Back in February, David Kwass and his two partners in the Center City wine bar/café Tria sauntered around the block to the newly opened Garces Trading Company, the gourmet market/cafe and the sixth restaurant in sizzling hot Philly chef/restaurateur, rising culinary superstar and Iron Chef Jose Garces’ ever-expanding empire of eateries. Kwass and his party weren’t as interested in the menu as they were in the small state store that sat behind glass doors inside GTC, adjacent to the casual dining area of the then-BYOB. A “wine boutique,” to be more specific—the first and only one of its kind in the state established by the Pennsylvania Liquor Control Board, and a concept that’s stirred up a ton of resentment among Philadelphia restaurateurs this year.
Recalls Kwass: “[Garces] came over and basically said, ‘You know, I really wish we didn’t have this bad blood about having the wine store here.’ And we told him, ‘We really think that it is incredibly unfair because essentially you’re given the ability to serve wine without paying for a liquor license or paying for insurance, and none of the rest of us were offered this deal.’ His response was, ‘I know Tria, I like Tria. You guys are good at what you do. All you have to do is compete a little bit harder.’”
How did Kwass feel at the conclusion of that conversation? “I was very proud of myself for not hitting him in the face.”
A few months later, Kwass, who’s also a lawyer, filed a lawsuit in the Philadelphia Court of Common Pleas against the PLCB on behalf of the Coalition of Restaurant Owners for Liquor Control Fairness (CROLF)—an alliance of licensed and BYOB restaurants within a quarter-mile of Garces Trading Company, including Tria, Lolita, Le Bec-Fin, Caribou Café and others—seeking an injunction to have the wine boutique closed.
Despite what he describes as “that one specific conversation which was tense,” Kwass says it’s not a personal thing with Garces—neither the chef nor Garces Trading Company were named in the suit. The CROLF’s beef is with the PLCB.
In the widely reported suit, the CROLF alleges that the wine boutique violated the Pennsylvania Liquor Code provision that alcohol cannot be opened or consumed on the premises of a liquor store. And, claimed the CROLF, the process by which only one establishment was selected by the PLCB to partner with a wine boutique was handled in a nontransparent—some have said “covert”—manner.
Further, the suit claims the one-of-a-kind arrangement created an unfair competitive advantage for GTC, mainly because wine and spirits were available to patrons at cost, and within a few feet of the dining area. Licensed restaurants have to upcharge their wine to offset those expensive liquor license/liability insurance fees, and other BYOBs such as GTC can’t offer the convenience of an on-site state store.
“I’d like to know why it wasn’t an open bidding process,” Kwass says. “If this is something that can only be made profitable for the state by virtue of an association with Jose Garces, was that the analysis? Or would it be profitable with us, with Stephen Starr, with [Le Bec-Fin’s] Georges Perrier, with [Caribou’s] Olivia de St. Martin—any number of other restaurateurs who certainly could have decided to open a BYOB cafe and allowed a state store to have 600 square feet within that?”
There have been some interesting recent developments in the case. For starters, the suit has been transferred from the Court of Common Pleas to the Commonwealth Court, which, Kwass acknowledges, could hurt the coalition’s chances of victory. “The Commonwealth Court has historically tended to give deference to the discretion of state agencies.”
Meanwhile, at the end of September, GTC obtained a liquor license and liquor-liability insurance so it can now serve (upcharged) wine, as well as beer, by the glass (although bottles are still available at cost). Speaking exclusively with PW—his first public comments regarding the situation—Jose Garces says: “We applied for the liquor license to enhance the customer service and hospitality of Garces Trading Company and for no other reason. We thought that taking the steps to apply for a separate liquor license might ease some of the issues and concerns of other restaurateurs.”
Kwass’ reaction? “Now that Garces Trading Company has gotten a liquor license—has presumably paid the $65,000 it costs these days to do that—and has paid for liquor-liability insurance, I would say that has a significant impact on one of our claims. Now, it is still the case that the partnership is a violation of the liquor code. That doesn’t change. And it’s still the case that the open-bidding process for this was completely nonexistent.”
