Category: Finance

Whiskey Investing

Cyndi

Considerations in Creating the Proper Legal “Mash Bill” to Protect Your Collateral

In 2024, the global whiskey market’s worth has swelled to around $70 billion and is forecast to hit $125 billion by 2032. https://www.gminsights.com/industry-analysis/whiskey-market. This has made some look to whiskey as an attractive target for private investment.

  Often, such investments are secured by the whiskey and related assets, as collateral. Here are tips on at least some of the considerations in creating the right recipe for such an endeavor.

Secure Your Interest in the Collateral

  The investor should ensure that it accurately secures its interest in the collateral by entering a written security agreement with the whiskey producer. A security interest attaches to the collateral and is enforceable against the debtor and third parties if: (1) value is given; (2) the debtor has rights to the collateral (i.e., the owner of the collateral or the right to transfer the collateral to the secured party); and (3) the debtor executes a security agreement. See UCC § 9.203(a).

Common Considerations in Entering a Security Agreement

Collateral Owner Identification: You will typically want the security agreement to correctly name the owner of the collateral. Among other things, confirm the name of the legal entity on the applicable secretary of state’s website; request and verify documentary proof that that party actually owns the collateral; include recitals of ownership in the security agreement; define the owner (once identified) in the agreement to include parents, subsidiaries, related companies, companies under common ownership, and the like; and take similar steps.

Non-Transfer:  It can also be helpful for the security agreement to include language that prohibits the owner of the collateral from conveying, transferring, or assigning the collateral without your written consent, and affirmatively states that the owner will not do so.

Successor Liability:  Consider including a successor liability clause that extends the security interest in the collateral to any subsequent owners in the event of an unauthorized conveyance, transfer, or assignment of the collateral. George W. Kuney, A Taxonomy and Evaluation of Successor Liability, 6 FLA. ST. U. BUS. L. REV. 9, 11 (2007) (“Successor liability is an exception to the general rule that, when one corporate or other juridical person sells assets to another entity, the assets are transferred free and clear of all but valid liens and security interests.”). Such a clause may also affirmatively require the named owner to take all affirmative steps reasonably necessary to cooperate with you (including, but not limited to, providing and signing any and all requested documentation) in recouping the collateral, should such an unauthorized transfer occur.

Describe the Collateral Correctly:  The collateral needs to be described such that a third party can reasonably identify it. What that means is the subject of a lot of law and “magic words.”

  As of July 1, 2001, all 50 states had adopted Article 9 of the Uniform Commercial Code, which governs secured transactions. While each state may differ in its interpretation and application of its implementation of Article 9, all will typically require that the description of the collateral be sufficient so that it reasonably identifies what is described. See UCC § 9.108(a). Particularly, a description of the collateral will reasonably identify the collateral and be sufficient if it identifies the collateral by specific listing, category, a type of collateral identified by UCC Article 9 as enacted by the state in question (such as inventory, equipment, deposit accounts, etc.), quantity, formula, or the catchall—any other method, if the identity of the collateral is “objectively determinable.” See UCC § 9.108(b). A general description of the collateral as “all the debtor’s assets” or “all the debtor’s personal property” is not (alone) typically sufficient. See UCC § 9.108(c). It may also help to include in the description that the collateral is “investment property,” “inventory,” “accounts,” “contracts,” “proceeds,” if those descriptions are accurate, and always include certain “after-acquired property” language. See, e.g., UCC §§ 9.108(d), 9.204.

  So, what does all that mean? It depends on the circumstances, and this is especially an area where pennywise legal advice in the drafting stage can have tremendous value down the line.

Perfect Your Security Interest:  “Perfection” of a security interest is the process of publicly establishing a security interest in collateral for purposes of gaining priority among other interest holders. https://www.law.cornell.edu/wex/perfection. Among competing security interests, one that is perfected will prevail over those that are unperfected. See UCC § 9.301.

  Perfection typically requires filing a UCC financing statement with the appliable secretary of state. A UCC financing statement is a document that includes basic information regarding your security interest, including the debtor’s name and mailing address, the secured party’s name and mailing address and that key description of the collateral. A primary purpose of all of this is to give the world notice of your security interest in the collateral you hope to lock down to protect your investment. You’ll want to file the UCC financing statement as soon as possible, and keep it current.

Other Typical Considerations

  Beyond the security agreement, there are many other considerations to take into account. A couple common ones are interest and warehouseman relations.

Interest—Hogs Get Slaughtered:  Of course, you may wish to charge interest on your investment. It is imperative that you be precise and conservative about the interest rate and the terms of the interest calculation to avoid committing usury, which carries severe penalties.

  Make sure that you know the maximum pre-judgment interest rate allowed by your state. Any percentage above that percentage, whether as stated or as calculated based on the agreement’s terms, can be usurious. And fixing an error there is often not as simple as correcting it after it has been called out—that is often too late.

  When calculating interest, good practices include always rounding down, never up; excluding the start and end days of interest; and being careful about including and wording compounding provisions, as the law around those can vary widely.

Make Friends with the Warehouseman:  In the craft whiskey space, it is likely that the barrels will be stored in a bonded warehouse, or else the distiller may be losing money by having to pay the taxes off the still, rather than after absorption and evaporation has occurred.

  Bonded warehouses were first created by Federal law passed on Aug. 1, 1862; were taken advantage of to create Bottled-in-Bond spirits with the passage of the Bottled-in-Bond Act of 1897; and had their current bonding period structure set by the passage of the Forand Act of September 2, 1958.

  In addition to the primary tax concerns addressed by all of these laws, the Bottled-in-Bond Act was passed to help ensure the authenticity and quality of the whiskey that the customers were drinking, in a time when many whiskeys and spirits contained unhealthy additives used by certain unscrupulous “Rectifiers.” Bonded warehouses are registered with, regulated and controlled by the federal government and their gaugers and provide a government-backed storage space for producers of craft whiskey to store their products.

  Whether the storage facility of the collateral is a bonded warehouse or not, it is important for the investor to maintain a good working relationship and a steady stream of communication with the individuals who run the particular warehouse. Having this rapport with the warehouseman will be important to help monitor the collateral to ensure that (when the collateral is whiskey), it is kept properly, doesn’t “walk out the door” randomly, and can be reliably held if there is a default or dispute that may implicate the investor’s rights in the collateral.

Summary

  In sum, if you are looking to invest in the craft whiskey industry, remember these tips to ensure that your investment is secured:

•   Make sure the owner of the collateral is properly identified in the security agreement;

•   Prohibit unauthorized transfers of the collateral and include a successor liability clause and/or a clause that requires your signature to authorize a transfer of the collateral in the security agreement;

•   Be thoughtful, careful and precise in your description of the collateral, taking into account the legal requirements and legal meaning of the language you use (or don’t use);

•   Perfect your security interest in the collateral by filing a UCC financing statement with the secretary of state as soon as possible to have priority over other creditors;

•   Don’t be greedy when it comes to providing for and calculating interest;

•   Build and maintain good relationships with the warehousemen where the collateral whiskey is stored for aging so that you can make sure that the whiskey is properly maintained, remains in good condition and is there when you need to foreclose on it.

