4-213

4-213. Restaurant audit

A. The director may require a restaurant to submit an audit of its records to
demonstrate compliance with section 4-205.02. The director shall not require an
establishment to submit to such an audit more than once a year after the initial twelve
months of operation even if the establishment is allowed to continue operating as a
restaurant pursuant to subsection E of this section.

B. Except as provided in subsection D of this section, the department shall audit
accounts, records and operations of a licensee that cover a twelve month period. When
conducting an audit, the department shall use generally accepted auditing standards. An
establishment that averages at least forty per cent of its gross revenue from the sale of
food during the twelve month audit period shall be deemed to comply with the gross
revenue requirements of section 4-205.02. The twelve month audit period shall fall within
the sixteen months immediately preceding the beginning of the audit.

C. If the audit or a consent agreement that may be offered at the discretion of the
director and that is signed by the licensee and the director reveals that the licensee
did not meet the definition of a restaurant as prescribed in section 4-205.02 and the
percentage of food sales determined by the audit or consent agreement was:

1. Less than thirty per cent, notwithstanding section 4-209, subsection A, the
director shall deem the license to have been surrendered or may revoke the license as
provided in section 4-205.02, subsection D.

2. At least thirty per cent but less than thirty-seven per cent, the department
shall allow the licensee a six month period to continue to operate under the restaurant
license, during which the licensee shall either:

(a) Replace the license with a bar or beer and wine bar license, except that, at
the end of that six month period, the department shall revoke the restaurant license or
the licensee shall surrender the restaurant license.

(b) Obtain permission from the department to continue operating with a restaurant
license pursuant to subsection E of this section.

3. At least thirty-seven per cent but less than forty per cent, the licensee shall
be granted a period of one year to continue to operate under the restaurant license,
during which the licensee shall attempt to increase the food percentage to at least forty
per cent. If the licensee does not increase the percentage of food sales to at least
forty per cent, the department shall allow the licensee a six month period to continue to
operate under the restaurant license, during which the licensee shall either:

(a) Replace the license with a bar or beer and wine bar license, except that, at
the end of the six month period, the department shall revoke the restaurant license or
the licensee shall surrender the restaurant license.

(b) Obtain permission from the department to continue operating with a restaurant
license pursuant to subsection E of this section.

D. The department may conduct an audit of a licensee described in section 4-209,
subsection B, paragraph 12 after twelve months following the beginning of operations as a
restaurant by the licensee to determine compliance by the licensee with section 4-205.02,
except that the department may conduct an audit of a licensee within the first twelve
months of operation if the licensee has made a substantial modification in the restaurant
equipment, service or entertainment items or seating capacity during that twelve month
period, in which event the department may conduct the audit for a period of less than
twelve months.

E. A restaurant licensee may continue to operate with its restaurant license if its
food sales are at least thirty per cent and less than forty per cent and the department
approves the continuation of the restaurant license pursuant to this subsection and
subsections C, F, G, H and I of this section. The department shall not approve more than
fifteen restaurant licenses pursuant to this subsection and subsections C, F, G, H and I
of this section in any fiscal year. The department shall not approve any additional
licenses pursuant to this subsection and subsections C, F, G, H and I of this section
from consent agreements entered into or audits conducted in any fiscal year after
2012-2013. The department may approve a request submitted by the licensee to continue to
operate with its restaurant license only if all of the following apply at the time the
licensee files its request with the department:

1. The restaurant has a sufficient number of cooks, food preparation personnel and
wait staff to prepare and provide the restaurant services that are necessary for the menu
offered by the licensee.

2. The restaurant's equipment is of a sufficient grade and the size of the
restaurant's kitchen is appropriate to the menu offered and the kitchen occupies not less
than twenty per cent of the total floor space of the licensed premises.

3. The menu is of a type consistent with a restaurant operation. In making a
determination pursuant to this paragraph, the department may consider the proportion of
food sales to alcohol sales, the price of spirituous liquor beverages and food served by
the licensee and whether the licensee provides reduced price or complimentary food and
beverages.

4. Not more than thirty per cent of the public interior area floor space consists
of pool tables, dart or arcade games, barstools, cocktail tables and similar types of
seating and dance floors, and the aggregate area of all dance floors on the premises is
not greater than ten per cent of the total floor space of the public area of the
premises.

5. The name of the restaurant does not include terms associated with alcohol
consumption, such as "bar", "tavern", "pub", "spirits", "club", "lounge", "cabaret",
"cantina" or "saloon".

6. Disposable dinnerware and smallware, including dining utensils, are not used
except in outdoor areas.

F. If the department intends to approve a restaurant's continuation of operation
pursuant to subsection E of this section:

1. The department shall advise the governing body of the city or town if the
premises are within the incorporated limits of a city or town or the county of the
department's intent.

2. The city or town or the county shall post a notice for at least twenty days on
the licensed premises that the licensee has made a request for continuation to operate
with a restaurant license and invite bona fide residents who own, lease or reside on
property within a one mile radius of the licensed premises to file written comments with
the department regarding the request within thirty days of the first posting of the
notice.

G. If the local jurisdiction through its governing body or its authorized agent
does not object within ninety days, the licensee may continue its operation as a
restaurant.

H. If the department intends to disapprove a restaurant's continuation of operation
pursuant to subsection E of this section, or if the local jurisdiction or its agent
timely objects to its continuation, the department shall set a hearing before the board
and the local jurisdiction shall post a notice of the hearing for a period of at least
twenty days on the licensed premises. The city or town or the county may testify at the
hearing and bona fide residents who own, lease or reside on property within a one mile
radius of the licensed premises may testify before the board regarding the licensee's
request. The board shall determine whether the restaurant may continue its operation
based on consideration of the criteria listed in subsection E of this section.

I. A restaurant licensee may continue to operate with its restaurant license
pursuant to subsection E of this section if the restaurant and the restaurant licensee
continue to meet the requirements of this subsection, subsection E of this section and
any other statute. As a condition of continuing operation as a restaurant under
subsection E of this section, the department may require the licensee to specifically
acknowledge the representations made by the licensee regarding its operations in support
of the licensee's continuing operation as a restaurant. Notwithstanding subsection A of
this section, if the licensee changes its operation in any way that materially and
detrimentally affects the representations made by the licensee, the department may audit
the licensee or terminate the license without an audit.

J. Notwithstanding section 4-209, subsection D, paragraph 12, the state treasurer
shall deposit five per cent of the annual fee for a restaurant that is permitted to
continue operating as a restaurant pursuant to subsection E of this section in the
driving under the influence abatement fund established by section 28-1304.