See other bills
under the
same topic
PRINTER'S NO. 612
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
548
Session of
2019
INTRODUCED BY YAW, J. WARD, LANGERHOLC, MENSCH, STEFANO, REGAN,
KILLION AND MARTIN, APRIL 16, 2019
REFERRED TO LAW AND JUSTICE, APRIL 16, 2019
AN ACT
Amending the act of April 12, 1951 (P.L.90, No.21), entitled "An
act relating to alcoholic liquors, alcohol and malt and
brewed beverages; amending, revising, consolidating and
changing the laws relating thereto; regulating and
restricting the manufacture, purchase, sale, possession,
consumption, importation, transportation, furnishing, holding
in bond, holding in storage, traffic in and use of alcoholic
liquors, alcohol and malt and brewed beverages and the
persons engaged or employed therein; defining the powers and
duties of the Pennsylvania Liquor Control Board; providing
for the establishment and operation of State liquor stores,
for the payment of certain license fees to the respective
municipalities and townships, for the abatement of certain
nuisances and, in certain cases, for search and seizure
without warrant; prescribing penalties and forfeitures;
providing for local option, and repealing existing laws," in
preliminary provisions, further providing for definitions; in
Pennsylvania Liquor Control Board, further providing for
general powers of board and for specific subjects on which
board may adopt regulations; and providing for Pennsylvania
retail franchise stores.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 102 of the act of April 12, 1951 (P.L.90,
No.21), known as the Liquor Code, is amended by adding
definitions to read:
Section 102. Definitions.--The following words or phrases,
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
unless the context clearly indicates otherwise, shall have the
meanings ascribed to them in this section:
* * *
"Franchise" or "franchisee" shall mean a retail franchise
store.
* * *
"Growth incentive" shall mean the discount provided to a
franchisee, by the board, for product sales growth by the
franchisee from the previous fiscal year, which shall be
calculated and applied only after the franchisee has had one
full fiscal year of franchise operation. The board shall approve
and apply the growth incentive once a year and within three
months of the end of the fiscal year.
* * *
"Product identification number" shall mean the stock keeping
unit (SKU) or a successor method of identifying specific
products.
* * *
"Retail franchise store" shall mean a business that has a
retail franchise store contract with the board to sell liquor
and wine to the public solely for off-premises consumption,
under terms set by the board. The term includes all wine
expanded permit holders licensed under section 415 and any
business with significant retail experience the board chooses
under selection criteria and standards set by the board. The
standards set by the board shall include, but not be limited to:
(1) Minimum required number of SKUs available for sale at
all times.
(2) Appealing and clean retail store environment.
(3) Maximized store locations to support consumer
20190SB0548PN0612 - 2 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
convenience.
(4) Other criteria established by the board for proper and
effective operation.
This term does not include a Pennsylvania Liquor Store.
"Retail franchise store contract" shall mean an agreement
between the board and a retail franchise store that allows the
retail franchise store to sell wine and liquor on behalf of the
board and which agreement has a term of not more than three
years, after which term the board has the right to renew the
contract if the retail outlet meets the standards set by the
board for sales, operational requirements, store appearance,
marketing support for board products, the number of product
identification numbers (SKUs) required by the board and other
standards the board may set.
* * *
"Wholesale price" shall mean the price paid by a franchisee
to purchase liquor and wine from the board and which price
reflects the discount given to the franchisee by the board.
* * *
Section 2. Section 207(b) of the act is amended and the
section is amended by adding a subsection to read:
Section 207. General Powers of Board.--Under this act, the
board shall have the power and its duty shall be:
* * *
(b) The following shall apply:
(1) To control the manufacture, possession, sale,
consumption, importation, use, storage, transportation and
delivery of liquor, alcohol and malt or brewed beverages in
accordance with the provisions of this act, [and] to fix the
wholesale [and] prices at which liquors and alcohol shall be
20190SB0548PN0612 - 3 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
sold to licensees and franchises under this act and to fix the
retail prices at which liquors and alcohol shall be sold at
Pennsylvania Liquor Stores and franchises.
[(2) Except as provided in paragraphs (3) and (4), prices
shall be proportional with prices paid by the board to its
suppliers and may include a handling fee. This proportional
pricing provision shall not apply to special liquor orders
authorized under section 305(a).