  Ross Williams (rwilliams@bellnunnally.com) and Ty Johnson (tjohnson@bellnunnally.com) are partners, and Catherine Baldo (cbaldo@bellnunnally.com) is an associate, at Bell Nunnally & Martin LLP, a full-service business law firm based in Dallas, Texas. This article is for informational purposes only, and neither constitutes, nor should be taken as, legal advice or legal opinion.

Elevating Beverage Distribution

Cyndi

The Case for AI-Driven Systems Over Legacy Platforms

android robot standing behind a bar serving a glass of alcoholic beverage

By: Ian Padrick – Co-founder and CEO of Ohanafy

The beverage industry in 2024 is characterized by rapid evolution, driven by shifting consumer preferences, technological advancements, and new market dynamics. As consumers increasingly demand healthier and more customized beverage options, the industry is witnessing significant changes in product offerings and business operations. This landscape presents unique challenges and opportunities for beverage distributors, particularly those operating on outdated legacy systems.

  Legacy systems, which have been the backbone of distribution operations for many years, are increasingly becoming a liability. These systems are often inflexible, unable to scale with business growth, and lack the advanced analytics capabilities required to respond effectively to fast-changing market conditions. They struggle with integrating new data streams and automating processes, leading to inefficiencies in inventory management, customer relationship management, and overall supply chain operations.

  A recent study by Aberdeen highlights a stark reality: businesses that spend 12% of employee time searching for data can incur up to $1.2 million in unnecessary costs annually for a company with 200 employees. This underscores the critical need for systems that enhance efficiency and profitability by reducing wasted time and resources on inefficient data management.

  In contrast, AI-driven systems offer robust solutions by harnessing the power of data analytics and machine learning. These modern platforms can integrate diverse data sources, providing a holistic view of business operations and consumer trends. This integration enables more informed decision-making and faster response times. Therefore, transitioning to AI-driven systems is not just about keeping pace with technological trends but fundamentally enhancing beverage distributors’ strategic capabilities.

The Risks of Legacy Systems

  One of the primary risks associated with legacy systems is their inherent lack of integration capabilities. These systems often operate in isolation, meaning that data silos are typical. When information cannot flow seamlessly between sales, inventory management, and customer relations, inefficiencies abound. This can include delayed order processing, inventory discrepancies, and a poor customer service experience, which can erode trust and reduce client retention.

  Moreover, legacy systems typically lack scalability. As businesses grow and market demands shift, these systems struggle to adapt. This inflexibility can stifle innovation, as adding new features or expanding into new markets might require extensive manual intervention or even complete system overhauls, which are costly and time-consuming.

  Another significant risk is the absence of robust analytics. Legacy systems do not utilize the power of modern data analytics, which is crucial for making informed decisions. Without these insights, companies may make choices based on outdated or incomplete data, potentially leading to a general lack of strategic decisions.

The AI-Driven Solution

  Transitioning to AI-driven systems can effectively address these risks. AI-enabled platforms offer integrated tooling where data from various departments is consolidated, providing a unified view of the business. This integration enables more streamlined operations, from inventory management to customer relationship management, ensuring that all parts of the business are aligned and efficient.

  AI-driven systems are inherently scalable. They are designed to grow with the business, easily accommodating new functionalities or market expansions without the need for disruptive overhauls. This flexibility ensures that beverage distributors can respond quickly to market changes, a crucial capability in an industry as dynamic as beverage distribution.

  Perhaps most importantly, AI-enabled solutions have advanced analytics and machine learning capabilities. These tools can analyze large datasets to uncover trends and patterns that might not be visible otherwise. For instance, predictive analytics can forecast demand more accurately, enabling better inventory control and reducing overstock and stockouts. Similarly, machine learning algorithms can enhance customer segmentation and personalize marketing efforts, increasing sales and customer loyalty.

Applications of AI in Beverage Distribution

  The transition to AI-driven systems in the beverage distribution industry represents a significant leap forward in operational efficiency and market responsiveness. Here are several systems that stand to benefit from leveraging artificial intelligence to enhance various aspects of the distribution process.

Inventory Management: AI significantly improves inventory accuracy and efficiency. By analyzing patterns in sales data, AI can predict future demand more accurately, enabling distributors to optimize their stock levels. This reduces the risk of overstock, which unnecessarily ties up capital, and understock, which can lead to missed sales opportunities. For example, AI systems can integrate historical sales data with seasonal trends and promotional schedules to adjust inventory levels in real-time.

Route Optimization: AI-driven logistics applications can dramatically improve delivery efficiency by optimizing delivery routes and schedules. These systems analyze traffic data, weather conditions, and delivery windows to suggest the most efficient routes, reducing fuel consumption and delivery times. This cuts costs and enhances customer satisfaction through faster, more reliable service.

Customer Relationship Management (CRM): AI enhances CRM systems by providing deeper insights into customer behaviors and preferences. This enables personalized marketing strategies, such as targeted promotions and product recommendations based on data-driven insights. For instance, an AI-enhanced CRM system can identify purchasing patterns and predict when customers might be ready to reorder or suggest new products they are likely interested in, thereby increasing the potential for upselling and cross-selling.

Sales Forecasting: AI algorithms excel at processing large datasets to identify trends that would be difficult for humans to spot. In beverage distribution, AI can analyze data across multiple channels to forecast sales with a high degree of accuracy. This allows distributors to better align their schedules and marketing strategies with anticipated market demand, reducing the risk of surplus and shortages.

Operational Efficiency: Beyond these specific applications, AI drives overall operational efficiency by automating routine tasks, such as order processing and payment transactions. Automation reduces the likelihood of human error and frees staff to focus on more strategic tasks requiring human oversight, such as customer service and business development.

Security and Compliance: With increasing data breaches and stringent data protection regulations, AI systems can also provide advanced security measures to protect sensitive information. Moreover, AI can help ensure compliance with industry regulations by monitoring and reporting deviations in real-time, thus avoiding potential legal and financial penalties.

Embracing the Transition to AI-Driven Distribution

Distributors that have switched to AI-driven systems often report substantial improvements in operational efficiency and customer satisfaction. However, transitioning to a new system is not without challenges. It requires careful planning and a clear understanding of business needs. The key to a successful transition lies in choosing a platform that is not only powerful but also aligned with the business’s specific needs and goals.

  While legacy systems have served the beverage distribution industry well for many years, the rapid pace of technological advancement and changing market dynamics make it clear that the future belongs to AI-driven solutions. By embracing these modern systems, distributors can remain competitive in an increasingly complex and fast-moving marketplace.

