, Corbin, KY

December 9, 2008

Restaurant struggles with 70/30 requirements

By Sean Bailey / Staff Writer

When Theresa and Karl Kranz opened the Lion’s Den Restaurant last January, they envisioned an establishment with nice tablecloths, candles and fine food.

Now, almost a year after opening the restaurant, the Kranzs are requiring patrons to purchase “food vouchers” just to legally keep the restaurant open. They’re getting customers  — but their customers want to drink.

“We started off trying to be a fine dining restaurant, and it wasn’t happening. I don’t think this area is quite ready for that,” Theresa said. “We’re just a local business trying to make it and keep things straight — legal.”

The problem, the Kranzs say, is alcohol sales. For a restaurant to legally sell alcohol in Corbin, it must prove that 70 percent of its sales are from food and no more than 30 percent of its sales are from alcohol.

When the Kranzs opened the Lion’s Den in January, they said they initially decided not to get a liquor license. The restaurant is part of a bigger complex that includes a hotel called the Mountain View Lodge. But after the opening, the Kranzs decided to apply for an alcohol license and open a small lounge next to the hotel’s lobby.

The Mountain View Lodge got its alcohol license in April of this year.

“The idea behind the alcohol was we wanted a quiet little lounge. You know, you could go to a hotel lounge, you go in and have a couple of cocktails before bed,” Theresa said.

Theresa said that idea simply wasn’t bringing people in. So the Kranzs knocked down a few walls and expanded the original lounge into what is now the Lion’s Den.

To keep in accordance with the law, the Kranzs recently began selling $5 food vouchers at the door. To get into the Lion’s Den during the evening, customers must buy a voucher, good for a month from the time of purchase.

The vouchers came from a combination of an idea from an employee and suggestions from an Alcoholic Beverage Control board (ABC) worker the Kranzs had consulted.

The ABC worker told the Kranzs that a cover charge would not be legal, but he told them about a restaurant that was able to stay open by selling hamburgers at the door in an attempt to keep food sales up. The Kranzs saw this idea as wasteful — they imagined people throwing hamburgers in the garbage after getting through the door. Instead, they took an employee’s idea for food vouchers.

“I didn’t know (if it’d work), I figured the first couple of nights that we tried it, business would drop, even 50 percent,” Theresa said. “It hasn’t. It’s turned a few people away, they think it’s a cover charge. It’s not a cover charge.”

Corbin Police Chief Carson Mullins said he couldn’t comment directly on the Lion’s Den’s case, because its alcohol license will be up for a “show cause” hearing on Jan. 27 in Frankfort.

The “show cause” hearing alleges that “on or about June 1, 2008 through August 31, 2008 and for an undetermined period of time prior thereto,” less than 70 percent of the Lion’s Den’s gross receipts came from food sales. The order to show cause claims, though not mentioning the vouchers, that the Mountain View Lodge is not meeting the required 70 percent food sales.

Vouchers could be a clever way to redefine “restaurants” in Corbin, but Mullins, while being unable to comment specifically on the Lion’s Den case, said any restaurant must show that food vouchers weren’t just purchased, but were actually spent on food, in order to meet Corbin’s 70/30 requirements.

Theresa Kranz says she’s hopeful that the hearing will show the restaurant has kept its alcohol sales under 30 percent of the restaurant total sales. She said she wasn’t surprised by the hearing because the restaurant’s audit numbers, which they must report to the state, were “really close.”

Besides keeping food sales up, the Kranzs say another unexpected consequence of alcohol sales is keeping underage kids from getting a hold of it. The Kranzs have hired security for night hours to check IDs at the door and stamp customer’s hands one color if they are over 21 and another if they are younger.

“Right now we’ve got lots of security here. I know that probably there’s been a rumor too, ‘That’s a bad place, they have lots of security.’ I’ve got a lot of security to keep an eye on underage (people),” Theresa said. “I don’t want them in here drinking. And any chance that a 20-year-old comes in with their 21-year-old friend, they are going to try to sneak a drink.”

Theresa said security guards are posted throughout the restaurant keeping an eye on the younger patrons. Karl Kranz is quick to point out that the restaurant has been trying to push food sales. He says all their advertisements never mention alcohol.

“And all the servers, the first thing they do when somebody sits down is put a menu in front of them,” Karl said. “They don’t ask them, ‘Would you like something to drink?’ ... ‘Would you like a beer?’ or anything like that, it’s always food first.”

The Kranzs said at this point they believe to stay competitive they have to sell alcohol. One solution to the problem, Theresa said, is for the city to drop the 70/30 rule.

“It would help us control underage drinking. You wouldn’t have to push food, I feel like that’s what we are having to do, is to push food, because alcohol sells apparently,” Theresa said.

Theresa adds that because the Lion’s Den is a restaurant, they can’t simply turn away people under 21.

“We’re a restaurant serving alcohol, you have to let (people under 21) in. I don’t think it’s right to come in with family and they have three kids under 21, you got the parents having alcohol. I don’t agree with it,” Theresa said.

Chief Mullins said as far as he knows, because the Lion’s Den is a restaurant it can’t turn minors away — provided of course they are not sneaking alcohol. Mullins, though, says he hasn’t heard any talk of changing the law, and doesn’t expect any changes.

“Restaurants in Corbin can sell alcohol as long as they are still a restaurant that sells 70 percent food,” Mullins said. “I’m just talking in general here, if you are a restaurant not selling 70 percent food, you need to re-evaluate your business. Bars are illegal in Corbin.”

Theresa grew up in Corbin, and she said she sees alcohol sales as a “mixed blessing.” She moved to Mississippi for a few years, where she met and married Karl. She and Karl moved back last year to renovate and open Mountain View Lodge on the urging of her father. She says she found it odd to come back to a Corbin that sold any alcohol.

“It was all new when I moved back to town. It was odd seeing alcohol being served here. It’s still a little odd,” Theresa said. “I graduated from Corbin. I’d like to see the community grow. We’re wanting to raise our child here.”

Recently, the Lion’s Den held a Thanksgiving dinner free for anyone in the community. The Kranzs said it was part community service and part promotion. They said they weren’t surprised when many of the visitors said they didn’t even know the restaurant existed. The Kranzs said it was typical — they had to explain what the Lion’s Den does.

“I say it 10 times a day, we are a restaurant serving alcohol. We are not a bar,” Theresa said.

For now, the Kranzs are trying new food options and weekly specials to draw a crowd that’s hungry, and not necessarily ready to drink.

“We could always completely get rid of the alcohol. But would people stop coming? Probably. Because there are plenty of choices for restaurants...” Theresa said.

“We’re just trying to stay legal and stay a family-oriented business. We are all family (running the business) and we have children and we are having to raise our children in this environment. This is our lives and we’re trying to make a go of it anyway we can.”