Beer Franchise Battle Brewing in Boston

On Monday brewers and distributors faced off to make their case in front of Massachusetts’s lawmakers. At issue is law that many craft brewers say leaves them trapped…

The sides have been divided for more than two years over these so-called “franchise laws.”

Under those rules, as the Boston Business Journal reports, “brewers who work with a distributor for six months are essentially locked into life-long contracts.” And brewers want changes to the law that would allow them to better negotiate their contracts with distributors.

Distributors, on the other hand, argue that the current law protects family-run businesses which invest heavily in brands up front, and that changes to the existing law could endanger that investment.

As the Boston Business Journal explains there are competing proposals at play…each seeking different thresholds for brewers to opt out of distribution contracts…

“A proposal backed by the Beer Distributors of Massachusetts would let breweries that produce less than 100,000 barrels in any 12-month period to leave franchise agreements.”

“The bill, which is sponsored in the House by State Rep. John Mahoney and in the Senate by State Sen. Marc Pacheco, would require a 90-day notification, and that the brewery pay the wholesaler for the rights and for the cost of inventory. Any disputes would go before the Alcoholic Beverage Control Commission.”

“The proposal is an increase from the 30,000-barrel limit proposed in similar legislation last year, and would cover all except the largest two brewers in Massachusetts — Boston Beer Co. and Harpoon parent company Mass. Bay Brewing Co. Inc.”

The Massachusetts Brewers Guild, who represent craft brewers, is countering with a proposal that takes a more tiered approach according to the business news publication…

“The bill would allow a brewer producing 5,000 barrels or less to be able to switch distributors with 30 days notice, and would have to pay 50 percent of fair market value for assets.”

“A brewer that makes between 5,000 and 350,000 barrels annually would have to give 45 days notice and pay fair market value.”

 “Finally, a brewer producing between 350,000 barrels to 6 million barrels annually would have to give 60 days notice and pay 110 percent of fair market value.”

Franchise law was but one of the issues discussed yesterday in front of the state’s Joint Committee on Consumer Protection and Professional Licensure. Legislators heard commentary from pub brewers who want the ability to self-distribute.

And brewers also testified against a pending proposal that wants to limit the explosion of beer gardens in Massachusetts through a licensing change that would limit beer garden and one day alcoholic beverage licenses to only 14 permits in a calendar year.

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