More small, independent restaurants may start up in Sandy Springs after an alcohol law that discouraged them was changed by the City Council at its Dec. 7 meeting.
The concern involves “percentage rent,” a deal where a landlord offers lower rent in exchange for a percentage of restaurant profits above a certain amount. Percentage rent encourages mom-and-pop and chef-owned restaurants by lowering the up-front cost of renting space.
Sandy Springs had an old ordinance that prohibited percentage rent deals with any business that sells alcohol. The intent was to prevent convicted felons from profiting from a liquor license they could not legally obtain by acting as a landlord. But the law applied to non-felons, too.
Earlier this year, Councilmember Gabriel Sterling noted that the law was having an unintended effect of banning or delaying start-up restaurants, which often serve alcohol. The law allowed the city manager to waive the ban on the percentage rent deal on a case-by-case basis, but that process could be be too lengthy and unpredictable for a start-up business. Sterling said that, as commercial rents rise to $35 per square foot, “cooler” independent restaurants were being priced out and only chain stores could afford the large up-front rent payments.
The problem was raised by local restaurateur Jason Sheetz, who runs the successful Hammocks Trading Company. He ran into the legal problem when seeking a percentage rent deal for his new restaurant, Under the Cork Tree.
“Changing the law would create and foster the notion that Sandy Springs wants to attract these smaller, independent, chef-driven restaurants,” Sheetz said earlier this year in a commentary in the Reporter.
The new law crafted by the city now bans only felons from joining in percentage rent deals involving alcohol sales. It also has exception for package alcohol licenses for businesses whose primary income is not based on the alcohol sales, such as grocery stores.
Atlanta, Brookhaven and Dunwoody are among the cities that already allowed such deals for restaurants.