type C Host licenses that the Commission will issue, there is a limited window of time to apply. Applications will be available beginning on July 15, 2022, and will be accepted until August 15, 2022.

The exact contents of the Type C Host application forms have not yet been disclosed. However, based on the applications for other types of sports gaming licenses, the application may include detailed narrative descriptions of planned sports gaming business activities, disclosure of the applicant’s business structure and ownership, and information about owners’ criminal, civil, bankruptcy, and regulatory histories. Type C Host applications will require a $1,000 non-refundable application fee, and the license must be renewed every three years.

The attorneys of Walter Haverfield’s Hospitality and Liquor Control team have decades of experience in business licensing within heavily regulated industries, including alcohol, cannabis, and more. Please contact us below if we may be of assistance.

Alexander R. Bibisi is an associate at Walter | Haverfield who focuses his practice on hospitality and liquor control. He can be reached at abibisi@walterhav.com or at 216-658-6217. 

John N. Neal is head of the Walter | Haverfield Hospitality and Liquor Control team. He can be reached at jneal@walterhav.com or at 216-619-7866.

Ohio Constitutional Carry: Implications for Liquor Permitted Businesses

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June 14, 2022

John NealAs of June 13, 2022, the state of Ohio now allows most individuals to carry a concealed handgun in public without having to obtain a concealed handgun license (“CHL”). Our attorneys have identified several important implications (and potential pitfalls) for Ohio’s D-class liquor permit holders and their patrons.

Under the new law, any “qualifying adult” may carry a concealed handgun throughout the state without a CHL. A “qualifying adult” includes anyone who: (1) is at least 21 years of age; (2) is not prohibited from possessing or receiving a firearm under any state or federal law; and, (3) is a U.S. citizen or an alien lawfully admitted under an immigrant visa.

Ohio law regulates the possession of firearms in D-class liquor permit premises, such as bars and restaurants. It is generally a fifth-degree felony to possess any firearm in licensed D-class premises. D-class permit holders and observant patrons are likely familiar with this warning sign, which state law requires every D-class permit holder to display on premises (see ORC §4301.637).

The sign warns that possession of a firearm “may” constitute a felony. The word “may” is used because the prohibition contains a few exemptions, most notably for individuals who have been issued a CHL. As of June 13, that exemption also applies to qualifying adults, meaning that any qualifying adult may now lawfully carry a concealed handgun in D-class premises.

Even under the new law, there are still two categories of people who remain prohibited from possessing any firearm on D-class liquor permit premises:

  • Anyone who is consuming any alcohol while on-premises, or who is under the influence of alcohol or any drug of abuse.
    • “Drug of abuse” includes marijuana, per OAC §4729:9-1-01. Therefore, anyone who has recently used marijuana cannot carry a firearm into a D-class premises.
  • Anyone who is not a qualifying adult, including:
    • Anyone who is prohibited under state or federal law from possessing or receiving a firearm. This includes most convicted felons, individuals under protection orders, and individuals previously involuntarily committed for mental health treatment.
    • Anyone under the age of 21. Persons ages 18-20 generally may possess and openly carry firearms in Ohio, but may not do so on D-class premises.

Note that unlike with driving, there is no permissible threshold for blood alcohol content while carrying a firearm. Carrying a firearm while having consumed any alcohol whatsoever is a first-degree misdemeanor under ORC §2923.15. This then becomes a fifth-degree felony under ORC §2923.121 if the firearm is carried in a D-class liquor permit premises. Under no circumstances should an employee of a D-class permit holder serve alcohol to any person the employee knows is carrying a firearm, as there are potential criminal ramifications for the server.

Ohio law is clear regarding concealed handguns. Any qualifying adult who is not consuming or under the influence of alcohol or drugs is allowed to carry on D-class premises (unless the business conspicuously posts a §2923.126 sign – more on that below). Ohio law is also clear on concealed weapons other than handguns: those are unlawful to carry per ORC §2923.12, regardless of whether the individual has a CHL or is a qualifying adult.

But what about firearms that are carried openly? Since the state of Ohio was founded in 1803, open carry of firearms has been generally lawful, without any permit required. While open carry in D-class premises by individuals without a CHL was previously prohibited, that may no longer be the case. The exemption for qualifying adults in ORC §2921.121 does not expressly require that the firearm be concealed, nor that the firearm carried must be a handgun (as opposed to a rifle or shotgun).  Open carry on a D-class liquor permit premises presents a gray area upon which Ohio courts have obviously not yet ruled.

Setting aside the concealed versus open carry question, it is important to remember that any private business may choose to post a sign prohibiting the carrying of firearms on its premises. Per ORC §2923.126, a person who knowingly violates such a posted prohibition commits criminal trespass, a fourth-degree misdemeanor. This law has not changed with constitutional carry, and any posted prohibition applies equally to both CHL holders and qualifying adults. D-class permit holders may, but are not required, to post such signage. (As an aside, it is also important to note that the state-mandated D-class premises warning sign discussed above (the §4301.637 sign) does not, by itself, constitute a posted prohibition for purposes of §2923.126.)