“I think that’s just ridiculous,” says PLCB chairman P.J. Stapleton. Like Garces, Stapleton has been tight-lipped about the wine boutique controversy. Until now. Stapleton (who first came up with the “wine boutique” concept seven years ago to mimic the way wine is sold in gourmet markets elsewhere in the U.S. and in Europe) tells PW that the PLCB placed advertisements—which stated, in part, “Proposals are invited to provide the Pennsylvania Liquor Control Board with approximately 1,000 to 1,500 net usable square feet of new or existing retail commercial space”—in the classified section of The Philadelphia Inquirer and other newspapers approximately a year and a half ago and subsequently entertained “six or seven” proposals.
One of those was from Garces—who Stapleton says approached the PLCB, not the other way around—and ultimately the PLCB went with the location because “we obviously wanted to partner up with someone who was going to be successful. It wouldn’t do us any good to be in a failing market and have a wine shop where no one came into the premises. That was obviously one of the considerations. We wanted to have a strong business partner, and we felt [Garces] was a strong partner given the success he’d had in the past and his concept, which was the market setting. It was the closest to what we had envisioned going in.”
PLCB Director of External Affairs Stacey Witalec says the PLCB’s classified ads—which never used the word “boutique”—were deliberately vague. “At that point we didn’t know we were definitely moving forward with [the wine boutique program]. There was no way of knowing whether or not we could move forward if we couldn’t find the space that we thought might work. We didn’t want anyone to think we were seeking out a specific partner. So lest we make it so specific that one group or another thinks that we were singling someone out and catering to them, the vagueness of the ad certainly opens the door to anyone who might have that type of retail space available that we could utilize, and then open it up for those discussions.”
Stapleton says the PLCB is thrilled with the business the wine boutique has generated to date, and hopes to open similar stores in the future, though no such plans have been finalized. “The amount of wine that’s sold out of that 600 square feet is phenomenal compared to other outlets we have throughout the state.” (According to sales figures provided by the PLCB, the boutique has sold $660,196 worth of wine and spirits between its Feb. 16 opening and Oct. 27. By comparison, the superstore at 12th and Chestnut streets, a space more than 20 times as large, has sold $11,905,496 worth of wine and spirits in the 12 months between Oct. 27, 2009, and Oct. 27, 2010.)
And Stapleton rejects the notion that the wine boutique inside GTC is unfair to other restaurateurs. “We have 620 stores in the Commonwealth of Pennsylvania. There are 65,000 locations [to choose from]—we picked one over others. We don’t only have one proposal for each location. We picked the one that is best for our business. Anybody who runs a business otherwise is foolhardy .... Business is about making decisions and choices, and this is no different. That’s life, right? That’s the way the world operates. Not everybody gets to do everything they’d like.”
As for the question of whether the wine boutique violates the liquor code, Witalec maintains that it’s written into the wine boutique sub-lease that “there is 600 square feet in which the store operates and you cannot open or consume in that area. Once you step outside that 600 square feet radius you are technically on Garces [Trading Company] property and that’s where you can open and consume.”
That issue, and others, will certainly play out in court. “The state appears to be playing favorites,” Kwass says. “That’s really where it comes down in the end, as well as the fact that if you read the statute, under the liquor code this is illegal. Does this mean that we are great proponents of the liquor code as it exists? Of course not. But that’s not the issue here. The issue here is given the rules, let’s all play by them.”
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State Rep. Babette Josephs, whose district encompasses much of Center City, says the PLCB’s partnership with Garces is—to say the least—a conflict of interest.
The prices are restaurant-grade, too. Dinner at Garces Trading Company costs as much as dinner at Distrito. Which isn’t to say it’s overpriced, just don’t delude yourself into thinking it’s cheap.
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