LIQUOR LICENSE TRANSFER PRIMER By: Christopher P. Baker Varnum LLP 39500 High Pointe Blvd., Ste. 350 Novi, MI 48375 (248) 567-7425

The four “ts” TYPES TIMING TROUBLE TIPS

TYPES ON PREMISES vs. OFF PREMISES

ON PREMISES CLASS C – MOST COMMON Class B Hotel License Definition: A location, licensed to sell, at retail, beer, wine, mixed spirits, and spirits for consumption on the premises. Examples: Bars, restaurants, bowling alleys, golf courses (some), entertainment centers. Note – Freely transferable within county. Definition: A hotel licensed to sell at retail, beer, wine, spirits or mixed drinks for consumption on the premises (including hotel rooms). Eligibility: Designed for a hotel with capacity for minimum of 25 rooms in the local governmental unit of fewer than 175,000 in population; or capacity for minimum of 50 rooms in a local governmental unit of 175,000 or more in population. Note – May convert a Class C to a B- Hotel License. May transfer ownership or interest.

On PREMISES continued CLASS a hotel Tavern Definition: License to sell, at retail, beer and wine for consumption on the premises only. Note – Freely transferable within county. Brew Pub Definition: License issued in connection with a Class C, Tavern, A-Hotel or B- Hotel to manufacture up to 18,000 barrels per calendar year, for sale on the premises or off premises (with a SDM) Definition: A hotel that is licensed to sell, at retail, beer and wine for consumption on the premises (Note: no spirits).

CLASS c, tavern, a hotel or b hotel resort licenses On PREMISES continued CLASS c, tavern, a hotel or b hotel resort licenses Resort Licenses Definition: Type of Class C, Tavern, A-Hotel, B-Hotel or SDD, issued without quota limitations. Note: Only a limited number may be issued generally at the discretion of the MLCC. “Original 550 Resort” – This type of resort license was first authorized by statute in 1964 and created an additional 550 resort licenses, transferable freely within the state. Eligibility: Full-time restaurant, open to the public five hours a day, five days a week, with seating of 100 persons and food sales must be 50% or more gross sales; or Maintain sleeping facilities with a minimum of 25 bedrooms, meeting, and conference rooms capable of accommodating 200 persons, or convention facilities accommodating 200 persons; or Sports or entertainment venue with a capacity of 4,500 or more; or Golf-course which is open to the public and has at least 18 holes, and measures at least 5,000 yards.

CLASS c, tavern, a hotel or b hotel resort licenses On PREMISES continued CLASS c, tavern, a hotel or b hotel resort licenses Section 531(3) Resort Licenses – The commission may issue no more than 5 new Resort Licenses each year, which are non-transferrable from its original location. Eligibility: Business designed to attract and accommodate tourists and visitors; Primary business of the establishment is not the sale of alcohol; Economic development factors must be considered; Capital investment of no less than $75,000. REQUIREMENTS: Full-service restaurant open to the public five hours a day, five days a week, with seating of not less than 100 persons. Food sales must be 50% or more gross receipts (except for establishments in counties with less than 50,000 population, which are only required to have 50 persons capacity); or Maintain sleeping facilities with a minimum of 25 bedrooms, meeting and conference rooms capable of accommodating 200 persons, or convention facilities capable of accommodating 200 persons; or Sports or entertainment venue which has capacity for 4,500 or more; or Golf-course open to the public and has at least 18 holes, and measuring at least 5,000 yards.

Off PREMISES SPECIALLY DESIGNATED MERCHANT LICENSE (SDM) Specially designated distributor license (SDD) Definition: A business licensed to sell, at retail, beer and wine in the original package for consumption off the premises. Examples: Grocery stores, convenience stores, food specialty stores, pharmacies, gas stations, and other establishments selling beer and wine for consumption off the premises. Note – Presently subject to limited quota. Freely transferable within county. Definition: A business licensed to sell, at retail, spirits and mixed spirit drink in the original package for consumption off the premises. Examples: Convenience stores, retail stores. Note – A half mile restriction removed. Transferable within county.

Off PREMISES continued Resort SDD’s State may issue no more than 15 resort licenses each year. Eligibility: Must be an SDD licensee; Must be located in a local governmental unit with a population of 50,000 or fewer; Must be a business designed to attract and accommodate tourists and visitors; Additional economic development factors either may or must be considered; May be located within 2,640 of an existing SDD location.

TIMING NEW ISSUE LICENSE vs. TRANSFERS

timing Transfers of Existing Licenses New issue Quota – Available License Requires local government approvals for on-premises licenses. General enforcement and license investigation by the Michigan Liquor Control Commission. Average approval time = 6 – 7 months. Resorts – Warning!!! New issues discretionary and may require 1 year + for approval. No local approval requirement. Subject to enforcement and license investigation. May involve either transfer ownership, transfer of location, or both Note: Certain Resort licenses may not be transferred to separate location. Average approval time = 6 months

Conditional liquor licenses timing Conditional liquor licenses TIMING: Definition: Allows an applicant for transfer of ownership of a retail license (Class C, Tavern, A-Hotel, B-Hotel, SDM, or SDD) to operate the business before final approval of the permanent license transfer. May be issued to an applicant requesting transfer of ownership and location of a qualifying on-premises retailer license and SDM license. May also be issued to an applicant requesting a stand-alone SDM license. 20 Business Days from receipt of full package: Complete Application Livescan prints Purchase Agreement Proof of Property documentation Complete Charter documents NOTE: May not be located within 500 feet of a church or school for consideration.

TROUBLE QUOTAS AND LOCATION RESTRICTIONS

Site-Specific RESTRICTIONS TROUBLE QUOTA Location and/or Site-Specific RESTRICTIONS SDD – 500 feet from a church or school. Class C – 500 feet from a church or school. Tax Liens Non-Renewal Eligibility of Applicant Prior criminal arrest/convictions Interest in other liquor licensees Police Powers Other Issues Transferor’s tax or other problems Prior violations SMD - One for every 1,000 in population. SDD - One for every 3,000 in population. On-Premises - One for every 1,500 in population.

TIPS CHECKLISTS RENEWAL/NON-RENEWAL STATUS Pending Violations Local influence (positive v negative)

SAMPLE CHECKLIST Buy / Sell Agreement Retailer License & Permit Application LCC-100 or applicable application LiveScan Fingerprints of Members / Stockholders Report of Members / Stockholders LCC-301 or applicable application Filed Articles of Organization / Incorporation Operating Agreement of Members / Bylaws Certified Resolution of the Managers or Officers Approving Loans and Capital 2 - 3 years US Federal Tax Returns Property Lease with Property Owner / Deed Member Affidavit- no police powers, criminal arrests, lack of interest in retail or wholesaler licenses

SAMPLE CHECKLIST cont. Budget Cost of any land acquisition and estimate of costs of construction of improvements Cost of initial equipment, supplies and materials Misc. costs/ expenses to open and commence operations Sources of all funds for item identified in the Budget   Capital contributed by Members, if any Third Party Loans- need copies of loan commitment, promissory note(s), security agreements Six Months of consecutive bank or institutional statements for any accounts that constitute sources for any of the funds Site diagram, construction drawings

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