Beer Franchise Laws
There are three primary public policies underlying beer franchise laws:
First, beer franchise laws support three-tier and tied-house laws by safeguarding the independence of beer distributors and ensuring that distribution rights can only be terminated for a good reason. In this way, beer distributors can serve their public policy function as a buffer between suppliers and family-owned retailers, ensuring that these retailers are not subject to undue pressure to violate liquor laws by over-promoting the sale of alcohol, selling to intoxicated individuals or selling to minors. Three-Tier, Tied-House, and Beer Franchise Laws safeguard an open, transparent, and accountable distribution system. In conjunction with Three-Tier and Tied-House Laws, Beer Franchise Laws facilitate:
- Local control and responsibility for beer sales.
- Full accountability in beer distribution channels.
- Institutional barriers to vertical control, and monopoly of the beer industry.
- An independent middle-tier able to fulfill its public policy function as a buffer between suppliers and retailers.
- Insulating family-owned retailers from undue pressure and influence by brewers.
- A system of checks and balances which moderates sales pressures and consumption patterns.
Second, because the relationship between supplier and distributor often lacks parity, beer franchise laws ensure relatively equal bargaining power between the two tiers. In this context, Beer Franchise Laws, like general franchise laws, are designed to protect distributors from unfair contracts and other prevalent and unregulated abuses.
Finally, beer franchise laws prevent suppliers from unfairly and without justification usurping a distributor’s substantial investment in a brand. Distributors make substantial financial, marketing, and advertising commitments. Distributors make long-term legal commitments: facility build-outs, multi-year lease and equipment agreements, and labor and employment agreements. Beer franchise laws prevent a supplier from usurping that distributor’s investment by prohibiting the brewer from terminating distribution rights for arbitrary or capricious reasons. Beer franchise laws ensure fairness and equity in the relationship, prohibit a brewer from being unjustly enriched at the distributor’s expense, and safeguards the distributor’s business and its employees from arbitrary and capricious termination. Because beer distributors are protected from arbitrary and capricious termination, they are willing to take on new craft brands and expand the craft beer market. The investment of beer distributors is one of the Primary reasons why the craft beer market has expanded dramatically in recent years.