An Introduction to Illinois Happy Hour Laws
In general terms, "happy hour" typically refers to a specified period of time in which certain food or drink items at a bar or restaurant are offered to patrons at reduced prices. Often, but not always, happy hour times are held in the late afternoon or early evening, coinciding with the end of the workday for many people and when patron traffic is relatively low. Happy hour, and discounted drink and food specials in general, are relied upon by many establishments as a means to attract customers during low-patron times.
As happy hour has become a fixture in most contemporary bar and restaurant settings, regulations regarding happy hour have emerged. Though these regulations vary from state to state, many restrict free, or "complimentary," alcohol, require reduction of the price of an eligible item whether by percentage or a fixed dollar amount, and prohibit charging a customer when he or she orders more than one drink during happy hour.
In Illinois, however, happy hour is treated as part of the State’s regulation of minors and underage drinking. The Illinois Liquor Control Commission ("ILCC") has the authority to oversee the issuance and operation of all liquor licenses in the State, but defers to the Illinois Department of Revenue for tax collection purposes , including the collection of liquor excise taxes. In accordance with its duty to protect the health and safety of Illinois residents, the Commission is authorized to regulate the distribution of alcoholic liquors, licensing of licensees, and operation of licensed businesses. The powers of the Commission are enumerated in the Illinois Liquor Control Act and the Illinois Administrative Code. There is no specific State law in Illinois addressing happy hour requirements, but these rules are outlined in the Commission’s Administrative Code (the "Code"). Though the Code does not regulate happy hour specifically, in practice the ILCC treats happy hour as one type of special promotion or happy hour. The current happy hour rules are as follows:
Cooking classes are considered a standard event as subject to the thirty (30) day notice requirement, unless otherwise requested by the licensee. Information required to be submitted includes the name of the event, the date of the event, and a description of the event (including the time of the cooking class and whether there is a sick policy available), advertising and email marketing sample materials, and copies of the liquor and food pricing, menu and the relevant passage of the sales application.
Out of state advertising will be permitted upon submission and receipt of the licenses from the Illinois Department of Revenue and Cook County for out of state events.
A Brief History of Happy Hour Legislation in Illinois
In early 1989, Jack O’Connell, a State Representative and clinical professor at NIU’s College of Business and Management, attempted to remove age any restrictions that restaurants faced when serving alcoholic beverages. Additionally, O’Connell would require that eateries have a certain level of food sales and obtain the consent of at least one-third of a local town’s residents (a procedure many cities jokingly rebut that only Uncle James or Aunt Mary would approve). In an effort to assist O’Connell in the proposed restaurant liquor bill, the Illinois State Restaurant Association commissioned a 1989 study that concluded that "eating and drinking establishments do not encourage alcohol abuse when at least 50 percent of their gross revenues derive from the sale of food items." As a result, the restaurant association concluded that "it is highly important that the law governing eating and drinking places be revised to allow for a more equitable and practical means for operation within the sales and business perspective of this industry."
Despite this, the state reversed its course again in 1993 and restricted happy hours at restaurants. Starting in 1993, the law that allowed happy hour specials at suburbs’ restaurants required that the happy hour period be no longer than one hour long and that drinks be discounted no more than 50 percent off the normal menu price. However, Section 6-25 of the Liquor Control Act allows limited happy hours for some taverns, allowing patrons to enjoy discounted drinks as long as the average drink price remains unchanged over a three-hour period (with an exemption for draft beer).
In 2014, the Illinois General Assembly once again modernized the regulations associated with alcohol laws in Illinois by passing Public Act 098-1080. The law deregulates happy hours and allows any liquor-licensed business to run promotions so long as it follows the same guidelines set forth above in Section 6-25 of the Liquor Control Act.
Limitations and Obligations
The restrictions and requirements under Illinois happy hour law are stringent, compared to those in other states. This is arguably the most complex area of Illinois state liquor laws, not just happy hour law. This means any Illinois restaurant or bar should definitely contact a trusted Illinois liquor license attorney to guide them through the process of creating a happy hour program that is legally compliant. These strong restrictions are meant to prevent over service. The most restrictive of these laws are that happy hours cannot be longer than four hours and the discount on alcohol cannot be more than 50% of the price at which either (i) the licensee purchased the alcohol; or (ii) the licensee otherwise would normally have received purchase for inventory. Further, discounts cannot be advertised in any way.
Benefits and Drawbacks for Companies and Customers
The implications of happy hour laws extend beyond the establishments serving alcohol; both local and state economies are affected, and consumers are impacted in terms of quality and cost.
For many Illinois establishments, happy hour promotions have traditionally been seen as a boon to business. Establishments have strategically set pricing and created promotions to bring in patrons during slow periods. Agings declared by local municipalities as "dry," or prohibition-era bans on the sale or consumption of alcohol in the evenings, can have a serious impact on local economies. "Dry" periods typically reduce overall sales revenue for the impacted establishments. Seasonal variances in foot traffic, such as those seen in the winter months, negatively impact establishment profits. The smaller local businesses are often hit hardest. Sourcing quality inventory can be another challenge, as local distributors are often licensed to provide only certain establishments with particular products. Happy hour specials increase foot traffic and sales, helping establishments to maximize profits. As a result, inventory sourcing differ in price. Increasing foot traffic brings the opportunity to raise menu prices, directly benefitting local economies. Advertising during peak hours allows local establishments to shore up their advertising revenues through signage, and some establishments have even developed close relationships with various trade companies, such as dry-cleaners, in which advertising occurs between the establishments at no-cost to the establishments. All of these economic factors can ultimately have positive effects on the local economy and marketplace overall. Negative impacts , as well, can be far-reaching. Lack of access to alcohol can be a deterrent for many prospective patrons, dissuading them from trying establishments. In an era of micro-breweries and wineries, many tourism companies and travel agencies are promoting planned trips to Illinois that are centered around alcohol production facilities. If the time frame in which the establishments are open to the public is materially reduced, as in "dry" periods, visitation and participation in local commerce is equally reduced, resulting in an undesired negative impact on local economies.
