Friday, July 23, 2010

Amynomics 101 - The Silly Economics of Dry Dallas

I took Economics 101 (at least twice) in college, and would like to talk about the economics of the wet vs. dry argument in Dallas.  Everyone thinks it's about a change in packaged wine and beer sales and sales tax revenue, or that it's about how much restaurants (licensed as clubs) spend to keep up a club membership database.  Chump change, guys, don't be like a pack of dogs distracted by Squirrels on the sidelines.  Into this argument let me introduce Amynomics 101, surely no Nobel Prize winning thesis, but an aspect of the economic consequences of the current law that are as relevant, if not more so, than those being currently discussed.

First, before we get into a discussion of what is best for Dallas, let me state that I'm very much for a system that controls alcohol consumption - especially when it comes to 1) minors and 2) over-imbibing and driving.   I agree with a system that works towards controlling both, while allowing those who don't break the rules the freedom to enjoy something that is completely legal.  I'm an accountant who loves to "follow the money", with a Bachelors of Science in Business Management from UT-D.  I am no economist, but for 20 years I've been working in the industry, trying to figure out the Texas Alcoholic Beverage Code, only to repeatedly find that just when you think you know it, you don't.

I completely agree that the sales tax revenue of retail store beer and wine (Squirrel - it's not really about sales tax revenue!) will vary little (relative to the total) between the wet-dry lines, but in these times can our city really afford to turn away any positive cash flow?   What will happen is a gradual shifting away from traditional Dallas "wet" area liquor stores to more grocery store/corner store purchasing within Dallas.  As beer and wine sales are siphoned from these high density liquor strips, there will be fewer stores that can survive on the leftover hard liquor sales.  Something like that seems to be going on up on Inwood Road in Addison since the suburbs surrounding them have voted themselves modified wet - lately I've noticed many shuttered stores that previously sold liquor, beer and wine.

It seems a break-even economic proposal unless you consider the cost to Dallasites who currently have to travel the extra distance to purchase (what in most towns is available on their neighborhood corner) beer and wine.   But Amynomics deals with the larger financial issues and how these ancient restrictions limit Dallas' economy, taxes, club licensees and their guests. 

Because of the way Texas' over 70 year old law was written, restaurants licensed as clubs in dry areas (Squirrel - it's dry, but it's not really dry!) must purchase their alcohol they sell through a 4th tier retail package store, paying as much as 20%-30% more for their inventory as a restaurant located in a wet area who can buy directly from a wholesale seller.   Highest in markup is wines, and a restaurant's alcohol sales are typically around 50-60% wine sales.

So based on the June 2010 report issued by the Texas Comptroller of Public Accounts (which was mostly payments for the month of May), I added up all the club licensees Mixed Beverage Gross Receipts payments and came up with the following numbers:

3 sample pages of June's TABC report,
yellow highlights are Dallas club licensees. 
Addison has zero club licensees.
Dallas clubs paid:  $1,061,163 in Mixed Beverage taxes in June, which mathematically translates to $7,579,736 in liquor, beer and wine sales. (These are not bars, they are restaurants, hotels, Veteran's organizations, country clubs.  They have strict requirements of how much alcohol can be sold relative to the amount of food sold.)   Let's say purchasing costs of alcohol for those sales is 30% of total sales, a pretty typical industry average and for purposes of this argument, by removing the 4th tier, let's use a lower 10% savings rate of overall purchases.

Wow, that's a savings estimate of $227,392.  For one month.  Almost $3 million per year.  Consider that this savings would be returned to Dallas business owners and their guests through lower prices.  And it costs the city NOTHING in lost tax revenue.  Higher cost-of-sales necessitates higher prices - an anecdotal story is my comparison of Merryvale Chardonnay at Houston's Park Cities vs. Addison. A $1 higher sales price per glass equivalates to a 10% buying premium for the same product in dry Dallas.   But laws of Economics (general laws, not just mine) dictate that as costs rise, demand drops, or in other words people will find ways to limit the higher costs of dining  out - by either doing without, by searching out BYOB places, by drinking at home, or by dining in a lower cost area like the 'burbs.   All of which results in lower taxes to the city.

