Dogfish questions Rehoboth’s brewpub ordinance

New regulations on operating brewpubs in Rehoboth Beach have run into opposition from the town's most famous brewpub.

Dogfish Head founder Sam Calagione said, "Dogfish opposes the brewpub regulation as it is currently written. Frankly, we don't believe the commission even needs to regulate brewpubs in this fashion; simply creating a regulation noting that brewery-pubs are a permissible use in Rehoboth, that they need to operate as a restaurant, and in compliance with Delaware code would be sufficient in our eyes."

At the city commissioners' June 6 meeting, Mayor Sam Cooper said he does not object to brewpubs brewing and serving beer on-site, but what he does have a problem with is a brewpub turning into a manufacturing facility shipping beer off-site.

"I don't want to create more of the same, where you have people manufacturing. Bringing material into the city to manufacture something, have them stand in the street to unload it, processing it and then bringing other trucks back to load it, standing in the street," Cooper said.

Shauna Barnes, attorney for Dogfish Head, and Jeff Hamer, owner of Fins, which has a brewpub on Route 1, say the city's proposed new regulations run contrary to state liquor laws, which supersede the city.
Barnes said most of what is brewed at Dogfish is sold on-site, and there would be very little truck traffic on the street.

Hamer said almost every business in town could be considered manufacturing in some way. He said state law allows brewpubs to sell beer wholesale.

Barnes said the company opposes a provision preventing the wholesale sale of beer for tasting events. Barnes said typically, tasting events are run through a wholesaler, as state law prevents breweries from donating beer. She said state law specifies that beer for tasting events has to be sold through a wholesaler or a retailer.

Until now, brewpubs have not been addressed in city code. The commissioners sought to clarify brewpubs as a permitted use after a contentious hearing on Dogfish Head's new brewpub in August. While the commissioners granted Dogfish a permit of compliance for its new building, questions were raised about permitted uses for brewpubs.

Cooper said Rehoboth's proposal is based on existing regulations in Georgetown and Dewey Beach; what he wanted to avoid was brewpubs developing into manufacturing facilities with trucks going in and out of town.

Dogfish, as of now the only brewpub in town, raised concerns in a letter to the commissioners about whether the restaurant would have to comply with the new regulations after the commissioners previously granted them a permit of compliance. Commissioner Stan Mills said Dogfish would be grandfathered and that he is approaching the ordinance as if there were no brewpubs in town.

"I'm looking at it as starting from scratch. What is the optimum situation for a brewpub?" Mills said.

Although Dogfish would be grandfathered, Calagione says that only goes so far. "As soon as we make a substantial change to the footprint - to swap out a tank, update a floor plan - the grandfathering status is lost. The regulation as written is overbroad, vague and subjective, and therefore difficult to comply with. It forced us to close at 11 p.m., required us to store our kegs inside - even though Dogfish and many other downtown restaurants have stored kegs outside for many years - and doesn't permit us to sell our beer to wholesalers. It basically curtails 21 years of operating history. We're hopeful, though, that the mayor and commissioners will take our input to heart and that we can reach consensus on an ordinance we all can support and be happy with," he said.

The ordinance does not include any regulations on distilling. During Dogfish Head's August permit hearing the commissioners questioned whether distilling is a permitted use. Barnes said state law permits distilling under its brewpub license. When the issue came up in August, Dogfish's attorney argued that there was no determination in the city code or by the commissioners that a distillery wasn't a permitted use.

Cooper said the distilling operation constituted manufacturing because Dogfish sells its spirits off-site.

The brewpub regulations are part of an overall restaurant ordinance envisioned to allow restaurant owners more flexibility for storage and kitchen space, without expanding the permanent seated dining area. The biggest change was to strike the current 5,000-square-foot size limitation and change it to 2,500 square feet of seated dining area with no limits on ancillary areas.

Susan Wood, owner of Cultured Pearl, said she the ordinance should make it easier for restaurant owners to modify their floor plans. At this point, anything deemed a substantial floor-plan modification for a restaurant serving alcohol must get a renewed permit of compliance.

"Over the past seven or eight years, it has been a real nightmare to do anything," she said, noting at one point she wanted to move a service station 5 feet. "I was told I had to go three months to a public hearing and spend $1,000," Wood said.

The proposed ordinance comes in part from a string of board of adjustment cases where variances were approved for restaurants greater than 5,000 square feet such as Greene Turtle, Cultured Pearl, Nicola Pizza and Grotto Pizza.

Board Chairman Tom Evans had just one piece of advice for the commissioners: Be clear with what you do.

"Don't write ambiguous code," he said.

The commissioners will continue discussion of the restaurant and brewpub ordinance at their July workshop.
 
New regulations proposed for brewpubs include:

• Brewery must be located on the premises, be part of the restaurant and hold a certificate of compliance

• No outdoor storage of raw materials

• All brewing must be confined within a building

• No more than 50 percent of the total gross floor area can be used for brewing

• Beer cannot be sold at wholesale for consumption off-site but can be removed from the premises for nonprofit promotional events or in growlers with a capacity of no more than a gallon. Growlers are typically sold in a 32-ounce size, or one quart; or 64-ounce size, a half gallon.