Business trend of serving free alcohol may not be legal

As the owner of Skirt Upsale Resale, Janet Pfeiffer knows her business relies on getting people through her doors to explore the displays of high-end and luxury consignment items, such as clothes, purses and jewelry. One way she has found to attract customers is to offer a free glass of wine while they shop at the store located in Sandy Springs’ Fountain Oaks shopping center.

“I always have some wine in the back,” she said.

She said she typically breaks out the wine for customers during special events, such as a trunk show she held over the holidays to display an artist’s jewelry. “It helps to draw people in … and makes them more amenable to possibly buying something,” she said with a laugh.

Pfeiffer is not the only business owner to tap into the idea that serving free alcohol to clients or customers is good for business.
Several metro Atlanta service and retails businesses offer such drinks. But a recent controversy in the city of Dunwoody has highlighted the practice, which the state says is not legal without a permit.

Several metro Atlanta salons and spas provide customers and clients with a free glass of wine and businesses that sell wedding dresses are known for handing out wine or champagne as a woman and her bridesmaids spend hours looking for just the right dress. And if you get a manicure at some spots, you’ll like be asked if you want a glass of Champagne.

Numerous “paint and drink” businesses have also popped up in Sandy Springs and throughout the Perimeter area where customers are encouraged to bring their own wine or beer and partake while learning from an artist how to paint their own masterpieces.

Fast food restaurants across the country, such as Chipotle and Starbucks, are even adding alcohol to their menus for customers who want to have a beer with dinner but don’t want to pay high-end restaurant prices.

And then there are exercise businesses, such as the popular Cyclebar franchise, with locations in Buckhead and Dunwoody, joining the trend.

The Buckhead location currently advertises a Happy Hour session of indoor cycling on Fridays followed by complimentary wine or beer and snacks, as do numerous Cyclebar franchise sites across the country.

The Dunwoody site on Ashford-Dunwoody Road would also like to offer clients some wine after a Friday evening workout, but has run into some roadblocks from the city.

Dunwoody’s city attorneys have said a business cannot service alcohol, free or otherwise, without first getting a license to do so from the city. Alcohol licenses, such as those obtained by restaurants and bars, can cost thousands of dollars a year and can be cost prohibitive for small businesses that just want to offer a glass of wine to clients occasionally.

“What you are doing is opening up a Pandora’s box to allow businesses that don’t traditionally serve alcohol,” Assistant City Attorney Lenny Felgin told Dunwoody City Council at its Jan. 9 meeting.

Councilmember Jim Riticher said he generally favors strict alcohol laws. “But I don’t think we ought to make it more difficult for the proverbial Dunwoody housewife to have a glass of Pinot Grigio while she gets a $150 hairdo, or a glass of bubbly at an art gallery,” he said, adding he did fear “unintended consequences.”

Taylor Harper, an attorney specializing in the beverage and alcohol industry, is representing Cyclebar Dunwoody and its owner, Jeff Delorme. Harper said he believes Dunwoody’s reticence to allow his client to offer free wine tastings is “ridiculous” and compared the practice to an office holiday party, where no license is needed.

“They’re not selling alcohol,” Harper told the council. “It’s unusual to have a local jurisdiction regulate this when at the state level, there is no license required.”

But state law, actually, is a bit sticky.

When asked about salons or exercise facilities or spas serving free alcohol to clients, the Georgia Department of Revenue said, simply, no can do.

“The Department of Revenue views transactions such as the ones you mentioned that include a ‘free’ alcoholic beverage as a sale of alcohol, and are not permitted unless the business owner has an alcohol permit,” said spokesperson William Gaston.

Attorney Kevin Leff, whose firm Sard & Leff in Sandy Springs focuses on alcoholic beverage regulations and compliance, said the state has always taken the position that any alcohol served, free or not, in a business where services are paid for means there is a sale of alcohol taking place and the business must be licensed to do so.

“They have taken the position that if there is some kind of commercial business going on, then there is in fact really the sale of alcohol taking place,” Leff said. “Under state law, there isn’t a way for a business to work around this.”

In 2009, a bridal shop owner in Columbus, Ga., was found guilty of violating a city ordinance by serving mimosas and orange juice cocktails to customers. The police department had received complaints the owner was serving alcohol and an undercover officer went into the business and pretended to look at tuxedos when he spotted the drinks being served and called in five others to raid the store.

In Dunwoody, the city’s attorneys are drawing up an amendment to the city code to create “limited on-premises consumption alcohol licenses for business not qualifying for regular licenses” for City Council members to consider. [UPDATE: On Jan. 23, the Dunwoody City Council voted to table revising its alcohol ordinance to allow for businesses such as Cyclebar to serve free alcohol.]

Those businesses would include places such as Cyclebar Dunwoody, where there is no full-service kitchen and no sale of alcohol. Only wine and beer would be allowed to be served.

The businesses would be required to get a license from the city, although the cost of the license hasn’t been determined. Cyclebar Dunwoody owner Jeff Delorme said he is willing to do whatever the city requires, but simply wants to offer clients wine as a way for them to socialize together. But, he added, if the license proposed and approved ends up costing in the thousands of dollars, he said he would not be able to do it.

Brookhaven, Sandy Springs and Atlanta laws require licenses for any businesses serving alcohol, according to city codes.

“In terms of local government, if Dunwoody wants to enact an ordinance [covering this issue], they can do it,” Leff said.

There is possibly one way to ensure businesses follow state law — have customers bring their own booze. But that, again, is left up to local jurisdictions. In Atlanta, for example, businesses that are licensed can allow customers to BYOB.

“The Department of Revenue does not have an issue with a person bringing their own wine to a business as long as it always stays in the possession of the customer that brought it in,” Gaston said.

But, the employees of the business cannot touch the bottle and only the customer can pour their own drinks, he said.

“The business can provide cups, ice, etc. Many local jurisdictions would not allow this practice, which is commonly known as ‘brown-bagging.’ Our concern is always the business itself providing the alcohol to the customer as previously discussed,” Gaston said.

Pfeiffer of Skirt Upsale Resale said she never thought to ask if she needed some kind of alcohol permit. As a longtime member of the Sandy Springs/Perimeter Chamber of Commerce, she said she regularly attended the organization’s wine events and came to believe offering free alcohol was legal.