What’s a “private club” and are they legal?

Many people are confused to see a night club or bar operating in a dry area.  They hear the term “private club” and wonder what it means. Is it legal to do that or are the owners violating the law?

The Private Club Registration permit is a permit issued by the TABC for non-profit entities such as club organizations and lodges (Veterans of Foreign Wars for example) that have a club house and want to provide alcoholic beverage service to the club members.  You can imagine what serving free drinks to club members would do to the club bank account let alone the public safety issues of serving a bottomless glass.  For this reason, it was obvious that private clubs needed a way to recoup their expenses while simultaneously discouraging excessive drinking at the club house.

Rather than allow private clubs to actually sell alcohol by the glass to its members, Texas created the Private Club Registration permit issued by TABC to allow non-profit entities to charge club members a service fee for every drink served.  The club could recoup its expenses and club members would be discouraged from over drinking as every drink served came with a price.

Over the years, private enterprise came along to test the viability of the Private Club Registration Permit as a means for obtaining alcoholic beverage service in dry counties.  Texas courts upheld the right of private clubs to form and utilize private business locations such as restaurants as their club house. They also hold the right to hire a for profit company (i.e. the restaurant owners) to provide the alcoholic beverage service to club members under the terms of a management agreement.

This management agreement, approved and voted on by the club members, enables the Management Company (the restaurant in our example) to collect part of the service fees being charged to club members as payment for providing the alcoholic beverage service.  The restaurant (the Management Company) is therefore able to earn something for providing a service to the club and allowing it to utilize its business location as the club house.  It probably goes without saying that, more often than not, the officers of the club are the same persons that own and operate the business where the club is located (i.e. the restaurant owners).  Anyone has a right to form a non-profit club and the same holds true for the owners of a restaurant.

For the customer of the restaurant, the experience is simple and straightforward. You arrive to order a meal, decide to order a beer or glass of wine and the server signs you up for club membership before serving you. When the check arrives, you’re charged a service fee for the drink (which on the check looks like you just bought a drink) and you pay a very small fee to enroll into the club. Years ago, when suburban cities were still completely dry, you may remember being issued a “Unicard” which could be used to track your memberships around town.

For the business seeking to host a Private Club Registration permit, the application process is arduous and fraught with mind numbing specificity that if you get wrong can get your application kicked out forcing you to start from scratch.  Many of our private club clients spent months, even a year or more, trying to obtain this permit before seeking our assistance.  We do not recommend you attempt to file this application on your own.  Please contact Dan Lindsey at Texas Liquor License to discuss the application process and requirements.  We are here to help.

We’ve really just scratched the service of private clubs in this blog post and will be exploring more issues associated with private clubs, including money management issues, in other posts.  Please feel free to browse them to learn more.

(C) 2015, Texas Liquor License.

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