While only a few communities across the United States have implemented happy hour bans, they leave some consumers unhappy. Taking away happy hour promotions takes away money in the pocket for a consumer. A consumer saves $1 to $2 per drink during happy hour. By taking away happy hour promotions, Illinois has taken away a valuable opportunity for consumers to save. Many consumers enjoy live music acts, but do not want to pay the $2 per drink cover when paying for a full dinner and a few drinks. Many consumers prefer to pay a fixed price, knowing that they will not pay a second price for tip or tax. Bans have upset bar hoppers by forcing them to wander around town on a cold winter’s night. Both in-state and out of state, tourists are dismayed by the lack of happy hour promotions.
In late 2016, the Illinois state legislature proposed to ban happy hours statewide, but massive pushback from businessmen throughout Illinois kept the legislature from moving forward.
Obligations and Consequences
All businesses that engage in the advertisement or promotion of happy hour beverages must comply with the provisions of the 2016 amendments to the Happy Hour Law. As a summary: advertisement or promotion of "2 for 1″ (BOGO), unlimited drinks packages, most free drinks (but not daily specials), drinks sold by the pitcher, etc. are all prohibited.
This means generally that if you do promote 2-for-1 drinks or unlimited drinks for 4 hours on Fridays – NOT PERMITTED. This means generally that if you offer daily specials of free drinks from 8 to 9 pm – NOT PERMITTED. This means generally that if you advertise unlimited drinks for an hour at some time during Thursdays and Saturdays – NOT PERMITTED. In fact, the ONLY idea that works under the law that creates a free-standing happy hour is where you advertise a specific drink and its price and if that drink is purchased you may receive a free complimentary drink of SOME OTHER KIND. If you promote that OVER and OVER and OVER AGAIN it is perfectly legal.
If you have unlimited drink specials or 2-for-1 or other types of free drink packages, you are NOT PERMITTED – period. An important note however is that some free drink promotions are permitted – if you happen to be in the permitted "package" category. Daily drink specials and specials which include free alcohol are PERMITTED. You also are PERMITTED to engage in any type of packaged unlimited or buffet style drink service, and you can offer 2-for-1 drinks if the second free drink is of a same or lesser valued drink. Also, unlimited drink specials are permitted in connection with a complimentary drink of a "different type". For example, Sunday Brunch with unlimited bloody marys or mimosas is PERMITTED. 2-for-1 Bloody Marys with the second free drink of a complimentary juice is PERMITTED. Complementary drinks (not unlimited) with bottomless champagne is PERMITTED. At the risk of sounding like a kindergarten teacher, more bad things were invented for free-standing happy hours than were devised for legal happy hours.
For anyone who does not follow the law, there are two potential consequences: suspension of liquor license and monetary fines ranging up to $10,000 per violation. Obviously, the first consequence is a very serious one. The second is an administrative penalty and may not be as significant (although there is always a possibility the penalty can be very large). A consideration that may be worse than either of those two is the public relations nightmare that could arise out of a negative publicity or public opinion campaign.
Looking Ahead: The Future of Illinois Happy Hour Regulations
A potential future trend could involve a push for more flexible happy hour regulations across Illinois. Currently, the State of Illinois bans happy hours, a remnant from the Prohibition era designed to discourage excessive alcohol consumption. As a result, many speculate the days of happy hours in restaurants and bars are numbered. Could Illinois move to a more liberalized drinking culture like Los Angeles, where happy hours are legal and increasingly popular?
For example, the City of Evanston allows happy hours but not offers promoting binge drinking. "It’s all about trying to strike a balance and come up with a set of rules that will still encourage consumers to drink responsibly," said Evanston Alderman Melissa Wynne to a reporter from the Cook County Chronicle. "It’s very common in cooking shows you see chefs pouring glasses of wine , and it doesn’t mean that customers are drinking wine at a dangerous level."
Legal experts speculate that Illinois may just be too conservative to embrace the idea of legal happy hours. "Under our present state law, that would be highly unlikely," said attorney Mark Holmes of Tressler LLP, a firm with a practice group dedicated to liquor licensing. "I wouldn’t say it’s impossible, but getting the legislature to change the statute to allow for happy hours is, from my view, very unlikely." Even if happy hours were legalized, experts predict there would still be restrictions. For example, a restaurant owner might be banned from removing away restaurant tables to hold a happy hour dance party.
On the other hand, one should not underestimate changes in Illinois liquor laws. The restaurant industry has a strong political voice in the Illinois legislature. Many political action committees, such as the Illinois Restaurant Association PAC, are closely tied with the political process in the State.