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Problems are surfacing with a year-old state law that allows business owners to buy and sell state alcohol licenses — issues that could cost Utah businesses thousands of dollars.
Take, for instance, Rheda Fouad, who bought a coveted bar license several months ago for $50,000, only to have it revoked Tuesday by the state liquor commission because his new Sugar House bar, The Ruin, was not ready to open within 60 days of the license purchase.
Fouad told the seven-member Department of Alcoholic Beverage Control (DABC) board that circumstances were out of his control — there were delays in getting a lease with the developer and then planning and building permits from Salt Lake City took longer than expected.
Once the liquor license purchase is final, however, state law says the new business must be operational within 30 days, said Sheila Page, the DABC's legal counsel from the Utah attorney general's office. The liquor commission can grant one, 30-day extension, which the liquor commission did for The Ruin in July.
Yet, the bar "is not anywhere near operational," Page told commissioners. "Your hands are tied and the license must be revoked."
The commission voted 6-1 to take back the license, but decided to hold on to it for a month before giving it to another business that has been on a waiting list.
Typically, businesses that want a club license must apply with the DABC and then wait — sometimes a year or more — until one becomes available through an increase in population or another bar closure. Currently, 12 businesses are waiting for a club license.
Buying a club license from another license holder avoids the wait, but is more costly. The licenses are in high demand because they allow, among other things, the establishments to sell drinks without food and to avoid having to build a 7-foot barrier known as a "Zion Curtain" to shield the mixing and pouring of drinks from minors.
Since the law took effect in July 2014, at least a half-dozen licenses have sold for anywhere from $30,000 to more than $100,000, business owners have told The Salt Lake Tribune.
While not opposed to the revocation, commissioner Neal Berube cast the lone no vote, saying The Ruin's license should be given immediately to one of the businesses on the waiting list.
"It seems like preferential treatment," he said.
While the situation looked dire for Fouad and The Ruin, there may be a reprieve. Chairman John T. Nielsen said that if the bar is in compliance by the commission's next meeting Sept. 29, the bar could be considered for a club license. But Nielsen made no guarantees.
DABC officials have also noted other issues with the law: How much time, if any, should closed businesses be given to sell a license; and the immense amount of legal work that the state requires to make a license sale official.
After the meeting, Nielsen said, it may be time for the Legislature to tweak the law.
"We've had time to see how the law operates and see the problems," he said. "There are some issues to look at."
Under the law, business owners can sell their alcohol licenses whether for the same location or a different premise. However, the license must stay in the county in which it was issued. Before the license transfer is finalized, club owners must prove to the DABC that there are no unpaid creditors or tax debts on the property. They also must pay a $300 license-transfer fee.
The owners of David's Bar and Grill, in West Valley City, were among the first to sell their license. In February, the LaSalle Restaurant Group, which also owns Oasis, Faustina, Kyoto and Caffe Niche restaurants, bought the license for its new Under Current Club in downtown Salt Lake City.
While new business owners probably lack the cash for such deals, the law has helped established business owners, such as Dave Morris of Piper Down in Salt Lake City.
In the past year, he said he has purchased two club licenses and opened for business within the legal time requirement. Morris and Green Pig Pub owner Bridget Gordon opened the Funk & Dive Bar in Ogden, buying the license that was owned by The Wine Cellar on Washington Boulevard. Morris next bought the 5 Monkeys Bar in Murray, expanding the kitchen and rebranding as The Ice Haus.
"We've made them bigger, better places," he said earlier this year, "which probably wouldn't have happened before."
Selling a liquor license has not gone as smoothly for Gary Lisende, who was forced to close his Silver restaurant in Park City nearly six months ago when lease negotiations with a new building owner fell through.
Lisende received a 60-day extended closure from the DABC to try to find another location. When that didn't work out, he asked for a second 60-day extension so he could put the license up for sale. He advertised in The Tribune and The Park Record, asking $60,000.
The company that owns Park City's St. Regis Hotel made an offer for an undisclosed sum that Lisende accepted in July. The two companies have been trying to work out the legal details but Lisende's second 60-day extension is coming to an end.
On Tuesday, he asked the commission for a third extension.
DABC compliance officer Nina McDermott expressed frustration with the delay. "How long can they hold onto the license to broker it?" she asked.
While the commission considered revoking Silver's liquor license — which would have killed the sale to the St. Regis — it showed some leniency, giving the parties until Sept. 10 to file the necessary documents.
"The department's concern is that the license has gone unused for six months," Page said. "And there are a number of other business that are up and running and could have used that license immediately."