Regardless of whether a business chooses to post such signage, business owners should be aware that Ohio law provides broad protections for businesses from any civil liability related to the actions of CHL holders or qualifying adults who bring handguns onto their premises.

If you are a D-class liquor permit holder and have questions about how the new concealed carry law might impact your business, we encourage you to contact the Walter | Haverfield Hospitality and Liquor Control team.

Alexander R. Bibisi is an associate at Walter | Haverfield who focuses his practice on hospitality and liquor control. He can be reached at abibisi@walterhav.com or at 216-658-6217. 

John N. Neal is head of the Walter | Haverfield Hospitality and Liquor Control team. He can be reached at jneal@walterhav.com or at 216-619-7866.

Ohio Set to Legalize Sports Betting

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December 22, 2021

John NealDecember 22, 2021 

After a turbulent ten-month journey, Ohio is finally poised to legalize sports betting. HB 29, first proposed in April, has now passed in both houses of the Ohio General Assembly and is awaiting signature by Governor Mike DeWine. The governor has previously expressed strong support for legalizing sports betting in Ohio, and has indicated that he plans to sign the bill into law. With the governor’s signature being the last remaining hurdle, legal sports betting in Ohio appears to be inevitable.

Similar to Ohio’s alcoholic beverage and medical marijuana industries, “sports gaming” in Ohio will be heavily regulated by the state. Businesses seeking to participate in what will surely be a bustling and profitable industry must obtain one of a limited number of highly coveted operating licenses. Because the number of licenses is extremely limited and licenses will likely be awarded “first come, first served,” interested applicants will need to move fast in order to secure a slot in the new regulated market. The Ohio Casino Control Commission (the “Commission”) is expected to begin issuing licenses in early 2022, with legal sports betting activities beginning no later than January 1, 2023.

The Commission will issue several different license types based on the nature of the sports gaming activities to be conducted, including:

  • Type A Sports Gaming Proprietor for online/mobile wagering;
  • Type B Sports Gaming Proprietor for wagering at brick-and-mortar locations;
  • Type C Sports Gaming Proprietor for operators of self-service and clerk-operated gaming terminals located in certain D-class liquor permit establishments;
  • Type C Sports Gaming Host licenses for D-class liquor permit holders desiring to host sports gaming on their premises; and,
  • Mobile and non-mobile Management Services Provider licenses for businesses to perform sports gaming activities on behalf of a Type A or B proprietor licensee. These are also sometimes referred to as “skins,” and would include popular platforms such as DraftKings and FanDuel.

HB 29 limits the number of available Proprietor licenses to 25 Type A, 40 Type B, and at least 2 but no more than 20 Type C. There is no hard limit on the number of Mobile or non-mobile Management Services Provider licenses, however, each Type A/B Proprietor may initially contract with only one services provider. Type C Proprietors are prohibited from contracting with any services provider. Notably, there is no limit on the number of available licenses for Type C Hosts.

Importantly, merely submitting an application does not guarantee that a business will receive a license. Each applicant must establish its suitability for licensure by clear and convincing evidence, and will need to demonstrate why they are more suitable to receive a license than other competing applicants. The Commission will examine a wide variety of factors when selecting licensees, including an applicant’s reputation, experience, and financial integrity. Further, the Commission is required to give preference to applicants that are a professional sports organization, casino, or video lottery sales agent.

All individuals with a financial interest in a license applicant (except for a Type C Host) will be required to complete a criminal history background check. The Commission will analyze the results of these background checks, as well as the regulatory compliance history of the applicant and its principals. The Commission will also assess the business experience of the applicant, including the nature of its current physical presence and economic involvement in Ohio, length of time in business, total amount of taxable income expected to be paid to employees, and intended economic contributions to the state of Ohio, such as promotion of tourism.

Ability to sufficiently finance the planned sports gaming business will be a major component of any winning license application. As part of the application process, applicants will need to submit audited financial transactions for the previous year, prepared by a CPA in accordance with GAAP and state and federal laws. Following review of the financial statements, the Commission may deny any application if the Commission determines that the applicant has “not demonstrated to the commission’s satisfaction financial responsibility sufficient to adequately meet the requirements of the business enterprise.” This extremely broad discretion means that applicants will need to show access to considerably more capital than the bare minimum necessary in order to receive a license.