(3) The board may price its best-selling items and limited
purchase items in a manner that maximizes the return on the sale
of those items.]
(3.1) The board shall develop and make public a pricing
formula and any changes to that formula, providing six months'
notice to liquor and wine vendors of changes to the pricing
formula. The pricing formula may have differing markups
depending on the classification of the product, such as value,
premium, super premium or luxury. The markup formula must be
identical within each product classification. The markup formula
set by the board shall be both price competitive with
neighboring states and grow profitably through premiumization.
(4) The board may discount the price of discontinued items.
(4.1) The board shall open two thousand (2,000) franchises
from January 1, 2020, to December 31, 2024. The location of the
franchises shall be determined by the board. The board may open
no fewer than four hundred (400) franchises in a calendar year
during this period, unless in calendar year 2024 there are less
than four hundred (400) franchises to open in order to reach two
thousand (2,000) franchise stores before December 31, 2024.
(5) All prices [of a particular] for each product
identification number for sale at Pennsylvania Liquor Stores and
20190SB0548PN0612 - 4 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
franchises shall be uniform throughout the Commonwealth. The
board may establish a preferential price structure for wines
produced within this Commonwealth for the promotion of such
wines, as long as the price structure is uniform within each
class of wine purchased by the board.
(5.1) The board shall require franchises to purchase liquor
and wine products from the board. The board shall provide
delivery service of liquor and wine to all franchises at a
frequency that allows franchises to maintain acceptable
inventory volumes. The board may also establish delivery
services to a franchisee's warehouse. The board shall develop
criteria for an appropriate franchise warehouse.
(5.2) The board shall sell liquor and wine products to
franchises at wholesale prices as follows:
(i) For liquor and wine products at a retail price of
twenty-four dollars and ninety-nine cents ($24.99) or less, the
discount rate shall be ten percent (10%) of the list price.
(ii) For liquor and wine products at a retail price of
twenty-five dollars ($25) or more, the discount rate shall be
fourteen percent (14%) of the list price.
(5.3) The board shall seek to support franchises to achieve
volume growth objectives. To reward volume sales growth, the
board shall implement the following growth incentive program:
(i) To be eligible for a growth incentive, the growth of
sales of nine-liter cases must meet or exceed a minimum total
growth rate of four and one-half percent (4.5%). Growth of less
than four and one-half percent (4.5%) over the previous year
shall not produce a discount increase.
(ii) The growth incentive shall be calculated as follows:
(A) For growth of sales of nine-liter cases of four and one-
20190SB0548PN0612 - 5 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
half percent (4.5%), the discount rate shall be increased by
three-fourths of one percent (0.75%).
(B) For growth of sales of nine-liter cases of five percent
(5%), the discount rate shall be increased by one percent (1%).
(C) For growth of sales of nine-liter cases of five and one-
half percent (5.5%), the discount rate shall be increased by one
and three-fourths percent (1.75%).
(D) For growth of sales of nine-liter cases of six percent
(6%), the discount rate shall be increased by two and one-half
percent (2.50%).
(iii) The maximum discount shall be eighteen percent (18%).
(5.4) A franchisee shall pay an initial fee of three
thousand dollars ($3,000) for a franchise and a fee equal to two
percent (2%) of the cost of liquor and wine purchased from the
board for off-premises consumption. The initial fee shall not
apply to a franchisee that is the owner of a wine expanded
permit. The fee shall be paid to the State Treasury.
(6) On a [quarterly] monthly basis the board shall publish a
listing of [the wholesale and] Pennsylvania Liquor Store retail
prices on its publicly accessible Internet website.
(7) No later than April 1st of each year the board shall
submit an annual written report to the Law and Justice Committee
of the Senate and the Liquor Control Committee of the House of
Representatives. The report shall contain information related to
the method and rationale for pricing products.
(8) No later than June 1st of each year, the board shall
appear before the Law and Justice Committee of the Senate and
the Liquor Control Committee of the House of Representatives to
provide testimony in relation to its annual written report under
paragraph (7).