About the Author

  Ian Padrick is co-founder and CEO of Ohanafy, the leading distribution management platform built on Salesforce. Before Ohanafy, Padrick has served in strategic roles at Salesforce, Veeva, nCino, Accenture, and Capgemini. He is highly regarded for his strategic vision and leadership within the Salesforce community and for continually advocating for the integration of AI-enabled technologies to enhance business operations and customer engagement. To get in touch, visit ohanafy.com/contact.

Ten Ways to Keep Profits on Tap

Cyndi
piggy bank sitting on short stacks of money

By: Raj Tulshan – Founder & Managing Member of Loan Mantra

Over the past two years the cost to run a business has risen sharply with inflation surging to over 13%. This squeeze leaves many business owners trying to operate more efficiently and find ways to do more with less — making every dollar count. A recent survey by Vistage reports that two-thirds of small business owners have either cut costs or plan to reduce spending in the near future. The majority, 67%, also plan to seek business funding over the next 12 months.

  Finding and evaluating the best financing options can be confusing for business owners that are already short on time and money. Using a one-stop loan application portal to find the best suited options like the one at Loan Mantra is a way to access multiple commercial loan options in one place and avoid high-interest debt. In addition, here are some tips to keep profits on tap.

Monitor Cash Flow Closely: Cash or flow management is critical for beverage businesses, as even minor fluctuations can have a significant impact on financial stability. Keep a close eye on your cash flow by monitoring incoming and outgoing payments regularly. Implement invoicing strategies to encourage prompt payment from customers and consider offering discounts for early payment to improve cash flow. By staying proactive and vigilant, cash flow crunches can be avoided to maintain a healthier financial position in the long run.

Reduce Overhead Expenses: Examine overhead expenses carefully and look for opportunities to reduce costs wherever possible. This may involve renegotiating lease agreements, downsizing commercial space, installing lighting timers or switching utilities and service providers to save on electric bills, phone service and Wi-Fi. Encourage employees to adopt energy-saving practices, such as turning off lights and equipment when not in use to save money on lower utility bills. Have major systems inspected for water leaks and waste. Saving dollars on overhead expenses is one of the best ways to contribute to your bottom line.

Negotiate with Suppliers: Building strong relationships with your suppliers can pay large dividends when it comes to saving money. Don’t hesitate to negotiate for better prices or discounts, especially if you’ve been a loyal customer. Explore different vendors and compare prices to ensure you’re getting the best possible deal on supplies and materials. Additionally, consider joining co-ops or buying groups with other businesses to increase purchasing power and negotiate bulk discounts.

Invest in Human Capital: Thirty three percent of U.S. companies expect employee turnover to increase this year according to a recent poll, costing an average of $36,295 per employee. While it may seem counterintuitive to spend money on training, investing in your employees can yield significant long-term savings. Research from LinkedIn found that 94 percent of employees say they would stay at a company longer if it invested in helping them learn. Well-trained employees are more efficient and productive, leading to lower turnover rates and reduced recruitment costs. Provide ongoing training and professional development opportunities to help employees stay current with industry trends and best practices. By investing in your team, you can build a skilled workforce that drives business growth and profitability.

Get the “Lifetime” worth out of Equipment: I was talking to a friend about their recent doctor’s office visit. During the visit, my friend noticed that as the medical tech entered the room, they dragged a large unit behind them bumping into both doorposts and finally hitting a back wall. They noticed how this tech roughly handled expensive medical equipment. This illustrates an important point. If a company purchases equipment designed to last 10 years but it only lasts 5, it will need to be replaced before its “lifetime worth,” or it will need replacement 5 years earlier than expected. This can add up to thousands if not millions of dollars in unintended expenses.

Train to Remain: Make sure that employees are properly trained to use equipment safely to minimizes workplace hazards to avoid unfortunate events that could result in heavy losses. It is a good idea to periodically check on employees to see how costly business equipment is being used and reward or remediate actions if needed. And don’t forget machines need regular scheduled maintenance for cleaning and repairs. Getting a lifetime worth out of equipment contributes to automatic savings and impacts profit.

Moderate prices: The public has hit a tipping point where high prices are driving consumers away from fast and quick-serve restaurants to eat at home. Prices at quick serve establishments rose 5% in March over the same month in 2023 while grocery prices have increased more slowly, according to the Bureau of Labor Statistics. The take-away? If price increases are needed, avoid this kind of consumer sticker shock by moderately raising prices slowly over time.

Drink in new distribution sources: Beverages now influence where consumers are choosing to eat. The National Restaurant Association’s 2024 State of the Restaurant Industry report, says that alcoholic beverages no longer take a back seat as just a “compliment” to dinner but can influence consumer’s choice of one restaurant over another acting as a key driver to the establishment. Seven out of 10 consumers who drink beer, wine, or cocktails claim the availability of alcohol beverages would make them more likely to choose one restaurant over another. Alcohol brands can approach eateries, local restaurants or franchise chains to form partnerships to push sales.

Get ready to go: Half of full-service restaurants deliver alcoholic drinks with food orders and 96% say they’ll continue to if permitted to do so in their area. 93% restaurants also offer alcoholic drinks with pick-up orders, according to the same NRA report. For operators who serve alcohol, beer is the most common alcoholic beverage served with takeout or delivery orders, with 83% of restaurants offering it. Wine by the bottle is available at 65% of full-service restaurants that sell alcohol with takeout or delivery, and cocktails are at about 6 in 10 full-service restaurants selling alcohol to-go. Locally sourced beverages, such as craft beers, are also popular among Gen Zs and millennials, as are alcohol-to-go selections.

Fake it until you make it: The mocktails are coming! The popularity of no and low-alcoholic beverages are anticipated to grow to 4% share of the alcohol market by 2027. Non-alcoholic beverage sales increased by 32% as compared to the year before while total alcoholic beverage sales for the same period only increased by 1%. Non-alcoholic beer “dominates” the no-alcohol category over wine and spirits while non-alcoholic craft beer claims over a quarter (28%) of the non-alcoholic beer available. The demand is partly fueled by more health-conscious, younger consumers who are concerned about personal wellness, low carb/calorie offerings and choosing brands that are sustainable and environmentally friendly.

  Saving money is a crucial aspect of managing business and implementing the right strategies can make all the difference. By investing in human capital, getting a lifetime worth in equipment, negotiating with suppliers, monitoring cash flow, reducing overhead expenses and expanding distribution channels, business owners can achieve greater financial stability and long-term success. With careful planning, smart decision-making and by making every dollar work harder, beverage businesses can thrive in today’s tough market and keep more profits on tap.

  Raj Tulshan is the founder and managing member of Loan Mantra, a one-stop FinTech business portal that democratizes the loan process by providing corporate sized services and access to entrepreneurs, small and medium sized businesses. Connect with Raj and Team Loan Mantra at 1.855. 700.BLUE (2583) or info@loanmantra.com.