In addition to demonstrating sufficient capital to start and operate the business, applicants will need to pay a license fee to the Commission upon being selected to receive a sports gaming license:

  • Type A Sports Gaming Proprietor: $500,000.00
  • Type B Sports Gaming Proprietor: $100,000.00 or $50,000.00 (depending on whether the licensee also holds a Type A license)
  • Type C Sports Gaming Proprietor: $100,000.00
  • Type C Sports Gaming Host: Amount to be determined by the Commission
  • Mobile Management Services Provider: $750,000.00
  • Management Services Provider: $100,000.00 or $50,000.00 (depending on the type of licensee served)

Being one of the first players in this new industry comes with many strategic advantages, and interested parties would do well to begin planning their sports gaming business and associated applications well in advance.

At Walter | Haverfield, we possess considerable expertise in licensing and compliance, developed through years of experience working with Ohio’s tightly regulated medical marijuana and alcoholic beverage businesses. We highly encourage you to contact us below to learn more about Ohio sports gaming and to discuss how you can secure a lucrative position in this emerging industry.

John N. Neal is head of the Walter | Haverfield Hospitality and Liquor Control team. He can be reached at jneal@walterhav.com or at 216-619-7866.

Alexander R. Bibisi is an associate at Walter | Haverfield who focuses his practice on hospitality and liquor control. He can be reached at abibisi@walterhav.com or at 216-658-6217. 

Ohio Board of Pharmacy Releases Applications for 73 New Medical Marijuana Dispensaries

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September 21, 2021

John NealSeptember 21, 2021 

Since its inception in 2018, Ohio’s medical marijuana program has continuously struggled with poor patient accessibility. In November 2020, 62% of registered patients reported having to travel more than 10 miles to reach a dispensary. To improve patient access, the Board of Pharmacy has approved the issuance of up to 73 new dispensary licenses. Interested applicants will need to move quickly, as this application window will close on November 18 at 2:00 pm EST.

The new dispensaries will be distributed across Ohio’s 31 “dispensary districts” based on patient population, with a goal of ensuring a ratio in each district of around 1,200 registered patients per dispensary. Some districts will have only one new license available, while severely underserved districts will have as many as 9 new licenses offered. Of the 73 total new licenses up for grabs:

  • 22 are located in northeast Ohio (including Cleveland, Akron, and Youngstown metros);
  • 8 in northwest Ohio (including Toledo metro);
  • 17 in southeast Ohio (including Columbus and Athens metros); and,
  • 26 in southwest Ohio (including Cincinnati and Dayton metros).

Applications must be submitted online using a web portal that will be posted on the Medical Marijuana Control Program’s website. The portal is expected to open on November 4 at 8:00am EST. Prior to the submission window opening, there will be two question and answer periods (9/20 – 10/6 and 10/17 – 10/21). The Board will limit questions to three per person per Q&A period. Importantly, any attempt to communicate with the Board following the end of the second Q&A period will result in an automatic disqualification from receiving a license. Accordingly, it is crucial that applicants obtain the assistance of legal counsel who are experienced in the medical marijuana industry and possess extensive knowledge of Ohio’s application process and the Board’s expectations from applicants.

The Board has announced an important change in how dispensary licenses will be awarded in this application round. During the previous 2017-18 application period, a third-party consultant scored each application based on the quality of detailed narrative responses to application questions. The 58 highest-scoring applicants were then awarded provisional dispensary licenses. In a tremendous paradigm shift, the Board has decided that the 73 new licenses will be awarded via a lottery system. Rather than competitively evaluating applications against one another, the Board will conduct a randomized drawing for each dispensary district. The drawing will produce a ranked order list of all applications in each district.

Next, the Board will evaluate each winning application for compliance with the Ohio Revised Code and Ohio Administrative Code. Winning applicants may be disqualified for any of a myriad of reasons, ranging from failure to fully respond to all application prompts, to violations of Ohio’s complex regulations surrounding application submissions, ownership disclosures, or financial requirements. The Board will also evaluate each applicant’s access to liquid capital ($250,000 minimum) and may refuse to issue a conditional license to any applicant possessing insufficient assets. Submitting a perfect application will be a necessity, as it is unlikely that applicants will be given any opportunity to amend or correct deficiencies identified during the Board’s review.

Applicants may only submit one application per land parcel (submitting subsequent applications for any adjoining parcels will result in disqualification from this licensing round). Note that applicants are required to have control over any parcel for which they apply, either by ownership or lease. Otherwise, applicants are not limited in the number of applications they may submit. However, the Ohio Admin. Code bars a “single owner” from receiving more than five dispensary licenses at any given time. State regulations also prohibit the issuance of more than 66% of available licenses in a multi-license district to any single applicant.

The Walter | Haverfield team possesses experience in the cannabis industry that is unparalleled in the state of Ohio. During Ohio’s 2017 licensing round, our team handled dozens of dispensary applications, resulting in multiple license awards across the state. Outside of Ohio, the attorneys of our cannabis law group have helped hundreds of applicants across more than 30 U.S. states and five countries to obtain both competitive and non-competitive business licenses. We highly encourage you to contact us below to learn more about Ohio’s medical marijuana program and  get started on your dispensary application immediately.

