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Were always hearing the famous tagline of "absolute power,desi remedy for heartburn, portable DVDs, "Why me?" you ask While their businesses are heavily regulated too their situations are more straightforward because each business stays neatly within its own tier in the "three tier" system of distribution The three tier system in case you aren't familiar with the term is the marketing structure in which alcoholic beverages are sold by suppliers (manufacturers or importers) to wholesalers by wholesalers to retailers and by retailers to consumers (Supplier wholesaler and retailer are the three tiers)The three tier system is firmly held in place by laws adopted both on the federal level and by every state which regulate how alcoholic beverages are marketed and how the various tiers of our industry interact These laws are called "tied house laws" named after a practice in England where a retailer may be "tied" to a specific manufacturer either through interlocking ownership or exclusive outlet agreements Prior to Prohibition "tied houses" were allowed in America and their marketing practices promoted excessive consumption (Brewery-owned pubs in the US would offer "free lunch" to attract business and heavily encouraged the consumption of their proprietary brand of beer to defray the cost of the complementary meal The eventual outlawing of tied houses led to the saying we are all familiar with today: "There's no free lunch")Hogtied by tied houseBrewpubs run against the grain of tied house regulation because they are manufacturers acting like retailers (or if you prefer retailers acting like manufacturers) This kind of "cross dressing" has traditionally been expressly prohibited by tied house laws in every state Therefore as the brewpub concept has become more and more popular with the constituents in each state the legislators in virtually every state (currently Mississippi is the last hold out) have had to pave the way with special legislation permitting the operation of brewpubs The brewpub laws differ greatly from state to state and each represents an exception to what is called "tied house restrictions"If you look at the patchwork of the fifty United States brewpubs are suppliers in some places and retailers in others In some states like Indiana legislators have simply created an exception that allows a brewer to also operate a restaurant under an additional license while keeping the privileges of the supplier license intact (More frequently however states take away a privilege or two when granting an exception) In other states like Michigan a special retail license has been established that permits restaurant licensees to brew their own beer In California the legislature did both A small beer manufacturer (a supplier licensee) is allowed to hold an interest in up to six on-sale retail establishments -- but must use wholesalers to supply beer to all but one of those restaurants Then for California licensees that don't fit within the six restaurant limitation a new class of retail license has been created that allows a full service restaurant to brew its own beerWhy were these exceptions necessary First the privileges of a traditional manufacturer's license are generally too narrow Brewpubs don't want to serve just their own beer; they want to offer beer and wine from all sources and often spirituous beverages as well Second the tied house laws in every state prohibit a manufacturer from holding any interest in a retail license (and vice versa) Yet brewpubs are often owned or partly financed by entrepreneurs who already own or finance non-brewing restaurants Until statutory exceptions were enacted in most jurisdictions just a drop of common ownership between the tiers was enough to poison a transactionToo little knowledge can be dangerous to your plans Now that virtually all states have carved out a place for brewpubs in their regulatory scheme does that mean Big Brother is watching out for you -- in a benign sense of the term In other words have these special new laws resolved the regulatory Catch 22's that brewpubs would otherwise face The good news is yes you can operate; the bad news is you have to watch your step and educate yourself so you know where to step boldly and where gingerlyIn each case where an exception has been made the privileges that may be exercised under that exception are narrowly defined Every brewpub operator needs to fully understand the law in his or her home state and review it again whenever changes in operations are contemplated For example you may start out simply serving food and beverages at your brewpub Later you may wish to sell kegs and growlers for consumption elsewhere Or you may get the urge to sell your beer to other restaurants Since these activities were not in your original plan you probably skimmed over those parts of the law quickly Or you read them but since you never used them you forgot exactly what they said Does your license allow off-premise sales Does your license allow any wholesale activity and if so can you sell direct to other retailers or must you employ the services of the middle tierKnowledge of state laws is also essential when expansion is considered Whether the expansion consists of taking on new investors opening other brewpubs or opening a non-brewing restaurant you need to know your latitude What type of interests in other licensed businesses may new investors bring along in their previous portfolio Such tied house interests may be limited in type or in number as it is with the small beer manufacturer's license in CaliforniaIf expansion beyond your home state is considered either in the form of wholesaling or setting up other retail locations you not only need to learn the laws of the other state you are entering but also find out about any interactions between the laws For example some states' tied house laws look only at ties within their own states Most states consider operations outside of the state especially where a supplier type license is held out of state and a retail license is held in state In California a company applying for a brewpub restaurant license (the retail version of brewpub license in that state) will be required to formally waive any rights it may have under licenses it holds in other states which allow it to sell directly to retailersWhen in doubt consult an expert I recommend either consulting directly with regulators in the state if you feel comfortable in openly discussing your question with governmental agents or with a specialist in alcoholic beverage law or compliance If you consult with an attorney be careful The patchwork assembly of prohibitions and exceptions create legal land mines of apparently direct contradiction Attorneys without specific experience in the area of alcoholic beverage regulation can easily misinterpret the laws based on reading them only Experience ready access to bureaucratic interpretation and familiarity with precedents all contribute to understanding how the laws and rules apply in specific situationsWhere there's a will usually there's a way Often creative thinking willingness to compromise and skillful diplomacy will enable you to walk through walls that seemed to block your path Occasionally you need to get a lawmaker to rewrite the book for you As the brewpub segment grows and matures its regulation will continue to be dynamic for some time to come The Pier extended into the Atlantic Ocean - almost 1,000 feet. 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