20190SB0548PN0612 - 6 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(9) The board shall require each Pennsylvania manufacturer
and each nonresident manufacturer of liquors, other than wine,
selling such liquors to the board, which are not manufactured in
this Commonwealth, to make application for and be granted a
permit by the board before such liquors not manufactured in this
Commonwealth shall be purchased from such manufacturer. Each
such manufacturer shall pay for such permit a fee which, in the
case of a manufacturer of this Commonwealth, shall be equal to
that required to be paid, if any, by a manufacturer or
wholesaler of the state, territory or country of origin of the
liquors, for selling liquors manufactured in Pennsylvania, and
in the case of a nonresident manufacturer, shall be equal to
that required to be paid, if any, in such state, territory or
country by Pennsylvania manufacturers doing business in such
state, territory or country. In the event that any such
manufacturer shall, in the opinion of the board, sell or attempt
to sell liquors to the board through another person for the
purpose of evading this provision relating to permits, the board
shall require such person, before purchasing liquors from him or
it, to take out a permit and pay the same fee as hereinbefore
required to be paid by such manufacturer. All permit fees so
collected shall be paid into the State Stores Fund. The board
shall not purchase any alcohol or liquor fermented, distilled,
rectified, compounded or bottled in any state, territory or
country, the laws of which result in prohibiting the importation
therein of alcohol or liquor, fermented, distilled, rectified,
compounded or bottled in Pennsylvania. The board may not sell
private label products. A Pennsylvania Liquor Store may continue
to sell private label products within its inventory after the
effective date of this section until the private label products
20190SB0548PN0612 - 7 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
within its current inventory are depleted.
[(10) The proportional pricing under paragraph (2) shall not
apply to special liquor orders authorized under section 305(a).]
(11) As used in this subsection, the following words and
phrases shall have the meanings given to them in this paragraph:
["Best-selling items" shall mean the one hundred fifty (150)
most sold product identification numbers of wine and the one
hundred fifty (150) most sold product identification numbers of
liquor as measured by the total number of units sold on a six-
month basis calculated every January 1 and July 1.]
"Discontinued items" shall mean those product identification
numbers that the board has voted to delist at a public meeting.
"Limited purchase items" shall mean those product
identification numbers that the board purchases on either a one-
time or nonrecurring basis due to the product's limited
availability or finite allocation.
["Product identification number" shall mean the stock keeping
unit (SKU) or a successor method of identifying specific
products.]
* * *
(o) To regulate franchises under Article V-A.
Section 3. Section 208 of the act is amended by adding a
subsection to read:
Section 208. Specific Subjects on Which Board May Adopt
Regulations.--Subject to the provisions of this act and without
limiting the general power conferred by the preceding section,
the board may make regulations regarding:
* * *
(k) The licensing, location and operation of franchises
under Article V-A.
20190SB0548PN0612 - 8 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Section 4. The act is amended by adding an article to read:
ARTICLE V-A
RETAIL FRANCHISE STORES
Section 501-A. Authority to enter into retail franchise store
contracts.
Subject to the provisions of this act and regulations
promulgated under this act, the board shall enter into 2,000
retail franchise store contracts by December 31, 2024.
Section 502-A. Qualifications.
The board shall set the qualifications for operations of a
franchise which shall include, but not be limited to:
(1) Providing adequate linear shelving to display the
minimum amount of product required by the board under section
503-A(c).
(2) Operating and maintaining an updated computer system
that meets standards set by the board.
(3) Operating and maintaining an updated system for
recording sales and tax collection that meets standards set
by the board.
Section 503-A. Operation.
(a) Purchase and storage.-- A franchisee shall be permitted
to purchase liquor and wine from the board, licensed wineries
under section 505 and licensed distilleries under section 505.4.
All liquor shall be kept on the premises, in a storage area or
warehouse approved by the board.
(b) Sale hours for off-premises consumption.-- A franchise
may sell liquor and wine for off-premises consumption between
the hours of 9 a.m. and 11 p.m. on any day, to a person that is
not licensed under this act.
(c) Product identification numbers.-- A franchise shall be
20190SB0548PN0612 - 9 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
required to maintain a minimum amount of product identification
numbers in inventory at all times as determined by the board.
(d) Sale price.-- A franchise store shall sell all liquor and
wine products at the same retail consumer prices as a
Pennsylvania Liquor Store.