John N. Neal is head of the Walter | Haverfield Hospitality and Liquor Control team. He can be reached at jneal@walterhav.com or at 216-619-7866.

Alexander R. Bibisi is an associate at Walter | Haverfield who focuses his practice on hospitality and liquor control. He can be reached at abibsi@walterhav.com or at 216-658-6217. 

Sports Betting in Ohio: What You Should Know About the State’s Proposed Law & How to Obtain a License

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June 24, 2021

John NealJune 24, 2021 

After the U.S. Supreme Court overturned a federal ban on online sports betting in 2018, Ohio is on the verge of joining over two dozen states that have already entered this flourishing industry.

On May 6, 2021, the Ohio legislature introduced SB 176, a bill to legalize and regulate sports betting. On June 16, 2021, the legislation was approved by a unanimous vote of the Senate Select Committee on Gaming, as well as by a 30-2 vote in the full Senate. The next step for the bill will be a vote in the Ohio House of Representatives, where it must also obtain a simple majority before advancing to Governor Mike DeWine for signing.

SB 176 seeks to create a regulated system for “sports gaming,” similar to Ohio’s legal structures for medical marijuana and alcoholic beverages. The bill would allow the use of any system or method of wagering approved by the Ohio Casino Control Commission (the “Commission”) for betting on both professional and collegiate sports, including Esports. Only thoroughly vetted businesses that have been issued a special license by the state may engage in the business of accepting wagers on sporting events.

The current version of SB 176 authorizes the Commission to license and regulate so-called “sports gaming agents” by issuing three types of “sports gaming proprietor licenses”: Type A for online/mobile wagering; Type B for wagering at brick-and-mortar locations; and Type C for self-service gaming terminals located in Commission-licensed, D-class liquor permit locations. SB 176 limits the number of each type of license that the Commission may issue, with no language in the current draft providing for any additional licenses in the future. As such, competition to obtain these first-come, first-serve sports gaming licenses will no doubt be intense, and the license quota will fill up rapidly. As was the case with the medical marijuana license application process, the earliest and best prepared have the best chance of securing a license.

Type A licenses will allow online betting through a website or mobile application. These sports gaming agents may also sub-contract with no more than two mobile management services providers, such as DraftKings or FanDuel. Websites and mobile apps used to accept bets must use location-tracking technology to confirm that participants are physically located in Ohio at the time of placing a bet—accepting online bets from individuals located outside of Ohio is not allowed, even if the individual is an Ohio resident. Further, SB 176 requires that the servers responsible for accepting wagers must be physically located in Ohio. SB 176 authorizes the Commission to issue only 25 Type A licenses.

Type B licenses will allow “sports gaming facilities” to engage in the business of sports betting. Type B sports gaming agents must maintain a physical premise in Ohio, or must contract with a management services provider who will operate a physical premise in Ohio on their behalf. All wagers must be placed in-person by participants at the physical premises, and no person is allowed to place wagers on behalf of another person who is not physically present. The area where wagers will be accepted must be off-limits to all persons under age 21, except for certain exempted employees. These licenses appear to be particularly targeted toward traditional sporting venues, such as sports stadiums and arenas. SB 176 authorizes the Commission to issue only 33 Type B licenses, and also limits the number of licenses that may be issued within each county (based on population).

Type C licensees may offer sports gaming through self-service terminals located at licensed “Type C Sports Gaming Hosts’” facilities. Type C hosts must be holders of a D-category Ohio liquor permit and must also obtain a host license from the Commission. Unlike Type A and B licensees, Type C sports gaming proprietors may not sub-contract with any management services providers, and are limited to only two sports gaming terminals per host location. SB 176 does not limit the number of Type C host licenses that the Commission may make available, but does limit the number of Type C proprietors to between 3 and 20, at the Commission’s discretion.

The process to obtain a Type A, B, or C sports gaming proprietor license will be strenuous, with extensive application regulations from the Commission likely to be forthcoming. Currently, applicants must be able to show they have access to a substantial amount of capital, and they must provide the state with at least one year of audited financial statements associated with that money. The initial fee for each license will be: $1 million (A), $100,000 (B), and $25,000 (C). Applicants must also give to the state a surety bond in a to-be-determined (likely large) amount.

In addition to the Type A, B, and C sports gaming proprietor licenses, SB 176 will also require licenses for mobile and non-mobile “management services providers.” As mentioned above, these licensees may contract with Type A and Type B license holders to manage sports betting on their behalf, either through a mobile application or a physical premise, depending on the respective license type. The initial license fee for a mobile management services provider will be $500,000, while the fee for the non-mobile license will be $1,000,000.

Another provision of SB 176 authorizes a “sports gaming lottery,” where the Ohio Lottery Commission will offer a sports pool in lottery format. Participants may wager on which side will win or lose. Each participant will pay a fixed fee of $20, and the winning side will split the losing side’s money. Sports gaming lottery tickets will be offered through traditional lottery retail agents approved by the Lottery Commission.

