What are Beer Franchise Laws?
The 21st Amendment to the U.S. Constitution gives states the primary responsibility to regulate alcohol. State franchise laws are a key component of state alcohol regulations; they address the relationship between beer suppliers and distributors. Beer franchise laws provide balance and guidance for brewers and beer distributors.
Beer Franchise Laws Support:
1) Consumer Choice – Product Diversity
2) Brewer Access – Distributor Independence
3) Public Safeguards – Responsible Sales
The consumer benefits because franchise laws support an independent system that generates tremendous choice in the market.
The brewer benefits because they gain access to equipment and personnel provided by independent distributors, who deliver and sell beer to retailers across the country. Small brewers especially benefit because distributors are able to act independently and carry all brands.
The public benefits because franchise laws support the system that regulates and safeguards a unique product..
Consumer Choice: Product Diversity
Consumers see new products in their marketplace. Beer franchise laws encourage distributors to make the investments necessary to expand distribution of new craft brands and allow new brewers with new products to enter the market through independent distribution.
Consumers have selection. American consumers access a wide selection of beer brands through an open distribution network, unlike industries where the distribution network is closed. According to the Nielsen Company, there is more selection of alcohol than any other consumer product.
Franchise laws promote consumer choice. Beer franchise laws prohibit brewers from terminating distributors for taking on new brands. Beer franchise laws inhibit forced consolidation and termination without cause. Combined with three-tier requirements, franchise laws prohibit vertical integration of the brewing, distribution and retail tiers, preventing monopolies.