Event-Season Tips for Restaurateurs & Vendors

Cyndi
man and women with beer glasses sitting outside with other people

By: David DeLorenzo

Summertime often equates to weddings, events, festivals, outdoor concerts and more where a variety of vendors converge to serve food, drinks and more. Establishments and vendors have a unique opportunity through these events to promote their businesses to a whole new demographic. However, these types of events come with their own set of specific circumstances in which restaurants and vendors need to be prepared for — and that they need to protect themselves from.

  First off, the more you know about the situation you’re going into or the event you’re scheduled to participate in, the better. This is key because your extended coverage for these events will depend on exactly what is going on during the event. You’ll want to make sure that you have your own insurance and understand exactly what that insurance will cover and what it won’t for any off-premises event.

  This will depend on not only your carrier but also on whether your current coverage will extend to the event. The extension of the premise may not. Some carriers have a designated premise of the endorsement, which will not allow their policy to cover the business at an event.

  It also depends on the role your business is playing at the event. For example, if you are a vendor of the event and not the host, the coverage requirements needed will be up to the host of that specific event and the city in which the event is being held, if it is held on city property.

  If the host has insurance for their event, it doesn’t necessarily mean that if a vendor shows up there they would have coverage if they were pulled into a lawsuit. So before committing to an event, check with your broker or insurance company to see if that coverage extends.

  Additional event coverage may require an added fee and your carrier will probably want to know the exposure basis of the event. This can include the size of the event and how many people are expected. This includes not only the total attendance count but also what percentage of those ticket sales include alcohol sales.

  The carrier will likely specifically want to know the event’s estimated attendance count of people consuming liquor. That number will be taken into account differently than the total attendance count.

  The carrier will also want to know what exactly is taking place at the event because anything from bouncy houses to ax throwing can become liabilities. It’s important to note that 99% of the time, these types of things are automatically excluded from a policy anyway.

  For example, consider if you’re a vendor participating in an event and you have your own insurance coverage that protects you from liquor liability for serving people at the event. If there happened to be an accident due to ax throwing and they were to get sued based on the ax injury because of alcohol, there would be an exclusion altogether.

  It is highly unlikely that a carrier will cover a vendor for those instances. That’s why it’s essential to recognize that in many cases, events with dangerous activities should be approached with a “buyer beware” attitude. You need to be cognizant that at these types of events, your company could be pulled into a claim or lawsuit that you may not have coverage for.

  Major events and festivals are often seen as opportunities to make more money, get additional exposure and get your name out there. However, if you aren’t fully aware of all the details of the event and all the things happening during it, you could be putting yourself at risk.

  It’s also important to recognize that with proper coverage, your carrier should cover your business for the normal instances of serving alcohol at the event. But with exclusions for things like the examples of a bouncy house or ax throwing, you would not be covered. If there was a claim due to an accident that was excluded on the premises policy, then anyone and everyone participating in the event would be on their own to defend themselves in the case of a lawsuit.

  However, if a person who consumed too much alcohol then decided to get into the bouncy house and broke both their legs may try to go after the vendors that served alcohol at the event, that would likely come out of their pocket, as an insurance would likely automatically decline it. On the other hand, if a patron drinks too much at the event and gets into a car accident, the vendor’s liquor liability coverage would likely protect them in that instance.

  It’s also wise to look for assault and battery exclusions on event coverage policies. Many of these events have assault and battery exclusions, meaning that if someone gets beat up at the event and wants to sue the host or a vendor, they will not have coverage for that.

  While event season is heating up, we’ve continued to see pretty steady and fair market premiums for event and off-premises coverage. This is highly situational and also depends greatly on what the host city or venue requires in terms of coverage.

  In many instances, two different coverages may be required — one from the city and one from the venue. Some cities may require coverages that are through the roof while others may only require a minimum limit. It is vital to understand what the municipality where the event is taking place is asking for in terms of limits on insurance.

  For example, they may ask for $1 million or they may ask for $5 million. However, if they ask for the latter, this can be discouraging for vendors to participate. At that point, it becomes very difficult for a company to see the value in signing a piece of paper for $1,500 for one day of $5M worth of coverage. It’s overkill, quite honestly because you already have all these participants carrying their own insurance, plus the venue, the event promoter and the city, which all have their own insurance as well.

  To foster and encourage a sense of community through local festivals and events, the municipalities really have to keep it reasonable. On the flip side, the insured parties have to understand exactly what it is they are being insured for — and even more importantly, what they are not insured for. That will be determined on a situation-by-situation basis by the carrier.

  Weddings can also create unique circumstances in terms of coverage. What falls on the venue and what falls on the vendor may depend on the venue and the situation as well. In many cases, we recommend that the client gets coverage for general liability and liquor liability. However, liability will likely fall on the venue itself if they are the ones serving alcohol.

  It all comes down to making sure that whoever is serving the alcohol, whether the venue or the vendor, is well-trained and certified in liquor training. This is a key way to protect your business while also keeping staff and patrons safe throughout event season.

  Out of his passion for serving the restaurant and hospitality industry, David DeLorenzo created the Bar and Restaurant Insurance niche division of his father’s company The Ambassador Group, which he purchased in 2009. For more than 20 years, he has been dedicated to helping protect and connect the hospitality industry in Arizona. For more information visit barandrestaurantinsurance.com.

How to Build Routines to Improve Financial Results

Cyndi

By: Kary Shumway, Beer Finance Association

The key to better financial outcomes is better financial routines.

Better routines involves following a system. And following it consistently.

Below is a financial routine you can use daily, weekly, and monthly, to help you achieve better financial results in your beer business.

Daily Financial Routines

  1. Track and update key performance indicators (KPIs)
  2. Build the daily scorecard

The key to KPI’s is to identify your most important numbers and then watch them like a hawk. Every day. Use these KPI best practices as a starting point.

The daily scorecard is a tool you can use to watch other key numbers in your beer business: cash, access to capital, inventory, and accounts receivable, to name a few. Use this daily numbers template, and update to fit your beer business.

Weekly Financial Routines

  1. Hold weekly financial huddles
  2. Update the 8-week cash flow tracker

In my opinion, weekly financial huddles are the best way to stay on top of your numbers and improve financial results in your beer business.

The huddles bring managers together to review the numbers, and take action to get better. What could be better than that?

The 8-week cash flow tracker is a tool you can use to put a laser focus on cash. Money in, and money out. Where did it come from, and where did it go. This cash tracker gives you answers.​

Monthly Financial Routines

  1. Use the month-end checklist
  2. Update the rolling 12-month forecast

The goal of the month-end checklist is to make sure all the things that need to be done, get done. You want numbers that are complete, accurate, and finished on time. The month-end checklist will help.

The rolling 12-month forecast is a tool you can use to update the budget every month.

Business changes all the time, and so should your financial plan.

