Brewpubs usually come into being with a torrent of fanfare and anticipation as the local beer community eagerly awaits the opening of the doors, and the amazing beers beyond. However, on very rare occasions, in the state of Delaware at least, brewpubs can open with the far less ceremonious swipe of the pen, and the mundane task of filling out forms.
That’s what happened recently when the popular Two Stones Pub franchise had to re-license their two Delaware bars/restaurants as brewpubs due to the recent opening of the Aston, PA based 2SP Brewery by Two Stones Pub owners Mike Stiglitz and Ben Muse.
When I reached out to Mike via email to get more information he confirmed the recent change. “True. As a brewery owner, all other restaurants must be licensed as brewpubs or we would be violating the regulations.”
Wanting to get a better understanding of the legal side of the situation I reached out to the Delaware Alcoholic Beverage Control Commissioner’s office to ask for some clarification and Deputy Commissioner Robert Weist directed me to regulation Title 4 Section 506 Interest in establishment selling to consumer (emphasis mine):
(a) It shall be unlawful:
(1) For a manufacturer or supplier, or the owner, partner or stockholder of a manufacturer or supplier, to own or be interested in any manner in any establishment licensed by the Commissioner to sell alcoholic liquors, either by the bottle or by the glass to the consumer thereof for consumption either on or off the premises where sold.
And although Robert admits that the law is pretty restrictive, “Delaware has the most stringent tied house laws in the United States”. He was quick to point out that the law has a good reason for existing.
“The law keeps someone like Anheuser-Busch from coming into the state and opening a bunch of restaurants and exerting their influence on the tier system.”
While Mike and Ben’s situation appeared relatively straightforward, Robert indicated that is not always the case. “Hotels are my [bane]”, he said as he went on to describe how quickly things can get complicated.
When a hotel opens and wants a license for a bar, the owning parties of the hotel are searched out. This usually means companies owned by other companies and more often then not can eventually lead to investment companies like REIT (Real Estate Investment Trust) which in turn can have thousands of shareholders. Apparently, figuring out who all the “owners” are and if any of them own a stake in a manufacturer as describe above is just a small part of what makes Robert’s job – interesting.
So with a better understanding of the regulations that forced Mike and Ben to re-license their establishments, questions started flooding in my mind. First and foremost? If the State is going to make them be a brewpub, are they going to in fact be a brewpub?
“Yes we will be doing nanobrew size batches throughout the year,” Mike replied. “We have several (VMS350) SABCO systems and we have decided to brew at all locations but it will be periodically throughout the year nothing scheduled and nothing set in stone.”
Of course that leads to another bonus of being a brewpub – growlers. But while the switch in license does allow the locations to sell growlers if they want, Mike was quick to point out that there are certain restrictions.
“Yes you are allowed to sell growlers if you are a brew pub but only what you produce. So that means we can only sell growlers at Two Stones Newark of beer that is produced at Two Stones Newark. We can not sell any other beer even Two Stones Pub Wilmington beer or 2sp Brewing Company beer.”
On the surface, this re-licensing might seem like a nuisance but it actually can be very beneficial to the owners of 2SP Brewery. Having pilot systems at their restaurant locations gives them a great opportunity to brew small batches of beer and get almost instant costumer feedback outside of the brewery. That kind of marketing situation is a great benefit.
It also gives them the opportunity to work closely with the kitchen at each location, perhaps producing beers that meld well with that particular Chef’s style or vision.
All of which gives Two Stones an excellent opportunity to scout beers that may become candidates to scale up at the larger brewery.
And it’s a wash financially for Two Stones as according to Robert there is very little licensing cost difference between that of a bar and that of a brewpub (depends on how you look at it. A restaurant license is $500 biannually, the lowest production brewpub/brewery license is $1500 for the same period). In fact, if Mike and Ben decide not to brew at their Delaware locations, very little would change – just a different license.
So this is a total win, right? Sadly not. The licensing change does have one downside to it which will be guaranteed to make Delaware craft beer fans unhappy. Section 512B Brewery-pubs of the regulations (again, emphasis mine) reads:
(b)(2) It may brew, bottle, and sell beer at no more than 3 licensed establishments, provided that each such licensed establishment qualifies as a separate brewery-pub under this section
(g) The provisions of § 546 of this title to the contrary notwithstanding, the sale for off-premises consumption at up to a combined total of 3 licensees licensed under this section or 2 licensees licensed under this section and a microbrewery licensed pursuant to § 512C of this title all owned or controlled by the same person shall be permitted.
(As a quick point of clarification, since the 2SP microbrewery is licensed in PA, it doesn’t count in regards to – or 2 licensees licensed under this section and a microbrewery.)
This means that when the next Two Stones’ location opens up later this year in Hockessin, it will be the third brewpub for the company; the most allowed by law for a common owner and the final Two Stones to open in the state of Delaware. When I commented to Mike that this was a shame because I know many people who would still love to have a Two Stones in Middletown, he replied that it wasn’t from a lack of trying.
“We are very upset we were not able to move into Middletown and we actually had signed the lease last year but then we were pushed out in favor of Green Turtle. I completely understand but chains seem much more preferential to a developer then a stand-alone unit independent proprietor. And just [to be] clear we did have a lease signed with the letter of intent but Green Turtle at the time was chosen over us as a preferred tenant.”
So there you go. The Delaware Two Stones Pub locations can now be officially referred to as brewpubs, although how much beer will actually be produced at each location is still under consideration by the owners and if it changes anything regarding the locations remains to be seen.
[The author would like to thank Mike Stiglitz and Robert Weist for their valuable time.]