SB 176 is the second major attempt to legalize sports betting in Ohio. A similar bill passed the House in 2020, but lawmakers were unable to reconcile differences between the House and Senate versions of the bill. Nonetheless, Governor DeWine has continuously voiced support for the creation of a legal sports gaming market in Ohio, having stated earlier this year that legalization is “inevitable.” With the passage of SB 176 in the Senate, it appears that the Governor’s statement was indeed accurate. Interested parties are already gearing up to pursue one of the coveted few licenses as SB 176 appears increasingly likely to become law.

At Walter | Haverfield, we are keeping a close eye on new developments in Ohio’s sports betting laws, as we have played instrumental roles in other tightly controlled sectors, such as Ohio’s medical marijuana program and the complex world of liquor control. We highly encourage you to contact us here to learn more about Ohio sports gaming and to discuss how you can secure a lucrative position in this exciting growth industry.

John N. Neal is head of the Walter | Haverfield Hospitality and Liquor Control team. He can be reached at jneal@walterhav.com or at 216-619-7866.

Alexander R. Bibisi is an associate at Walter | Haverfield who focuses his practice on hospitality and liquor control. He can be reached at abibsi@walterhav.com or at 216-658-6217. 

 

Last Call: Emergency Rule Forces Ohio Bars and Restaurants to End Alcohol Sales at 10 P.M.


August 3, 2020

John NealAugust 3, 2020 

All Ohio bars and restaurants are ordered to cease the sale of alcoholic beverages by 10 p.m. each night pursuant to an emergency adoption of the state’s Liquor Control Commission ruling signed into order by Ohio Governor Mike DeWine. The order is in response to the increasing number of COVID-19 cases in Ohio. The proposal was first announced by DeWine, promulgated by the Liquor Control Commission, and then signed as an executive order. Under the new order, establishments are mandated to stop serving alcohol by 10 p.m., and patrons must finish their drinks by 11 p.m. However, customers may continue to order food until the establishment’s closing time.

The new rule also expands the number of to-go alcoholic drinks from two to three, if purchased with a meal.

DeWine pushed for the 10 p.m. cutoff, citing reports from the Ohio Investigative Unit (OIU), which enforces liquor laws statewide, of multiple instances of overpopulated patios and overflowing dance floors in contravention of existing orders.

Many restaurateurs and bar owners alike have opposed the new rule. Some have referred to the mandate as a death sentence after experiencing a prolonged state of slow business and closures due to the ongoing pandemic. Some have called on DeWine to prove that bars are a substantial cause of spreading the illness by releasing data that proves so.

The new rule remains in effect for 120 days from the date that the order went into effect (July 31, 2020), or until rescinded by the Liquor Control Commission.

If you have additional questions regarding the recommended practices of Ohio restaurants and bars, please reach out to us here. We are happy to help.

John N. Neal is head of the Walter | Haverfield Hospitality and Liquor Control team. He can be reached at jneal@walterhav.com or at 216-619-7866.

Food Trucks Allowed to Operate at Ohio Rest Stops


April 10, 2020

John NealApril 10, 2020 

On April 10, 2020, Ohio Governor Mike DeWine announced the creation of a state permit, which authorizes food trucks to operate at any of the state’s 86 rest areas. The move is an effort to help feed truck drivers and other essential personnel during the COVID-19 crisis.

The permit application, managed by the Ohio Department of Transportation, can be found here.

The following rules and guidelines apply to all food truck operators at Ohio rest stops:

• The purpose of the permit is to sell food.
• No beverage sales are allowed except for coffee.
• Operators are not permitted to sell pre-packaged snacks and desserts (i.e. candy and chips) in order to support existing on-premise vending operations, unless there are no snack and vending machines on site.
• All food truck workers need to wear masks and gloves at all times.
• No self-service condiments are allowed.
• When an order is ready, operators must text the customer in an effort to discourage lines.
• The following advertising is prohibited: advertising in the rest areas, on a highway right-of-way, on food finder apps and on social media. Advertising is only permitted on the food truck itself.
• Operators need to comply with all department, state and federal rules and Ohio Department of Health guidelines.

For a complete list of terms and conditions associated with the food truck permit, go here.

For additional legal questions regarding the service, sale and delivery of food and alcohol, please reach out to us at marketing@walterhav.com. We’re happy to help.

John N. Neal is head of the Walter | Haverfield Hospitality and Liquor Control team. He can be reached at jneal@walterhav.com or at 216-619-7866.

Cocktails To Go: Ohio Allows the Sale and Delivery of Hard Liquor Drinks


April 7, 2020

John NealApril 7, 2020

Ohio restaurants and bars with an on-premises liquor permit may now sell drinks made with high-proof spirits for carry-out and for delivery with the purchase of a meal.  Customers are limited to two drinks “per meal.” The move comes after the Ohio Liquor Commission promulgated emergency rulemaking on April 7, 2020, allowing for this change.