(e) Other licenses.--Notwithstanding any other provision of
law, nothing in this act shall prohibit a franchisee from
holding:
(1) a distributor license under section 431;
(2) a restaurant liquor license or retail dispenser
license; or
(3) an importing distributor license under section 431.
Section 504-A. Conditions of operation.
(a) General rule.--A retail franchise store shall be subject
to the following conditions, obligations and requirements:
(1) Collect the tax required under Article II of the act
of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
of 1971, and remit the tax to the Department of Revenue.
(2) May not sell or distribute liquor to an individual
under 21 years of age or to an individual who is visibly
intoxicated under section 493.
(3) Retail outlets and facilities involved in retail
operations, including a change to the facilities during the
term of retail franchise store contract, are subject to
approval, inspection and investigation by the board and
enforcement bureau.
(4) Adequate security shall be maintained to protect the
franchisee's inventory from unauthorized sale or diversion
and prevent unauthorized distribution.
(5) Notify the board within 15 days of a change in
20190SB0548PN0612 - 10 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
persons holding an interest in the retail franchise store
contract.
(6) Notify the board within 15 days of becoming aware of
an arrest, criminal indictment or conviction by the
following:
(i) If the franchise is owned by an individual, the
individual.
(ii) If the franchise is owned by a partnership, a
partner.
(iii) If the franchise is owned by an association, a
member of the association.
(iv) If the franchise is owned by a corporation, an
officer, director or shareholder of the corporation.
(v) An affiliate of the franchise .
(7) Notify the board within 15 days of becoming aware of
a violation of this article by a person listed under
paragraph (6).
(8) The premises shall be configured in a manner and
with adequate safeguards to ensure that all liquor and wine
products are secure and that liquor and wine products may not
be accessed during prohibited hours of sale.
(9) An individual younger than 18 years of age may not
be employed to work at a register from which the sale of
liquor or wine takes place or be employed to handle any
liquor or wine products contained within a franchise store.
(10) The presence of at least one register designated by
signage where the sale of liquor and wine products shall
occur which shall be staffed by an individual at least 18
years of age.
(11) Comply with the responsible alcohol management
20190SB0548PN0612 - 11 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
program training under section 471.1.
(12) All managers and employees who will engage in the
sale of liquor and wine shall attend responsible alcohol
management training within one month of commencing
employment.
(13) A transaction scan device shall be utilized to
verify the age of an individual who appears to be under 35
years of age before making a sale of liquor or wine.
(b) Violations.--A violation of this act or the board's
regulations for governing activity occurring under the authority
of the retail franchise store contract granted to a franchise
may be the basis for any of the following:
(1) a fine, suspension or retail franchise store
contract revocation;
(2) nonrenewal of a retail franchise store contract;
(3) revocation of operating authority; or
(4) a penalty authorized under section 471.
Section 505-A. Applications.
(a) General rule.--An applicant for a franchise shall file a
written application with the board in the form and containing
the information prescribed by the board and a nonrefundable
filing fee of $750. An application shall contain the following:
(1) Pictures of the retail outlet, including the
interior and exterior.
(2) A description of the proposed part or parts of the
retail outlet in which liquor and wine will be displayed for
purchase.
(3) A description of alterations proposed to be made to
the retail outlet or additional construction plans to be
undertaken after the approval by the board of the application
20190SB0548PN0612 - 12 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
for a license.
(4) A description of the location at which liquor and
wine sales will take place and how many registers will be
solely dedicated to the sale of liquor and wine.
(5) Proposed storage locations for liquor and wine
inventory.
(6) Any other information the board may require.
(b) Citizenship and residency.--If the applicant is a
natural person, the applicant's application shall show that the
applicant is a citizen of the United States and has been a
resident of this Commonwealth for at least two years immediately
preceding the application.
(c) Corporate applicant.--If the applicant is a corporation,
the application shall show that the corporation holds a
certificate of authority to transact business in this
Commonwealth.
(d) Verified signature required.--Each application shall be
signed and verified by oath or affirmation by one of the
following:
(1) if a natural person, the owner;
(2) if an association, by a member or partner of the
association; or
(3) if a corporation, by an executive officer of the
corporation or a person specifically authorized by the
corporation to sign the application, to which shall be
attached written evidence of the person's authority.
