Tied-house rules

Definition

The federal bar on a drinks supplier holding an interest in a retailer.

Why It Matters

They decide who may put money into a business that sells alcohol, which quietly removes a financing route a buyer might otherwise assume exists. The federal rule makes it unlawful for a supplier to induce a retailer to buy its products to the exclusion of others by acquiring an interest in the retailer's license or property, or by furnishing equipment, fixtures, signs, supplies, money or services. The line that catches people is the mortgage. Taking a mortgage on the retailer's real or personal property counts as an interest in that property, so a distributor cannot quietly finance the store, and a note from a supplier is a different conversation from a note from the owner. The federal part also exempts nobody from a state's own version, and several states are stricter. Ask who holds every lien before assuming a source of capital is available.

In numbers: On a $4M deal, a distributor offering to carry $400,000 against a mortgage on the coolers is an interest in the retailer's property, whatever the paper calls it.