Details of this Rule are as follows:

  • Drinks cannot contain more than two ounces of spirituous liquor per container.
  • Food must be purchased in conjunction with the purchase of order. However, beer, wine, and low-proof products, in their original sealed containers were always allowed to be sold at carry-out/delivery, and that is still permitted (unless a local restriction is reflected on the liquor permit.)
  • All drinks must be in a closed container.
  • All purchases are subject to the open container law upon leaving the permit premises.
  • The permit holder must comply with all applicable state tax laws.
  • The permit holder is subject to all liquor laws and rules including hours of operation, minimum age requirements, and the prohibition against sales to intoxicated persons.
  • Establishments that take advantage of the rule must have a food service license issued by its local health department.

The rule remains in effect for up to 120 days. If you have further questions about this new rule or any of Ohio’s recent policy changes in light of the pandemic, please reach out by emailing us here. We are happy to help.

John N. Neal is head of the Walter | Haverfield Hospitality and Liquor Control team. He can be reached at jneal@walterhav.com or at 216-619-7866.

 

COVID-19: Mitigating Risk and Allowing for Limited Operations of Restaurant Business in Ohio for Carry-Out and Delivery


March 16, 2020

John Neal

A more recent article that explains Ohio’s policy change on the sale and delivery of hard liquor drinks can be found here.

March 16, 2020 

In conjunction with the Ohio Governor’s Office, the Ohio Department of Health ordered the stoppage of on-premises food and alcohol service effective 9:00pm EST March 15, 2020. The move is designed to combat the spread of the coronavirus (COVID-19). Many states have followed suit.

The Ohio Order specifically exempts carry-out and delivery of food and alcohol (meaning beer and wine only).  The Governor has encouraged the use of carry-out and delivery as options, and for the public to continue to use local restaurants. From a moral perspective, restaurants that stay open to help ensure the public has access to food are to be commended, especially considering that most operations will lose money doing so.

Of course, nothing that has been issued to date grants any protection or immunity to restaurants for continuing operations, and as such, the general principles of liability and negligence will apply to how a food service operation interacts with the public.

National and state agencies have issued guidance, and in some cases, orders, with regard to managing the coronavirus outbreak.  Although most people have seen them, restaurants that are going to maintain an operable kitchen must remember to advise its employees, preferably in documented writing, that they must:

  • Wash hands often with water and soap (20 seconds or longer) – Employees should be required to do this at regular intervals.
  • Dry hands with a clean towel or air dry your hands – Restaurants should ensure that clean, disposable papers towels are available and direct employees that they be used.
  • Cover your mouth with a tissue or sleeve when coughing or sneezing (and excessive sneezing or coughing should probably result in an employee being sent home).
  • Avoid touching your eyes, nose, mouth with unwashed hands or after touching surfaces – Employees should be advised not to do these actions, and immediately directed to clean their hands if they inadvertently do.
  • Clean and disinfect “high-touch” surfaces often – The restaurant should wipe down with disinfectant such surfaces at regular intervals, and if possible, have appropriate hand sanitizers on site and used by employees frequently.
  • Continue to strictly comply with all existing regulations of the health department relative to operating a food service licensed business.

Not only should these procedures be advised, management should monitor and enforce them.

Understand, of course, that an employer can (and should) require an employee to go home and stay home if the employee has symptoms of coronavirus (or, quite frankly, is sick in any fashion).

In her March 15th order, Dr. Amy Acton, director of the Ohio Department of Health, found that coronavirus is “spread between individuals who are in close contact with each other (within about six feet) through respiratory droplets produced when an infected person coughs or sneezes.  It may be possible that individuals can get COVID-19 by touching a surface or object that has the virus on it and then touching their own mouth, nose or eyes.”   She also cited research to “confirm that COVID-19 is spread simply through breathing, even without coughing.”  That last finding is alarming.

This leads to one of the most significant pronouncements of the March 15th Order regarding “social distancing.”

Physical Premises Restrictions

Per the March 15th Order, “Lines for carry-out in these establishments must have an environment where patrons and staff maintain social distancing (six feet away from other people) whenever possible.”

Because of this and the general nature of the spread of coronavirus, a restaurant should devise carry-out and delivery programs designed to prevent the spread of coronavirus.

If possible, a restaurant still selling carry-out foods would be well-served to consider whether the delivery of that food and alcohol can be accomplished on a porch, patio, or outdoor open space on premises.  In this way, a restaurant can avoid having possible exposure to the indoors and kitchen area, it will serve as a buffer between the customer and employees, and it will prevent general congregating indoors.

In the event that a premise simply is not physically situated to allow for this kind of service, then a restaurant should consider utilizing the smallest indoor area closest to the door, confined in some fashion to keep patrons from sitting or congregating in the restaurant.