Higher production costs means thinner margins for those businesses, which translates to less incentive for new businesses to grow in the area. This is huge, no, HUGE economics.   Between sales taxes, mixed beverage gross receipts taxes (14% of alcohol sales), payroll, property, unemployment and franchise taxes, few businesses generate tax-revenue-per-square-foot like a full-service, full-bar restaurant.  So dis-incentivizing these maxi-tax generating businesses is like saying "Thanks, but no thanks".  No problem, (they say), looking to the modified wet suburbs to the (north, south, east west) where the mix of residential and commercial rivals that of any Dallas neighborhood.  Leaving Dallas residents to figure out how to keep our libraries and community centers open without raising property taxes on our homes.

Entrepreneurs will always look to locate in the areas where they have the greatest opportunity to succeed, lower costs mean more money to pay back bank loans or other financing that helps open these very businesses.  Making the suburbs a better breeding ground for success means jobs and sales tax revenues move out of Dallas.  Add to the mix the high density of suburban residences and commercial areas that can help support community-based restaurants out there, and you have a higher chance of payback success outside of the city.   I am unqualified to put a $dollar amount on this loss of future business development, but am certain to my very business core that it is NOT insignificant.  Or else the suburbs would have stayed dry, I think.

Wet/dry politics is tied to land (Squirrel-it's not just Addison landowners that likes wet real estate!), in Dallas like no other large city in Texas.  Austin, San Antonio, Houston, El Paso......which are dry?  None.  One factor facing a modified-wet Dallas, where wine bars or beer bars would be allowed on local corners like in other cities, is what happens to the old "wet".  As retail sales and restaurant sales move to other more residential locations, the density of these businesses in traditional wet strips becomes less populated, reducing rental income and inviting redevelopment. 

Until then, what, pray tell, invites redevelopment of a scuzzy swab of industrial late-night clubs and liquor stores when a landlord can "churn and burn" differing bars or stores - as one fails and another tries to re-open to success. Keeping these strips of areas as "exclusive sales belts" limits regeneration in some of the precincts most needing a redo.  For now it also keeps cities like Addison in fireworks on the 4th of July, and promoting their local restaurants through city-sponsored advertising campaigns.

There are some incidental costs to dryness that are more nuisance than than prohibitive (Squirrel-these are not the real fight!).  For one, club restaurants have to transport their own alcohol from the sellers location to theirs, sometimes they do this themselves, or there are a few companies specially licensed to do this for a fee.  So while a beer truck delivers to Centennial Liquors, a block away from Sevy's Grill, Rathbun's or Hillstone, they are prohibited from crossing a 70 year-old line to deliver to our doors.  And then there is the membership database, most of us utilize Unicard which has a modest monthly cost considering the service they offer.  However both are just other expenses deducted from profitability, vs. a wet neighborhood (to the north, south, east, west of Dallas); another cost for an entrepreneur to consider when opening the restaurant of their dreams.

Let me digress about another economic point that seems unseen by the public (Squirrel! Squirrel! Squirrel!).  I am all for alcohol enforcement when it makes sense.  But tell me, does having TABC agents (licensed to carry guns, no less) go through boxes of membership records from the (months or years) past make sense to anyone?  Because the last time we had an audit, two agents spent 4 hours going through boxes of membership records going back 3 years. 

Perhaps, like me, you'd rather they'd find out the whys and hows of wrong-way drunk drivers on the tollway vs. who came in to have a gin and tonic at Sevy's bar six months ago.  To the agents credit - they are only following what the law requires, but in these economic times, is it wrong to question the entire premise of this rule of law and how our enforcement of alcohol is misguided?  Is it time to do away with the requirements of club membership simply based on the fact that it is a waste of taxpayer's money?

So Amynomics points you to keep the eye on the real prize, the higher costs and loss of growth and tax revenue to the city only results in profitibility to a few - and certainly not the Club restaurants, guests or citizens of the city.  If we want to see strong, vibrant restaurants in our neighborhoods we must keep up with our suburban neighbors, or risk losing business development to them.  Unlike many in these times, our industry is not asking for government financial handouts, only for fairness in laws, from which all of Dallas could benefit.

Wedding Bells Are Ringing For Chris Ward

According to Mercury Grill's Facebook page.  Ms. Rebecca Jackson will become Mrs. Chris Ward in a ceremony tomorrow.  Great news and congratulations!