Don’t wait until year-end to update your financial plan. Build a model that you can update each month. Regular, consistent, routines that help you see 12-months into the future, all year round.

Wrap up and next steps…

Better financial results don’t happen by accident, they happen when we follow a consistent process.

Use the daily, weekly, and monthly process above. Your income statement will thank you.

P.S. Check out the Beer Business Finance Association. A network of beer industry professionals just like you. We come together on a quarterly basis to share ideas and best practices to improve financial results in our beer businesses.

Liquor Licensing & Insurance 101

Cyndi

What Establishments Selling Liquor Need to Know

By: David DeLorenzo

When you’re operating an establishment that serves food and alcohol, being properly licensed and insured is crucial to the safety and the success of your business. Even if you’ve been in business for some time, it’s vital to stay abreast of ever-changing laws as they apply to serving liquor, specifically. Read on for some liquor licensing and insurance tips to keep your business running strong, while you protect yourself and your staff.

  First of all, it’s important to consider the type of license that you have and the insurance that will cover it. A lot of people may have a misconception about the type of license they have and the dictation for what type of insurance that is needed. For example, a No. 6 license (subject to Arizona law), which is generally a bar license that is 100 percent liquor that will have some dictation on the type of insurance that you will need. You will have to go to markets that are fully vested in the ability to write 100 percent liquor or 50 percent or more liquor, because of that No. 6 license.

  However, the license itself is not as important as the percentage. It only matters that you have a license when it comes to insurance. For example, consider a No. 12 license, which is a restaurant license that allows you to serve 60 percent of your sales in alcohol and at least 40 percent of your sales in food. The insurance agency will look at that No. 12 license, but what they really want to know is how much you are actually serving in alcohol and how much you are serving in food.

  The reality is that most No. 12 businesses may serve 30 percent alcohol or five percent — a lot less than that 50 percent (which is generally what a No. 12 license allows for). All the insurance company really cares about or looks at is the actual percentage of liquor to food. However, if you served 60 percent alcohol and 40 percent food, the insurance company may still classify you as a bar and you will likely have a higher rate even though you have a restaurant license. It’s the percentage of food to alcohol sales that really matters when it comes to your insurance coverage and rates, not necessarily the license itself.

  In the insurance world, if you serve 30 percent alcohol and 70 percent food, for example, that is generally the threshold and the maximum for you to get the most positive and beneficial insurance rate in Arizona because your liquor is 30 percent or lower. Once you exceed that 30 percent threshold, it puts your business in another category of insurance that basically does not allow you to go to those direct markets for your coverage.

  You will need to go to a secondary market, generally a more expensive market, because your liquor liability is increased when you have more people drinking liquor. You have to be insured differently the more liquor you serve and typically those direct markets don’t want to take on that risk. However, there are other markets for that.

  If at least 30 percent of your sales are attributed to liquor, you should look into an umbrella to go over your primary coverage. This umbrella will give you another layer of protection over what you’ve already purchased in terms of your insurance.

  It’s also important to carefully analyze the amount of entertainment your establishment provides and the hours of operation if you’re getting into heavy liquor service. Those two factors will impact on your rate just as much as serving more alcohol than a standard restaurant would.

  There is nothing wrong with entertainment or later hours, but you do need to understand that those factors put you in a different classification at that point. Based on that you will need to adhere to higher rates. This is because the companies that write these have actuaries that have determined what they need to charge in order to create an actual rate that makes sense for the carrier to write the business.

  When it comes to selling to-go alcohol, it hasn’t really come to full fruition as many thought it would after COVID. There are insurance companies that write liquor stores, convenience stores or even grocery stores, which is basically to-go alcohol. When you look at those types of establishments, to-go alcohol is already being sold. It hasn’t really changed the stance from an insurance perspective when restaurants are selling to-to alcohol. They just look at the total amount of alcohol sales coming out of that establishment. For example, if a restaurant is selling only three percent alcohol and the rest is food, the insurance company won’t really look at whether that three percent is from to-go liquor sales or not.

  Ultimately, it is up to the establishment to perform in the act of not overserving a customer and not serving a customer that is already noticeably intoxicated. That is regardless of whether the alcohol is served at their establishment or purchased to-go. While selling to-go liquor as a restaurant or bar is legal, is it important to be properly licensed for that.

  For any business selling liquor, it is important to review your policies once a year with your insurance agent to ensure there aren’t any changes that would necessitate an adjustment to your coverage. It is also vital to adequately train your staff, particularly in the awareness of not overserving or not serving a customer that appears to be already intoxicated.

  Documentation of this training is also extremely important. Keeping that and all other documentation in a place that is safe and yet accessible can help protect your business if something were to go awry. If you hear of an incident, even if you don’t

know whether that person was at your establishment, collect your camera footage from that evening and save it in the event of a law suit. You may or may not be liable, but it is good to have, particularly if there was a wreck or even a death near your business. It’s a good idea to collect that data just in case. Security cameras with time-stamped data can be a lifesaver to your business and your staff.

  It’s always important to work with an insurance agent that specializes in the bar and restaurant industry. They will have the knowledge to support your needs and also ensure that you have the coverage you need to protect your business, your staff

and your clientele.

  Out of his passion to serve the restaurant and hospitality industry, David DeLorenzo created the Bar and Restaurant Insurance niche division of his father’s company The Ambassador Group, which he purchased in 2009. For more than 20 years, he has been dedicated to helping protect and connect the hospitality industry in Arizona. For more information visit our website: www.barandrestaurantinsurance.com.

Is 2024 a Make it or Break it Year for the Beverage Industry?

Cyndi
man with hammer ready to hit a brick wall

By: Neeraj (Raj) Tulshan – Founder of Loan Mantra

Most small and medium business owners define this year as a “make it or break it” time for them, according to a recent survey from Slack. After dealing with the COVID pandemic, rising inflation, ongoing labor shortages, supply chain disruptions and other challenges, nearly a third of respondents (32%) aren’t sure their businesses will make it through 2024.

  Is this year going to “make it or break it” for your beverage business? There are things that all beverage industry professionals can proactively do to mitigate risks and maximize successes.

The Future of Beverage Sales Looks Bright

  First, the good news: after years of challenges and struggles – including a $200 billion loss in restaurant and bar sales during the pandemic – this year, sales are expected to top $1 trillion for restaurant and foodservice industry for the first time in history.

  More promising news: significant growth is expected in the restaurant and foodservice industry, with a projected increase of 200,000 jobs. Additionally, 45% of foodservice operators report needing more employees to meet increased customer demand. Dining out is trending again, after taking a major hit during COVID shutdowns. Now, the average American dines out three times per month and orders takeout or delivery four and a half times per month. Statistics for the younger Gen Z demographic are even higher, with 10% of Gen Z eating out at least once per week. Demand is high, especially among younger consumers, as 52% of consumers – including 67% of millennials and 63% of the Gen Z demographic– say ordering takeout from restaurants is an “essential part of their lifestyle.”