Although difficult in practice, the Director’s Order requires that patrons and staff stay six feet away from each other.  As such, employees should actively ask people in line to stay at least six feet away from each other while waiting, and a sign to that effect is advisable.  If a staging area can be situated where customers can pick up their own orders, this would be ideal.

Delivery

Like the restrictions for carry-out, delivery should be designed to minimize any contact between employee and customer. Again, payment should be made in advance over the phone, and other than handing the order to the customer, there should be no contact between persons. (The employee may even ask the customer if she wants the order left on the doorstep as opposed to handing it to her.)

In addition to these considerations about contact, restaurants should remember:

  • Food can be delivered by employees or third-party services, but beer and wine cannot be delivered using third party services unless they have an H-class permit. Not a lot of third parties have that licensing.
  • An employee must be 18 years old to deliver or sell carry-out alcohol.
  • The restaurant should consult with its insurance agent and/or carrier to ensure that employees making deliveries are covered under liability insurance coverage (or, more to the point, that any significant increase in delivery is covered).

General Terms of Carry-Out and Delivery Business

Patrons should be advised when placing an order:

  • No person showing any symptoms of illness will be served, even carryout – If you’re sick, send someone else to pick up your order.
  • Credit card payments in advance over the phone will be the only payment method allowed. This will eliminate the contact involved in the exchange of cash between employee and customer.  Other than possibly handing the bag of food over to the customer, there should be no contact or exchange of items between employee and customer.   If a customer has to pay on site and the restaurant decides to accept that, then the employee should manually type in the card authorization numbers.
  • Due to the increased contact that would result from a dispute about an order and the possibility of contaminated food coming back to the restaurant, the restaurant should advise that all sales are final, no returns or exchanges.
  • Restaurants can and should increase their prices and are entitled to up-charge for what they are doing due to all the risk, extra procedures, increased costs, and inability to generate revenue from full kitchen use by on-premises dining. Rules of reasonableness must apply, and increased prices should be uniform to all customers.  Remember to change your 30-day price list for beer and wine at your earliest opportunity.

Other Considerations

Wine.  Remember that Ohio law defines 42 proof and below spirits as “wine”, and therefore you are allowed to sell those at carry-out and delivery.  This includes such items as Baileys, and some popular low-proof whiskeys and vodkas.  You can never sell spirituous liquor (above 42 proof) at carry-out or delivery.

Wage and Hour considerations.  Remember, as always, to keep close track of employee time with delivery work, and to pay proper compensation and any overtime.

Mileage Reimbursement for employees.   A restaurant does not have to reimburse employees for mileage driven while making deliveries PROVIDED that the employee is making sufficiently more than the minimum wage to offset the driving costs.  Remember that mandatory expenditures that an employee incurs as part of his/her job cannot cause the employee to make less than the minimum wage.  So if an employee is right at the minimum wage, then yes, the employer must reimburse.  If the wage is high enough to cover the cost of mileage incurred, then no.  Although not the required amount, the IRS standard reimbursement rate is 57.5 cents per mile.   This may be hard to determine on an employee-by-employee basis, so instituting a standard amount per delivery can suffice.

Insurance.  Every restaurant should review whether they have a business interruption or other income loss covered claim as a result of the coronavirus and its related events. In many cases, there will not be a claim for business interruption because it is not caused by “physical loss or physical damage,” or there may be a pandemic exclusion.  Regardless, the easiest initial approach is for the restaurant to request a coverage review from its broker as a result of coronavirus, and then each policy must be reviewed as to its own particulars. Coverage reviews from brokers are generally free, and are an excellent starting point for an insurance analysis.

John Neal is chair of the Walter | Haverfield Hospitality and Liquor Control group. He can be reached at jneal@walterhav.com or at 216-619-7866.

 

Pass the Permit: How to circumvent liquor permit quotas


January 24, 2018

John NealAre you having difficulty finding a liquor permit to transfer in your city, village or township? It’s a common problem. Oftentimes, all of the permits are taken because the liquor permit quota in a particular area is maxed out.

However, there is another way to get a liquor permit into a municipality when all of the quota permits are taken and no special permit is available. Ohio has long had a way to transfer a permit from one community to another, and the process has recently been made easier. It is known as the “TREX.”

The Economic Development Transfer (“TREX”) is the transfer of a liquor permit into an economic development project. Spelled out in Ohio Revised Code §4303.29(B)(2)(b)(i), TREX is intended to help those areas of the state which have an over-issuance of permits by allowing transfers of permits from other areas of the state. Put differently, a liquor permit can be bought from a seller in one area of the state and transferred to the buyer’s area, regardless of municipal boundaries.

Of course, to break the quota rules in this fashion, the state requires that the municipality to where the permit will be transferred endorse the transfer in writing. (Both businesses seeking to obtain a permit through the TREX system and municipalities should be aware that even if the political subdivision signs the TREX form, it can still object to the transfer under O.R.C. §4303.26). The buyer is also required to demonstrate that the project is an economic development project.