Wednesday, July 21, 2010

DISD's Chefology 101 Class

Get a group of kids together to cook an excellent meal, odds are good it's a recipe for a career in food service.    Here's the facebook album of the meal they produced on July 21st in conjunction with Le Cordon Bleu Institute of Culinary Arts.

Monday, July 19, 2010

Back In The U.S.A.

Someone's been on a 10 year vacation.  Join us at Sevy's Grill on (this!) Wednesday, July 21st, from 5 p.m. to 7 p.m. for a tasting of Cardhu single-malt scotch which has re-entered the U.S. after a 10 year absence. Joining us will also be Jason Lizarada, Reserve Brand Manager of Glazer's to answer any questions.  And check out our new bar menu, with delectible small plates, including: Mini Kobe Corny Dogs, Venison Sausage Quesadillas, and Mini Shaved Steak Sandwiches.

Friday, July 9, 2010

Silver Fox Steakhouse at Centrum Closed

So sayeth a reader.  Phone number no longer connected.  Verified by their Frisco location.

Thursday, July 8, 2010

The Crossroads Diner Coming To North Dallas

Could this be the satisfaction of Dallas' fondest food requests?  A great diner?  Run by a former Yankee?  According to Tom Fleming (Lombardi Mare, Pappas Bros., Old Hickory Steak House @ The Gaylord, Central 214), who is in final lease negotiations for a location on Walnut Hill Lane, they've set a goal to cook the "best damn breakfast in Dallas".   "Potatoes?", I ask.  "Everything is from scratch", he replies.  Save me a seat, baby.

At the Dallas Farmers Market Cooking Series class this Saturday, Tom will be treating attendees with items he's planning for his chef-driven comfort food menu.    The restaurant itself will be a family friendly and value driven spot, cooking breakfast and lunch Tuesdays through Sunday, and an early dinner on Thursdays, Fridays and Saturdays to start.  Partnering with Tom in the kitchen is Carl Strelecki, formerly of Standard and Central 214.  They will also have a beer and wine license.

Sevy & I drove by a week ago, and noticed someone had left the light on.  Tom says once the ink is dried on the lease, the chandelier (above) is for sale, as is a 4 burner wok and lots of indestructable green vinyl chairs.

Thursday, July 1, 2010

Bing Me Again, And Again, And Again

A few months ago I was invited, as a "member of the Dallas blogging community" (giggle), to a dinner at a nice area restaurant for a discussion of how could enhance my readers' experience when they visit this crazy little creative writing project.   I thanked the Bing Community Manager for the invitation, but having a conflict with an event that evening I had to decline, while perhaps also mentioning that, ahem, Sevy's Grill would make a fine location for any future tutorials they might be giving.   Jeez.

Whether it's Ads by Google, or Bling with Bing, I've always felt a little weird about partnering, like the more independence I keep, the less likely I am to get myself in trouble.   Yet here I go.  In hopes of getting a sparkling t-shirt sent to me like the ones I saw this week at the Fancy Food Show, I am going to say here and now, I confess to having visited the Bing booth no less than five times over two days. 

Not that Bing, Bing the cherry-flavored-sparkling-energy-drink.  So enthusiastic over their delicious, 40 calorie-per-12 oz. serving refreshing beverage, I shared it with the friends from Dallas who were also up in New York City visiting the show.  The marketing girls of Bing were not serving their product with vodka, but hey now, that's a great idea! 

So now, little ol' "accept no advertising" me is willing to wear their product name across her chest - which, I'm just saying, can be quite a statement.   And it looks like others enjoyed their bing cherry flavored effervescent refreshment at the show, it can make all the difference in getting this product into an HEB, or Safeway, or Albertson's here in Dallas.  Please.

They will also ship up to 48 cans anywhere in the continental US (where Fedex Ground Service delivers) for a flat $2.

UPDATE:  Just heard back from Petey and his Bing Team at Inspiration Beverage Co. in Lakewood Colorado:  "Right now, the Central Market - Dallas location is our only distribution point for BING."  I'm going to check it out and report back.
UPDATED UPDATE:  So far two Central Markets (Dallas and Plano) and no sign of Bing.  I am going to order some, because lately we've entertained ourselves with cocktail concoctions we could create using Bing as a mixer.  Now we have to try them out.  Bing-A-Ling, anyone?  How about a Bing Me Manhattan?