Massachusetts Franchise Law Reform Among New Guild President’s Priorities in 2020

Newly named Massachusetts Brewers Guild’s president Sam Hendler wants to finally resolve the contentious franchise reform debate with the state’s wholesalers.

Hendler, a co-founder and co-owner of Framingham, Massachusetts-based craft breweries Jack’s Abby Craft Lagers and the Springdale Beer Company, acknowledged that the franchise law reform effort has been dragging on long before he was of legal drinking age.

“I was a high school senior when it started,” he told Brewbound, adding that he’s eager to see the issue finally resolved. It’s something he’s hopeful can be accomplished during his one-year term as guild president.

In Massachusetts, both brewers and wholesalers have worked with legislators to allow small brewers to exit their contractual relationships with wholesalers.

The craft brewers’ proposals (H. 327 and S. 104) create a tiered system based on production volume with varying lengths of time needed to notify wholesalers of a brand’s departure (30, 45 or 60 days, based on annual production) as well as a payment of fair market value to the wholesaler. Disputes would be mediated by an independent, third-party arbitrator.

The wholesalers’ proposals (H. 3549 and S. 178) require that breweries producing fewer than 100,000 barrels annually give notice 90 days prior to termination.

According to Hendler, the wholesalers’ proposal could leave a beer company in limbo for up to 14 or 15 months if termination is appealed. On the other hand, the brewers’ proposal would allow beer companies to “move today” and the rest of the process would take place “in the background over time.”

“They’ll get paid, even if they disagree with the determination of fair market value, all the stuff that can go to arbitration, the brand moves today,” he added. “We’re not going to be handcuffed for a year and a half, which is plenty of time for a wholesaler to kill a brand.”

Although activity around the bills has been dormant since a hearing last July, guild executive director Katie Stinchon said the guild’s measures in both legislative chambers are likely to advance.

“We are keeping the course and will continue to take meetings on the Hill to talk to legislators and work to level the playing field in this arena,” she wrote in an email to Brewbound.

Hendler said both sides agree that the issue needs a resolution.

“Both of our industries are spending a lot of time, money and effort in the statehouse fighting each other on this issue, and it is sapping from our ability and their ability to potentially work together to move other initiatives forward,” he said.

Another legislative issue on the guild’s radar is preserving the state’s seasonal, pop-up taprooms. Massachusetts craft breweries have used one-day licenses to host pop-up beer gardens from the spring to late fall. A bill (S. 158) introduced in 2019 would prevent any one commercial entity from applying for more than 14 single-day licenses in a year.

The bill poses “significant threat to open-air [beer] gardens,” Stinchon said. The legislation is currently under review but unlikely to receive further consideration before the legislative session finishes in early January 2021.

“Our brewers and government affairs team strongly advocated against this language that would make creating these spaces impossible,” Stinchon said.

The bill was introduced on behalf of the Massachusetts Restaurant Association, whose members often pay hundreds of thousands of dollars for liquor licenses. The trade group has argued that seasonal beer gardens are manipulating a loophole in the law.

Popular beer gardens of the last few years include Trillium Brewing’s pop-up space on Boston’s Rose Kennedy Greenway, Wachusett Brewing’s beer garden at The Patios at City Hall Plaza, Night Shift Brewing’s Owl’s Nest locations along the Charles River and Notch Brewing’s mobile biergarten. Some occupy space within Boston public parks, operate for several months and contribute money to local nonprofits.

“They’re such a success story, consumers love them, they’re bringing people into venues that are occasionally massively under-utilized,” Hendler said. “It’s a really positive thing. We want to figure out a solution that keeps them alive and healthy and growing.”

Another priority for the guild is securing the ability for craft brewers to sell their products at farmer’s markets and expanding self-distribution rights for brewpubs, which is currently the state’s only brewery license that does not permit self-distribution, Hendler said.

“Those are relatively smaller issues — not that they’re less important to us — but there’s not crazy opposition to either,” he said. “It’s more a matter of really making our case in the statehouse that this is important.”

In addition to the legislative matters, Hendler hopes to continue past president Rob Burns’ goal of educating guild members on business practices. The guild’s third annual conference in May will offer a technical brewing track and a business track, during which Hendler is scheduled to deliver a presentation with Bob Babine of Edelstein & Company CPA titled “Tightening the Books, Staying Lean & Fine-Tuning Brewery Operations.”

“These aren’t the sexiest things ever, but they’re really important and especially if you’re looking at an industry that is hitting some headwinds and not everybody is growing by 30% a year anymore,” Hendler said. “Managing cash flow is going to be really, really important.”

In 2019, a handful of Bay State breweries shut down or closed taprooms. Nationwide, brewery openings are still outpacing closings, but the gap is narrowing. During the guild’s annual meeting in January, Brewers Association chief economist Bart Watson estimated that the percentage of breweries opening to total breweries will hover around 10% this year, while the percentage of closings will be about 5%.

“I think a lot of brewers who have come up the last 10 years maybe were able to be a little lackadaisical in some of these areas and that’s not going to be a recipe for success the next 10 years,” Hendler said. “Let’s make sure people understand their business, understand the basic principles and are doing the things that they need to be doing to keep the doors open.”

Currently, Massachusetts has 171 active breweries, 206 active licenses, and 257 active Alcohol and Tobacco Tax and Trade Bureau (TTB) permits, according to Watson’s presentation. Hendler said another priority is growing the guild’s membership, which currently sits at 110 members, beyond the “Boston to Worcester bubble.”

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