(e) Posting notice of application.--An applicant for a
retail franchise store contract shall post, for a period of at
least 30 days beginning with the day on which the application is
filed with the board, in a conspicuous place on the outside of
20190SB0548PN0612 - 13 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
the premises or at the proposed new location for which the
license is applied, a notice of the application. The notice
shall be in a form, size and contain any provisions as the board
may require by regulation. Proof of the posting of the notice
shall be filed with the board.
(f) False statements.--If any false statement is
intentionally made in any part of the application, the affiant
shall be deemed guilty of a misdemeanor and, upon conviction,
shall be subject to the penalties provided by this act.
(g) Municipality notified.--Upon receipt of an application
for a new franchise , the board shall immediately notify, in
writing, the municipality in which the premises is located.
Section 506-A. Contracting decisions.
(a) Investigation.--The board shall investigate:
(1) If the applicant and officers, directors and
principals, if any, are of good repute, responsible and
suitable candidates for operating as a franchise.
(2) Whether the applicant possesses adequate, legitimate
and verifiable financial resources to:
(i) Operate a franchise.
(ii) Purchase and maintain the required amount of
inventory under section 503-A(c).
(iii) Meet and maintain all financial obligations to
continually operate a franchise.
(3) Whether the applicant proposes an acceptable retail
outlet and location for the sale of liquor and wine.
(4) Whether the planned operation of the applicant
complies with this article and all applicable sections of
this act.
(b) Location.--
20190SB0548PN0612 - 14 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(1) The board shall conduct an investigation to
determine the feasibility of the location and type of retail
outlet that the applicant is currently operating. The board
shall consider:
(i) The proximity of the proposed location to an
existing Pennsylvania Liquor Store or proposed or
existing franchise.
(ii) Whether the proposed location would impact the
public health, welfare, peace and morals.
(iii) Whether the existence of a franchise in the
proposed location could create law enforcement issues.
(iv) Whether the interior and exterior premises are
clean, orderly and are in full compliance with all State
and local building codes and ordinances.
(v) Whether the proposed location within the
community is in compliance with all ordinances.
(2) All expanded wine permit holders licensed under
section 415 shall be exempt from the requirements of this
subsection.
(c) Contract prohibition.--
(1) A retail franchise store contract shall not be
granted if the proposed location is:
(i) Within 300 feet of a preschool, elementary or
secondary school, church, hospital, charitable
institution or public playground without approval of the
board or municipality.
(ii) In a municipality that voted to preclude the
establishment of a Pennsylvania Liquor Store.
(iii) In an area that could create law enforcement
issues.
20190SB0548PN0612 - 15 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(2) All expanded wine permit holders licensed under
section 415 shall be exempt from the requirements of this
subsection.
Section 507-A. Hearings.
The board may hold hearings on applications for retail
franchise store contracts and contract renewals, as it deems
necessary, at a time the board shall fix for the purpose of
hearing testimony for and against applications for new retail
franchise store contracts and contract renewals.
Section 508-A. R etail franchise store contract renewal .
(a) Renewal.--A r etail franchise store contract shall be
renewed every three years, unless the board finds that the
franchisee violated the term of their retail franchise store
contract or guidelines of the board.
(b) Renewal considerations.--In reviewing applications for
renewal, the board shall consider:
(1) The franchi se's inventory of liquor and wine.
(2) Whether the franchise can continue the financial
viability of their business under section 506-A(a)(2).
(3) Any changes in the interior selling location of the
premises or proposed renovations.
(4) Any complaints lodged against the franchise.
(5) Any violations charged against the franchisee.
Section 509-A. Terms of contract.
The board shall set all the terms of the retail franchise
store contract, including revocation, suspension and penalties
on franchise affiliates, executive officers, directors or
general or limited partners or persons holding a controlling
interest in the retail outlet as a result of the following:
(1) violations of any provision of this act;
20190SB0548PN0612 - 16 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(2) furnishing the board with false or misleading
information;
(3) inability to establish continued financial viability
of the franchise under section 506-A(a)(2); or
(4) the franchise is no longer reputable or suitable for
a retail contract.
Section 5. This act shall take effect in 60 days.
20190SB0548PN0612 - 17 -
1
2
3
4
5
6
7