2 restaurants say Ontario unfairly revoked their rights to sell booze

Two restaurant owners in Ottawa are fighting for the right to sell takeout alcohol again after being told they weren't allowed because their restaurants are located inside grocery stores, even though they say they are not grocery stores.

"It doesn't make sense at all, if I can consume it in here and you acknowledge that there's a restaurant in here then I should be able to take out the door," said Tony Zacconi, who owns Italian market, bistro and social house Mercato Zacconi in Ottawa's Little Italy.

"We have some groceries that we're selling here as part of a bigger business and they just didn't see it my way," Zacconi added, referring to the Alcohol and Gaming Commission of Ontario (AGCO).

Zacconi said he expanded his other banquet hall business in 2021 to include a licensed market and restaurant that sells wine and beer after the Ontario government made it possible for restaurants to sell takeout alcohol alongside food to help them weather COVID-19 lockdowns.

• Ontario allows alcohol delivery, takeout with food orders in light of COVID-19

Mercato Zacconi includes a full-service restaurant with a wood-burning pizza oven. It's located inside a market which also includes a prepared foods to go and some grocery items.

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At the time he applied for the restaurant liquor licence, Zacconi said no one had an issue. In April of this year an inspector from the AGCO fined the business $3,500 and the alcohol was removed from the shelves in August.

"It hurt a lot more than I expected it to hurt to be honest, because not only were the alcohol sales … a big part of my sales, but also like it was a reason to bring people into the store," Zacconi said.

Rules say takeout booze can't be in grocery stores

Pat Nicastro, owner of La Bottega in the ByWard Market, found himself in a similar situation, specifically because of his restaurant's location within his store.

La Bottega is described by Nicastro as "an Italian market" with a full-service restaurant at the back. It includes an Italian coffee bar, signature sandwiches and specialty food products.

"I'm devastated. This was a huge blow to us. This is something we worked on for years and we did for years and the public loved it," Nicastro said.

Most restaurants with liquor sale licences can sell takeout wine and beer with food, but regulations under the Liquor Licence and Control Act prohibit restaurants in certain spaces — including convenience stores, department stores, big box stores and grocery stores — to do so.

In Ontario some grocery stores are allowed to sell wine and beer on their shelves — if they are licensed by the province and offer a variety of food products. Produce, dairy and food must also take up at least 10,000 square feet of retail floor space.

Both Zacconi and Nicastro say their businesses do not fit that definition of a grocery store that sells wine and beer because their markets are not big enough.

Nicastro say his store is 6,000 square feet and Zacconi says his store is 8,000 square feet, with food only taking up about 2,500 square feet.

They argue their businesses can't be called a grocery store by the province if the AGCO defines a grocery store as more than 10,000 square feet.

"The AGCO, they haven't been able to tell us what we did wrong," Nicastro said, adding that similar businesses such as Eataly in Toronto are doing the same thing.

"The problem is it's entirely subjective, up to the liquor inspector," Zacconi added.

'Street level bureaucracy'

The grey area within the law is intentional, according to Dan Malleck, a professor in the department of health sciences at Brock University who's also a medical historian specializing in drug and alcohol regulation.

"It gives the government the sort of flexibility to apply the rule or not," Malleck said.

"It's something we call, in academia, street-level bureaucracy."

Other businesses which took advantage of the new law allowing takeout alcohol sales agree all the rules around the change are confusing.

"I think that there are, again, kind of some grey areas that it's even hard for us to get an answer from people, but I think that all in all it's been a good thing," said Emma Campbell, co-owner of Corner Peach, a small central Ottawa restaurant that added a bakery and bottle shop with a small selection of grocery items earlier in the pandemic.

Rick Herrera, who owns North Market in Almonte, said he hasn't seen a liquor inspector since applying for the licence five years ago.

North Market offers wine and beer, coffee, baked goods, prepared food to go and specialty groceries.

"The rules are absolutely confusing and yeah, there hasn't been a whole lot of guidance at all," he said.

Meanwhile, Nicastro and Zacconi are hoping the AGCO will take another look at their files.

Zacconi is asking customers to sign a petition. He says even he if wanted to expand the food section of his market and apply for a separate liquor licence allowing him to sell alcohol from a grocery store, he isn't able to.

Ontario only gives out 450 of those licences and they're all taken.

CBC contacted the AGCO several times. They refused to give an interview and only provided a statement.

The statement said the AGCO has been working in a flexible and collaborative way to ensure licensed establishments across the province know about the new sales opportunity but follow the law.

"While we are unable to comment on specific cases, we can confirm that the AGCO assesses every case on its facts and has been pleased to observe a very high level of compliance with these new rules across the province," the statement reads.