Lacking liquor licenses the root of restaurant closings
Financial troubles and filled liquor license quotas are the root of the problem in the recent closings of several Delaware restaurants.
Matt Mullins, public information officer for the Ohio Department of Commerce’s Division of Liquor Control, said bars or restaurants need D-Class liquor permits if they wish to sell any type of alcohol. A D-Class permit, he said, allows patrons to consume alcohol on a restaurant’s premise, while different types of D-Class permits allow for the sale of different types of alcohol.
For example, a D5 liquor permit “give you all types – beer, wine, liquor, and low-proof spirits,” Mullins said. According to the Ohio Department of Commerce, a D5 permit allows for the sale of “spirituous liquor for on premises consumption only, beer, wine and mixed beverages for on premises or off premises in original sealed containers, until 2:30AM.”
Mullins added that the D5 permit allows for sale of these products Monday through Saturday, while adding a D6 license extends this sale of wine, beer and liquor to Sundays. Several restaurants in Delaware operate under active D5 liquor permits, like Chandra’s Bistro located at 10 N. Sandusky St. and El Vaquero located at 259 S. Sandusky St.
The first step the Division of Liquor Control takes to decide if they can approve an application for a liquor permit is to run criminal background and financial verification checks on the applicants, Mullins said.
“We also have to check if any public institutions are within 500 feet of the new applicant’s location for the license,” he said. “Public institutions like churches and schools can reject the application for a liquor permit and can request a hearing.”
Another step in a restaurant obtaining a liquor permit is looking at how many permits are available at a given moment based on the city’s liquor permit quota. This quota, Mullins said, provides for a certain amount of liquor permits in the city based on the city’s population.
“Ohio Revised code provides for one D-Class permit for every 2,000 people in the population of the city,” he said.
According to census data, the most recently estimated population for the City of Delaware was roughly 36,000 people in 2012. Using Mullins’ explanation, this leaves the City of Delaware with about 18 D-Class liquor permits available to be filled.
If a restaurant seeks a certain type of permit and the quota is filled, Mullins said restaurant owners can apply for transfer of ownership of a permit. This would involve a business becoming the owner of a permit previously owned by a business that no longer needed it.
The Face of the Problem
If residents of Delaware have dined in the city at any time in the past five years, they might recognize the name Nova Restaurant. Nova Restaurant, closed its doors at 5 N. Sandusky St. in 2012 after its owner filed for bankruptcy and was later indicted with fraud.
The liquor permit associated with Nova Restaurant, a D5 class permit, was cancelled before its closing on June 29, 2011 because of what Mullins described as a tax problem.
“In 2009, the Ohio Department of Taxation sent us a tax non-renewal order for the business,” he said. “There’s a statue in Ohio Revised Code that prevents us from renewing licenses if there’s a delinquent tax issue.”
On Jan. 29, 2010, Nova Restaurant’s owners sent an appeal to the Ohio Liquor Control Commission regarding the notice and a stay issue was ordered from this date until April 23, 2010, Mullins said, meaning liquor was sold between Jan. 29 and April 23 of 2010.
“The Franklin County Court of Common Pleas affirmed the commission’s decision and our own decision on June 29, 2011,” he said.
Following Nova’s closing, another restaurant, Generations, tried its hand at business in the same location. On Aug. 20, 2012, the owners of Generations applied for D1, D2 and D3 liquor permits, which would provide for the sale of a combination of beer, wine, spirituous liquor and mixed drinks, and the restaurant was granted a D2 and D3 permit.
“For the D1 permit, there was no opening under the quota,” Mullins said.
To bypass this issue, Generations applied for a D1 permit through the “trex” process, a transfer of permit ownership that is exempt from the city’s quota numbers.
“The City of Delaware designated it as an economic development project and they had a D1, D2, and D3 permit at one time,” Mullins said.
Generations ended up closing due to what Sean K. Hughes, business concierge and economic development director for the City of Delaware, called a “marketing issue.”
After Generations also closed, Son of Thurman took its place, officially opening on Feb. 13, 2014. All of the liquor permits possessed by Generations were transferred to DeVol Holdings LLC, under the DBA Son of Thurman.
Hughes said he thinks Son of Thurman will have more success than its predecessors in the same location.
“Son of Thurman ownership has tremendous restaurant experience and has a brand name,” he said. “They are already so successful that they are driving customers into surrounding restaurants who do not want to wait or who are making a return visit to Delaware.”
Hughes said the owner of Son of Thurman, Chris DeVol, has “tremendous experience” in low cost marketing and will use his abilities to properly market Son of Thurman in conjunction with its parent restaurant, Thurman Café.
This is key, Hughes said, because usually in Delaware, “restaurants close because business is bad or because of poor marketing.”
Hughes said other problems, like poor customer service, can impact the success of local businesses.
“Often times bad service can impact a restaurant faster than food quality issues,” he said. “If a restaurant gets a reputation for bad service, customers can be very unforgiving. A typical customer won’t give a restaurant a second chance if they have experienced bad service.”
Even Closer to Home
Independently-owned Fiesta Mexico closed amidst financial issues including problems with paying taxes.
Fiesta Mexico’s liquor permit, a D3 allowing for the sale and consumption of spirituous liquor, was cancelled on April 18 of this year because the restaurant did not renew its application since it had gone out of business in late 2013.
Ana Angeles, a former Fiesta Mexico employee, said she thinks part of the reason the restaurant went out of business was because of the limitations of its D3 liquor permit. Angeles said when Fiesta Mexico first opened and applied for liquor permits necessary for the sale of beer and wine, D1 and D2 class permits, were unavailable because the quotas for them in the City of Delaware were filled.
“We used to have a liquor license, that means like hard liquor – no wine, no beer,” she said. “And that was one of the problems. Some students like to drink beer, or some people like to go and enjoy their food with just one beer, not like something really strong like liquor. But there aren’t enough licenses for every place.”
Angeles said Fiesta Mexico originally intended to sell beer and wine, but a liquor-only permit was the only option available due to the full quota.
“The permit said that two other places were on the list to wait, so it depends on who made their application first,” she said.
Hughes said the closing of Fiesta Mexico was a “surprise” to the City of Delaware.
“Fiesta Mexico was a surprise to us as they did not indicate there was a problem, so we were not able to help,” he said.
Hughes also noted that the large space at 13 W. Williams St. could be hard for restaurateurs to manage successfully.
“This is an incredibly large restaurant space and probably more than an upstart restaurant can handle unless they have years and years of restaurant experience,” he said. “We are working to recruit experienced restaurateurs and existing successful restaurants into this space.”
Sean Hughes said many restaurants are looking at the city’s empty storefronts like Brooklyn Heights’ old space and a 38 E. Winter St. open location, next to the Strand Theatre.
In regards to Fiesta Mexico’s old location, Hughes said a Mexican café is opening by an experienced restaurant owner. The windows of the restaurant currently indicate that this will be called William Street Café.