  This comes as Americans are spending more of their income on food than they have in 30 years. As food prices remain high, U.S. consumers spent more than 11% of their disposable income on eating, either in restaurants or at home.

But Costs are Rising

  It’s not all sunshine and rainbows for the restaurant industry, which is facing increased operating costs that are cutting into their profits. In fact, over a third (38%) of restaurant operators said their restaurants were not profitable last year.

  A big problem is that grocery prices continue to skyrocket, and 97% of restaurant operators say higher food costs are negatively impacting their businesses. Grocery prices have jumped by 25% over the past four years, outpacing general inflation (19%) during the same timeframe. Several factors – including supply chain disruptions, droughts, avian flu, and labor shortages – have contributed to higher food prices.

  Another pressing issue: 98% of restaurant operators say higher labor costs are a problem for their business. For instance, unhappy employees cost U.S. businesses an astounding $1.9 trillion in lost productivity last year, according to a recent Gallup poll. Another report found that the highest percentage of paid time off (PTO) requests in the last four years (56%) occurred in January 2024.

  Many employees are currently disengaged, dissatisfied, and burnt out, with only one-third of respondents saying they feel engaged at work. And that’s a problem for employers, as happy, satisfied, engaged employees have been proven to boost a variety of important metrics, including sales, profits, productivity, and employee retention.

  With all this in mind, how can brewers, distributors and pub owners prepare to make it in 2024, with successful, profitable businesses? They should implement these tips:

  Offer seasonal specialty drinks. Consider offering specialty and seasonal offerings, like Starbucks does with their popular lavender drinks in the spring and beloved pumpkin spice lattes each autumn. Think of best-selling and highly anticipated seasonal brews, like Sam Adams Octoberfest, that customers look forward to all year – and purchase as soon as they’re available. Offer “limited time only” drinks to boost customer interest, engagement, and sales. Also, leverage hot trends, like distilling, to attract more customers and drive additional sales. Sell alcohol and coffee – and fun boozy coffee drinks – to attract a wider audience and increase sales.

  Give customers what they want. For instance, the online ordering market has grown exponentially since the COVID shutdowns, and is expected to grow to a whopping $505.5 billion by 2030. Additionally, food delivery services are on the rise. Food delivery is the most popular way for consumers to engage with restaurants, with more than three-quarters of customers (77%) regularly ordering delivery. If you aren’t already offering online ordering and delivery options, it’s time to start! Tap into trends like lagers and new hop products and techniques (including hop extracts and oils). It’s also smart to offer a wider selection of nonalcoholic options for a growing population of people who are not imbibing. Also, be mindful of consumers’ favorite foods to order when dining out – including French fries, hamburgers, mashed potatoes, and grilled cheese– and include these items on your menu. When you give people what they want, they’ll be more likely to visit (and return to) your establishment.

  Engage employees. As unhappy, disengaged employees cost U.S. businesses nearly $2 trillion in lost productivity last year, it’s clear that employers need to work proactively to keep staff satisfied, loyal, engaged, and motivated. To accomplish this, provide competitive salaries and attractive benefits packages. Invest in employee development, give tuition reimbursements, and promote from within. Create a healthy work environment and supportive culture, where employees feel valued and appreciated. Thank employees – sincerely – for their hard work. Recognize top performers at staff meetings, on your social media platforms and website, and via in-store signage. Give financial bonuses and other incentives – such as gift cards, extra days off, etc. – to employees who go above and beyond. Set sales goals and provide individual or team rewards when key metrics are met. Accommodate time off requests for personal commitments. These efforts will differentiate your brand from the competition, helping you attract, retain, and engage talented employees.

  Tap into the virtual market. Ghost kitchens and virtual restaurants are the fastest-growing segments in the restaurant category, with a staggering 85% growth rate in the past year. They’re expected to become a $71.4 billion industry by 2027. Ghost kitchens share physical space, focus on delivery, and offer an opportunity to run a profitable business with limited operating expenses. These virtual businesses allow brands to run their operations in a more cost-effective, risk-adverse way. Some brands are diversifying the ghost kitchen model, providing food and drinks for catered events instead of solely meal deliveries. Consider this trend – and get creative with it!

  Embrace automation. Automation offers restaurants and bars the opportunity to supplement their existing teams and do more – even if they are short-staffed. By automating time-consuming and tedious tasks – such as inventory management – your employees can focus more time, energy, and attention on customer-facing, value-add activities. Tech solutions, like automation, can help boost your organization’s efficiency and productivity, reduce errors, improve accuracy, decrease waste and associated spending, leverage data for more informed decision-making, and improve the customer experience. Fortunately, tech tools have become more affordable, accessible, and intuitive, making them realistic for beverage companies of all sizes and budgets.

  Reduce food waste. Food waste costs the industry a tremendous $162 million in America alone. With the cost of groceries still astronomical, taking proactive steps to cut food waste can have a huge impact on your bottom line. Some ways to successfully reduce food waste include getting creative with leftovers, training staff on portion control, avoiding over prepping foods, storing foods at proper temperatures, improving inventory management, and using the FIFO (first in, first out) system to cut down on spoilage. Repurpose ingredients, like using the bones from your roast chicken dinner special to make broth for the next day’s soup or risotto. Use lower-performing beers to make beer cheese dip or beer-battered fish. Additionally, rely on historical data to drive smarter purchasing decisions.

  Be financially prepared. While no one could have predicted the black swan of COVID, it’s essential to be financially prepared for business curveballs. Perhaps your bar’s oven breaks or your basement floods. Maybe sales are down for a few months, or a supply chain disruption interrupts a key liquor delivery. Or maybe the increased costs of running your business are cutting into your profitability and money has become tight. Prepare for any eventuality by getting your financial ducks in a row before a monetary crisis hits. Watch your credit report and creditworthiness. Organize your paperwork and financial documents in case you need to apply for a loan. Businesses can set up a free account online at loanmantra.com to keep records ready and secure. Get prequalified with multiple lenders, even if you’re tempted to just apply to your existing bank or credit union. While you may think it’s easier to have all your banking centralized in one place, you may save significant money with a different lender, so it’s worth doing some research. It’s also wise to meet with a financial advisor to get an objective opinion on your financial situation. A trusted professional can help you identify (and mitigate) risks, determine how to become more profitable, and provide valuable advice when (and if) you ever need a loan.

  After four tumultuous years of nonstop challenges, hopefully many beverage businesses will “make it” in 2024, enjoying increased sales, higher profits, more engaged employees, and happier customers. Give customers what they want, leverage trends, experiment with seasonal offerings, reduce waste, be financially prepared, and enjoy a better, more profitable, highly productive year.

About the Author

  Neeraj (Raj) Tulshan is the Founder and Managing Member of Loan Mantra. For more information visit our website or give us a call! www.loanmantra.com 1.855.700.BLUE (2583)

Financial Literacy Training

Cyndi

By: Kary at Beerbusinessfinance.com

Financial literacy is the ability to read and understand the most important numbers in your beer business.

