May 17, 2021
The law prohibiting issuance of new liquor store licenses will expire on July 1, 2021. At that time, the Tennessee ABC can issue new retail liquor store licenses.
How did this happen?
Many observers expected the Tennessee General Assembly to extend the moratorium or make the moratorium permanent during the 2021 legislative session. The thinking was that retail liquor stores suffered from wine in grocery stores (which we affectionately called WIGS).
The moratorium on new licenses was seen as a way to potentially create value in retail liquor store licenses, at least in cities and towns with strong economic growth.
We were beginning to see a market for retail liquor store licenses, albeit in its infancy. A few prospective store owners were willing to pay tens of thousands of dollars extra to acquire an existing liquor license, rather than wait to see if the legislature extended the moratorium.
We suspect that there may have been a lack of agreement within the retail liquor store association. At least some members wanted to open another store.
Legislators in rapidly-growing areas such as Murfreesboro, Johnson City and Clarksville may have been feeling pressure not to continue to limit the number of retail liquor stores, where demand was becoming pent up. The moratorium can be viewed as anti-competitive.
What does the expiration of the moratorium mean?
The old rules will be back in place starting July 1. One merely needs to apply for a Certificate of Compliance from the city and a retail liquor store license from the Tennessee ABC. The two-store limit and all local location restrictions remain in place. And, of course, the applicant must meet all of the legal requirements.
The Tension between WIGS and Retail Liquor Stores
The moratorium was one of the more recent legal developments to compensate retail liquor stores for the loss of business from WIGS (wine in grocery stores).
From time immemorial, Tennessee state law required that a Tennessee resident could own only one liquor store.
In connection with the passage of WIGS, state law was changed to allow ownership of an unlimited number of stores. In addition, liquor stores were granted the right to sell a long list of items, making them more competitive with grocery and convenience stores.
Remember the days when a liquor store couldn’t sell a corkscrew or mixers?
Conjures up “I Threw Away the Rose,” by Merle Haggard:
Once I lived a life of wine and roses
And I drank a lot back then for one concern
Success for me lay just around the corner
After WIGS, along came a big box liquor retailer, which prompted a new limit on the number of stores. An owner can now own only two retail liquor stores.
A long running battle over the constitutionality of the Tennessee residency requirement for ownership of a retail liquor store was ultimately resolved by the U.S. Supreme Court, paving the way for licensing retail stores by out of state owners, including said big box retailer.
When grocers pushed for Sunday sales of wine, retail liquor stores saw little benefit. As part of the deal allowing Sunday WIGS sales, and New Year’s Eve and Fourth of July, the moratorium was imposed. At the same time, a 10% minimum mark up was added for spirits, which we see as a step towards SIGS - spirits in grocery stores.
Although the our crystal ball is broken and needs a new set of batteries, at some point, SIGS seems inevitable. So do more changes to the laws concerning retail liquor stores.