According to O.R.C. §4303.29(B)(2)(b)(ii), the factors that may be used to determine whether the project is an economic development project include:

  • the amount of financial investment in the project
  • the number of jobs that will be created by the project
  • projected earnings
  • projected tax revenues for the political subdivisions in which the project will be located
  • architectural certification of the plans and the cost of the project

It is the buyer’s responsibility to locate and purchase the permit, and the Division of Liquor Control recommends that people consult with attorneys for that process. Experienced attorneys who handle Ohio liquor law matters can typically locate a permit for purchase in mere days.

Upon filing of the TREX application, the superintendent of the liquor control will determine if the existing or proposed business that is seeking a TREX qualifies as an economic development project. If so, the transfer will be approved and proceed.

A permit that has been “TREXed” can be subsequently transferred to a different owner at the same location. In addition, it can be transferred to the same owner or a different owner at another location, provided that new location meets the economic development project criteria.

John Neal is an attorney at Walter | Haverfield who focuses his practice on state and federal liquor permit licensing as well as the licensing of Ohio’s new medical marijuana industry. He can be reached at jneal@walterhav.com or at 216-619-7866.

Outdoor Refreshment Areas Offer Major Appeal to Local Developers, But Only Time Will Determine Their Long-Term Feasibility


December 20, 2016

As seen in the November 2016 issue of Properties magazine.

It was more than 18 months ago that the Ohio legislature approved the creation of designated outdoor refreshment areas throughout the state to help spur economic growth, but Cleveland is just now in the process of getting its first one in The Flats. Within these specially designated areas, the state’s open container laws do not apply, allowing customers to walk freely with open containers of beer, wine and spirits within the designated borders without fear of that criminal violation.

The creation of such outdoor refreshment areas could pay big dividends to developers who would be able to create destination locations unrestricted by existing open container liquor control laws. The concept is not unique to Ohio, as other states have similar designations under different names. One of the most famous areas in the country not subject to open container restrictions is Bourbon Street in New Orleans. While other destination points around Northeast Ohio are exploring the creation of an outdoor refreshment area, The Flats East Bank is the only one within City of Cleveland limits to have actually filed for an application. It was Middletown that had the state’s first designated area under the new legislation. Other close-to-home outdoor refreshment areas can be found in downtown Canton and Lorain.

A key challenge in creating additional outdoor refreshment areas is that developers cannot directly request them. Rather, the application must be made by the municipality. It is then up to the developer and municipality to create whatever mechanisms they see fit for governing how the outdoor refreshment area will function relative to days and hours of operation and other desirable restrictions.

Another challenge under the legislation sponsored by Senator Bill Seitz is the restriction as to where these areas can be located. In the original legislation, only municipalities with populations greater than 35,000 people could qualify for a single designation. That restriction has already been amended such that, effective April 2017, municipalities with fewer than 35,000 people may create an outdoor refreshment area, assuming they meet other minimum criteria. In municipalities with populations greater than 50,000 people (such as the City of Cleveland), the legislation allows for the creation of only two designated outdoor refreshment areas. In addition, there must be at least four establishments that currently hold liquor licenses within the boundaries being designated and those boundaries must be able to be clearly defined geographically.

Beyond these criteria, health and safety issues must also be addressed with responsibilities delineated amongst the municipality, the developer and the individual permit holders. The long-term success of these outdoor refreshment areas will ultimately depend on how responsibly they are operated. Few want the reputation of a Bourbon Street to be associated with Cleveland. For that reason, the Ohio legislation allows for the dissolution of a specific designated area.

To help avoid problems, the legislation leaves a great deal of flexibility for developers to work with the city to create, for instance, an Authority that would have regulatory powers to control conduct within the area. Although there have been no high-profile problems occurring to date within these outdoor refreshment areas, all parties need to work collaboratively and cautiously to ensure a successful and safe operation and avoid events that may result in public backlash.

Assuming that adequate controls are in place, the potential for outdoor refreshment areas is tremendous, especially if they are created in conjunction with a Community Entertainment District that allows for easier liquor permitting. With the combination of the two designations, a particular development would be extremely attractive to prospective renters and retailers and have a major competitive advantage in differentiating itself and drawing foot traffic. The options are nearly endless, as developers could work with their municipalities to write any number of terms into the legislation. For example, the parties could even choose to reserve these rights only for private ticketed events, as opposed to privileges available to the general public.

It is still very early in the process to conclude how successful designated outdoor refreshment areas will be in Ohio, but savvy developers should be watching the progress being made in this area and evaluating their options with experienced legal counsel to make sure they are leveraging their opportunities.

John N. Neal is a partner and chair of the Hospitality and Liquor Control group at Walter | Haverfield.