Financial literacy training starts with practical and actionable ideas that you can use right away to improve financial results.

All of our financial training is for non-financial owners and managers.

Here’s how our financial literacy training works:

Quarterly financial meetings

You’re invited to join our beer wholesaler financial round-table meetings.

Network with peers, share best practices, and learn specific ways to improve financial results. Right away.

Library of wholesaler financial training courses

Access over a dozen wholesaler financial training courses.

Learn how to build your budget, build your key metrics dashboard, create (or update) your wholesaler business plan, and more.

Weekly beer wholesaler financial newsletter

Each week you’ll receive financial tools and resources straight to your inbox.

Examples of topics covered: Key drivers of wholesaler cash flow, sales growth strategies, cost cutting processes that work, and much more.

Beer wholesaler webinars, workshops and podcasts

Join our webinars and workshops (or watch the replays). This is your opportunity to hear from the best of the best in the beer industry.

Past topics: How to improve gross profit, beer wholesaler budgeting workshop, the latest technology and software.

Planning templates, models, and spreadsheets

We’ve got models to help you create your sales forecast, analyze gross profit, track cash flow, and much more.

If you’re ready to learn more about beer wholesaler cash flow, net operating income, and (wait for it…) EBITDA, now is the time to invest in your financial literacy training. ​

Yours in financial literacy,

Kary

P.S. Interested in learning more about our beer business financial training programs? Book a time for a 15-minute talk. 

Forecasting Business Plans in Uncertain Times

Cyndi

How to Plan for the Fiscal Future in 2024

a robot hand and a human hand both pointing to a dollar sign

By: Raj Tulshan, Loan Mantra

Over the past few years, small business owners have seen dramatic changes in the financial landscape, with an array of challenges and an uncertain future. Several years of global disruption have left small businesses on a rollercoaster ride, facing a global pandemic, supply chain disruptions and ongoing labor shortages. Recently, despite rising inflation and bank failures, small businesses experienced some good news, with cryptocurrency going mainstream, an increase in diverse small business owners, a rise of Artificial Intelligence (AI) in the workplace and more. As we welcome 2024, let’s review a few highlights of 2023.

In 2023 small businesses reported becoming more optimistic, predicted a growth in revenue and planned to hire more staff in the coming year.  They anticipated making higher investments in their companies moving forward. What’s more, we saw an increase in diversity among small business owners, and a rise in the number of small businesses across the country, which account for an impressive 99.9% of the businesses in the U.S. 

While the economic outlook improved in 2023, there are no guarantees that 2024 will be the same. And, as the new year begins, many businesses remain hesitant about the road ahead. It’s human nature to want to predict the future – and in the business world, vital for owners to have a plan to move forward. The one constant is change. Financial service professionals can help business owners and leaders manage these economic and cultural shifts to stay adaptive and resilient during the coming year and for years to come. While no financial expert has a crystal ball, there are key factors that impact the fiscal future. Here are financial considerations for making business plans and strategies that will work today and tomorrow.

The Rise of Artificial Intelligence (AI) and Machine Learning (ML)

AI and ML technologies are already being used in fraud detection and investment research in the Fintech industry. ChatGPT is a new tool that is generating interest in average consumers who have interacted with it out of curiosity. Chatbots are already augmenting customer-facing service roles, increasing speed and simplifying complex transactions. Personal finance, budgeting, operations and management apps are becoming integral for business owners who want to use business data to take control of revenue and meet financial goals. Adoption of these technologies and resulting changes present large business opportunities – and a quantum shift for the business over the long term.

Digital Payments and the Blockchain

As was seen during the pandemic, the shift to digital payments continues to accelerate. Further declines in cash usage will be seen with an upsurge in alternative payment methods, including cryptocurrencies. In 2023 we saw cryptocurrencies go mainstream as patrons used crypto to purchase goods and services, real estate and more. At the same time, governments worldwide are exploring cryptocurrency regulations.  In 2024, expect to see clearer guidelines and potentially greater acceptance of cryptocurrencies in mainstream finance. In addition, the standardization of one central currency may appear called the Central Bank Digital Currency or CBDC.

The CBDC has become a highly charged issue as adoption of it would be controlled by a central entity with likely ties to a social credit system for consumers. Consumer advocates warn that the use of this would put unfettered power and control in the hands of those controlling it. The World Economic Forum states that a CBDC would forever change the relationship between the public and their money with an end to private accounts and choice over what is purchased by individuals.  The WEF states their plans are to monitor every purchase made and eventually restrict what a person could spend their money on and when. This means proposing limitations on travel, dictating how much protein is consumed per week or even collecting carbon taxes directly from accounts without personal choices of the account holders. A CBDC account could be turned on and off at will, restricted based on that individual’s social behaviors, political leanings, religious belief systems and health choices (imposing mandatory experimental vaccines, for instance) and penalize those that don’t go along with centralized dictates.

Interest Rates and Inflation

High interest rates and inflation have a direct impact on those that seek commercial loans and how much funding is available. With an economic constriction, the availability of credit opportunities for business will lessen. As challenges mount, it will be more important to have a financial education. Financial literacy is gaining recognition as a crucial life skill. In 2024, there will be a growing emphasis on financial education, with schools, organizations and governments working to enhance people’s understanding of money management.

Redefining Retirement

The concept of retirement is evolving.  More individuals are opting for phased retirement or exploring flexible work options.  This trend will continue in 2024 as people seek purposeful post-retirement activities and income streams. People will also seek more control over their money in the coming year with the use of personal financial apps becoming integral for money management.  In 2024, expect these apps to offer more sophisticated features, from AI-driven budgeting to customized investment advice, empowering users to take control of their finances.

It’s also vital to note that in the wake of the upcoming election, social security and Medicare reform will be at the bottom of the United States government’s political to-do list. Alternatively, on October 31 2023, the White House announced a Retirement Security Rule, which legally protects consumers seeking financial guidance.

Sustainable investing is also gaining momentum.  Investors are seeking opportunities that align with their values, focusing on companies making a positive environmental and societal impact. In 2024, this trend will continue to grow as investors emphasize responsible investment choices.

Hitting the Debt Ceiling.

As the past year saw banks collapse, new debt ceiling highs and potential interruptions of government created anxiety and lack of confidence in political leaders. These actions will give rise to new bank systems, options and alternatives to banking. Decentralized Finance (defi) is also reshaping traditional banking and finance.  In 2024, we can anticipate more DeFi projects and platforms emerging, offering decentralized lending, borrowing and trading options.

