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Restrictive liquor laws make it daunting to open a restaurant in Utah, which could be why so few national chains are doing business here.
One obstacle facing national restaurant chains is the mandate that bartenders must be hidden from public view, forcing some brands to change floor plans and business models or open elsewhere, commercial real estate brokers say.
Since the law went into effect in January 2010, only two national chains have obtained liquor permits: California Pizza Kitchen and New York Pizza Delicatessen.
By contrast, national chains opened 16 new restaurants in 2009; seven in 2008, as economic conditions worsened; and 14 in 2007, shortly before the Great Recession hit that December, according to the Utah Department of Alcoholic Beverage Control.
More locally owned restaurants are going into business a total of 156 were awarded liquor permits in 2009 but national chains are an important component to economic development, says Steve Bowler, a real estate specialist at Coldwell Banker Commercial in Salt Lake City.
"It's the national chains that can pay the prices for a pad on a mall site to make the deal work," said Bowler, whose clients include Olive Garden and Smashburger. "National chains can come in with advertising and a strong pay package for employees.
"And restaurants with high-volume sales are the anchor that draws people into malls. Chains already know liquor sales will be lower in Utah, but now to have to build a barrier for bartenders is a huge problem that many chains aren't willing deal with."
Hersh Ipaktchian, founder of Iggy's Sports Grill, said it would be difficult to expand because he'd have to change floor plans and the dining concept that people have come to expect from his nine Utah restaurants.
"Until my architects figure out how to make it work, it's much easier for me to franchise outside Utah," Ipaktchian said. "It makes more economic sense for architects to design buildings and bars, not the Legislature and the liquor commission."
Bryan O'Meara, CEO of Porcupine Pub & Grille in Cottonwood Heights, said his company decided against opening a second location at Foothill Village in Salt Lake City or the Jordan River Parkway and is now looking to expand out of state.
In Utah, barrier requirements would increase staffing costs by $100,000 annually because more employees would have to be hired to cover for backroom bartenders who no longer could serve customers directly.
In February, real estate broker Chris Hatch told developers and retailers at a conference of the International Council of Shopping Centers it's unlikely lawmakers or stakeholders such as the Utah PTA will support changing the law requiring new restaurants to hide bartenders and open liquor bottles away from the view of diners.
He said he's lost clients who were considering Utah for a new location because they would be at an economic disadvantage when competing with existing restaurants that are exempt from the barrier mandate.
"What national chains are telling us is that licensing obstacles are our problems to figure out not theirs," said Hatch, a principal with Salt Lake-based commercial real estate firm Mountain West.
Chains must also contend with a shortage of liquor permits, a process that involves waiting periods of up to several months.
Last year, restaurant licenses were in such short supply that only a summer permit was available for California Pizza Kitchen's newly opened Murray restaurant. That fall, a year-round license became available, but for months, the restaurant had no assurances it could continue serving alcohol.
The publicly traded Los Angeles company, with other Utah locations in Salt Lake City and Orem, operates 240 restaurants in the United States and nine other countries.
Lawmakers approved 35 additional restaurant licenses, beginning in July. But they refused to increase the number of club permits, creating a bottleneck of applicants. Earlier this month, 16 businesses applying for club licenses went away empty-handed because no permits were available.
The shortage could negatively impact high-end eateries, making it difficult, under other permits, for those serving expensive wines to meet food-to-alcohol ratios.
A lack of club licenses could become even more acute in the coming months. Because of inflated population estimates on which the number of licenses are based, it may take a year or longer for the actual population figures to free up more club permits.
Another obstacle facing all clubs and restaurants is a newly enacted law that allows establishments to sell their licenses on the open market. The liquor commission unsuccessfully petitioned Gov. Gary Herbert to veto the legislation, saying licenses could fetch hundreds of thousands of dollars, adding even more unnecessary costs to opening a restaurant.
The bill's sponsor, Sen. John Valentine, R-Orem, said the provision to sell licenses doesn't go into effect until 2012, giving the commission and the public a chance to seek changes.
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Fewer restaurant chains opening in Utah
The number of liquor licenses obtained by national chains has dipped since January 2010, when lawmakers required restaurant bartenders to be hidden from public view. Here's the breakdown:
• Past 17 months two national restaurants
• 2008 Seven eateries
• 2007 14 restaurants
Who opened when?
Among chains opening restaurants in 2007 were Olive Garden, Applebee's, Great American Restaurant, Pei Wei Asian Diner and The Cheesecake Factory.
Some of the chains opening restaurants in 2008 included Chili's Grill & Bar Restaurant, Red Robin Gourmet Burgers, Winger's Grill & Bar, Noodles & Company and Texas Roadhouse. In 2009, Donovan's Prime Steakhouse Restaurant, Sweet Home Chicago Pizzeria, Spaghetti Mama's, Don Pedro's Family Mexican Restaurant, Hyatt Place and New York Pizza Delicatessen.
Source • Utah Department of Alcoholic Beverage Control.