Economists Predict Soft Landing

According to J.P. Morgan Wealth Management, Looking into 2024, strategists now expect that while the U.S. economy is likely to slow, it should avoid recession. The lower likelihood of a painful economic crash should help with financial decision making going into the new year. Other economists are skeptical that the U.S. can maintain economic growth with interest rates so high. The Conference Board predicts slow GDP growth slowing means a “shallow recession” in the first half of the year. The nonprofit research group said wage growth is slowing, pandemic savings are declining, and U.S. household debt is spiking.

At the same time the labor market is resilient heading into the new year. The unemployment rate has risen to just 3.8%, and the economy has averaged more than 250,000 jobs created per month over the past three months. The Federal Open Market Committee projects the U.S. unemployment rate will average a healthy 4.1% in 2024, still well below its long-term average of around 5.7%. The firm said softening consumption, coupled with rising interest rates, will also weigh on U.S. business investment in early 2024.

With these points in mind, plan for the coming year knowing that the ability to be flexible, adaptable and agile will be of significant benefit.

Raj Tulshan is founder and managing partner at www.loanmantra.com. Reach him via Linked-in at https://www.linkedin.com/in/tulshan/.

How Bars & Restaurants Can Protect Themselves Amid Heightened Violence

Cyndi
photo of man in bar holding down another man on a table getting ready to punch that man and a women is trying to stop that man from punching

By: David DeLorenzo

Rising violence is an unfortunate reality around the world. It’s happening close to home, too. Bar and restaurant owners are experiencing incidences involving weapons or shootings in and around their establishments on a more regular basis. This is a sad situation and a dangerous one. Bar and restaurant owners need to know what to do in the aftermath of a weapons incident. Even more importantly, they need to know how to protect themselves and help prevent incidences from happening in the first place.

  Unfortunately, many people don’t realize that it’s becoming more common for firearms exclusions to be included in insurance policies. These prevent an insurance company from having to pay out any monetary compensation to not only the insured but also victims of an incident. That means beyond any monetary compensation, these exclusions ensure the insurance company would also not have to cover other items such as risk assessment, business income lost if the establishment had to temporarily close or was hit with a lawsuit or post-counseling services for those involved. Just one incident could put a bar or restaurant right out of business. It’s important that they are aware of what their policies do and do not cover — and to protect themselves from scenarios like this.

  In the current state of the industry, and at any time, being informed is essential. Bar and restaurant owners should check their policies to see if weapons are excluded from their commercial general liability coverage. If these exclusions exist in their current policies, bar and restaurant owners should add stand-alone coverage to their policies (or purchase them separately). These will protect them in the case of active shooter and deadly weapons incidents.

  As with being educated, being proactive in preventing an incident is key. Bar and restaurant owners need to protect their businesses, their livelihoods, their staff and their patrons. That’s a heavy responsibility — one that should not be taken lightly, especially amid heightened violence situations. There are a few steps owners can take.

  First, simply posting “no weapons” signs at the entries of the establishment, on the building and around the premises (such in the parking lot) can help. If the bar or restaurant owner suspects a violent incident could occur or has noticed aggressive behavior, they could heighten security measures by hiring a door person as well as additional security personnel, preferably those who have previous law enforcement or nightclub experience.

  Proper staff training is another factor that can help bar and restaurant owners in the case of an incident (or hopefully in the instance of preventing one). It’s important for employees to receive on-going training for security as well as preventing overserving that could lead to aggressive behavior, a fight or a shooting. Servers should know how to spot an “obviously intoxicated” person and understand the establishment’s policies on how to address refusing to serve or no longer serving alcohol to an obviously intoxicated person.

  The California Department of Alcoholic Beverage Control notes: “The law states that no person may sell or give alcohol to anyone who is obviously intoxicated. Therefore, every person who sells, furnishes, gives, or causes to be sold, furnished, or given any alcoholic beverage to any OBVIOUSLY intoxicated person is guilty of a misdemeanor. A person is obviously intoxicated when the average person can plainly see that the person is intoxicated. In other words, the person looks or acts drunk.”

  Because weapons incidences are often a result of too much alcohol, staff should be trained on how to spot the signs of intoxication so they feel confident in assessing whether or not they should serve that patron. Restaurants can actually be slapped with a lawsuit if a fight breaks out on their premise. In today’s world where people become easily triggered and too much alcohol, a recipe for an incident is brewing.

  Ideally, an intoxicated person (or a person carrying a weapon) shouldn’t make it past door security — another reason to create a position for that very important role if the restaurant doesn’t already. If a staff member notices that a person is becoming intoxicated, they need to halt their alcohol service immediately.

  In addition to door security, security cameras are an excellent resource to help protect bar and restaurant owners in the case of a weapons incident. Good quality security video footage with timestamps can help catch the details of an incident, limit liability and hopefully absolve the bar or restaurant of any fault in the case of a weapons or shooting incident at their establishment.

  Keeping weapons out of the establishment is crucial, but oftentimes these acts of violence are happening around the establishments or in their parking lots, not actually inside. This is where the addition of cameras and security around the perimeters and in their parking lots can also prove helpful.

  Weapons exclusions are becoming mainstay on policies with carriers not wanting to cover violent acts with a weapon that happen on the premises of bars, restaurants and other businesses in the hospitality industry. However, with these types of instances on the rise, businesses need to ensure they are protected — as well as their employees and their patrons.

  In addition to weapons exclusions becoming more common, assault and battery exclusions as well as sub-limits on policies stating carriers don’t want as much liability on violent acts between partners and or employees are becoming more frequent. Liquor liabilities are also an issue. Liquor liability sub-limits no longer cover the full limit of an establishment’s lease.

  I was recently part of a team that worked to change the law when it comes to establishments that serve alcohol in Arizona. While it’s legal to serve alcohol to adults, establishments can literally get a claim filed on their record and get a letter from an attorney if they so much as think a person stepped foot onto their premises and had a sip of one drink. 

  The burden has been for the establishment and their insurance carrier to prove that they didn’t do something negligent. The problem with this is a combination of many things — one of them being that wording of “obviously intoxicated” mentioned earlier. This phrase has taken on whatever meaning it needs to in order for whatever party suing the establishment to make their case.

  Together with some very influential people in the Arizona hospitality along with the Arizona Licensed Beverage Association (ALBA), which was a major player in this effort, an Amicus Curiae brief was formed. With this decision by the Supreme Court being held, there should be some changes to the way establishments are sued and how insurance companies underwrite risks. This is new to everyone involved and it will take some time to see changes occur, but overall this is a win for the Arizona hospitality industry.

  Finally, it’s important that bar and restaurant owners stay in communication with their insurance agents and up to date on any changing policies. Spending some time ensuring an establishment is properly covered provides safety and peace of mind for all.

  Out of his passion to serve the restaurant and hospitality industry, David DeLorenzo created the Bar and Restaurant Insurance niche division of his father’s company The Ambassador Group, which he purchased in 2009. For more than 20 years, he has been dedicated to helping protect and connect the hospitality industry in Arizona.

For more visit: barandrestaurantinsurance.com