State alcohol regulators deny liquor license for Grand Rapids laundromat owner

GRAND RAPIDS — Edward Bates opened a laundromat on Grand Rapids’ far south side in 2018 after investing about $3 million into the building with renovations and new equipment.

His business, known as Duds N Suds of Grand Rapids LLC at 1517 Langley St. SE, is far from a typical laundromat.

Bates was aiming for a “higher end” clientele. The 3,500-square-foot building built in 2016 features flat-screen TVs on the wall and dozens of new commercial washers and dryers. The biggest is a 135-pound capacity Electrolux machine that cost $33,000 and $6,000 to install. 

Soon after opening, Bates had a novel idea that would truly set him apart from other laundromats: He wanted to install a bar at the end of the building to serve beer and wine to a captive audience waiting for their clothes or bedding to dry.

For the past four years, Bates, 70, has pursued a hard-to-acquire liquor license. He finally found one when a local restaurant owner who had no interest in serving alcohol looked to sell his license so he could focus on breakfast food. Bates had an in, so he began the rigorous process of preparing a license transfer request with the Michigan Liquor Control Commission.

After compiling the requisite application materials, Bates’ Beer & Wine By Lewis Diallo LLC in May 2022 submitted his request to the MLCC to transfer the ownership of the escrowed tavern and specially designated merchant licenses.

The three-member MLCC, led by Chairperson Pat Gagliardi, unanimously denied Bates’ request on Dec. 13, 2022. Citing a commonly used administrative rule, the two-page denial letter stated: “The applicant’s family-style business does not adequately address the Commission’s concerns about expanding alcohol sales into such establishments, as this may adversely impact the laws related to health, welfare, and safety of the general public.”

Less than a month later, on Jan. 10, the MLCC heard Bates’ appeal, which allowed the business owner to make his case for the idea in person. He had also hired attorneys at Miller Canfield Paddock and Stone PLC. Bates is a longtime West Michigan entrepreneur, and owns or previously owned a restaurant, car lot, pet grooming shops, rental properties and a medical transportation company. He also obtained a TIPS (Training for Intervention Procedures) certification, a training program for people serving and selling alcohol, in preparation of the licensing process.

“I kind of thought: People come in and they want to relax. I have internet, and people do come in here and will be doing work. Sometimes they’ll sit for a couple of hours. I figure they can have a beer or wine,” Bates said in a recent interview. “I just thought it would be a good thing to be able to serve it while they’re here, and I think the atmosphere is conducive to it.”

However, two of the three commissioners were unswayed by Bates’ appeal. According to a transcript of the Jan. 10 meeting, Gagliardi and Commissioner Dennis Olshove couldn’t envision a laundromat selling alcohol. They had never heard of such a concept, let alone considered it for a liquor license. The appeal denial order again cited the “family-style business” and the alleged effect on the health, welfare and safety of the public.

“We are not here because you invested a lot of money, and we are happy that you did and we wish you the best. We wish all of the people that come before us the best,” Gagliardi said Jan. 10, per the hearing transcript. “We are not here to give you something to make you unique. And to me, when I look at the pictures of your facility, to say we are going to license that as a tavern or bar, it is just really beyond me.”

Gagliardi also raised concerns about the laundromat’s bar being open to the general public, as is required under a tavern license.

“These are public licenses for public spaces,” he said during the meeting. “And we don’t give licenses for laundromats to take care of their clientele.”

Gagliardi later said: “I just don’t want to walk down the road of licensing laundromats, that is plain and simple.”

Gagliardi declined to comment on the license denial, citing the potential for Bates to submit another application to the MLCC.

Edward Bates invested roughly $3 million into renovations and furnishings for Duds N Suds in Grand Rapids. MIBIZ PHOTO BY ANDY BALASKOVITZ

‘Laundrobars’

Miller Canfield Senior Attorney Christopher Gartman, who is representing Bates, said based on his research, Bates’ request would have been the first laundromat to receive a liquor license in Michigan.

“I appreciate it being a matter of first impression for them, but that’s just not a good reason to not do it,” Gartman said of the MLCC. “Their job — and they take it very seriously and do a good job at it — is (to focus on) the health, safety and welfare of Michigan’s residents. I thought we did enough to explain why it’s going to be a safe place. I don’t know that it necessarily opens the door for laundromats to get licensed. We have one here with a unique lounge atmosphere; the hang-up seemed to be that we don’t fit the model of a tavern.”

Such a concept has been deployed elsewhere. Bon Appétit magazine in 2013 featured seven of the world’s best “laundrobars” in U.S. cities like Asheville, N.C., San Francisco, and College Station, Texas, as well as in Germany, Copenhagen and Belgium. The establishments, some of which also serve food, included names like The Bar of Soap, Brain Wash Cafe and Laundromat, and Harvey Washbangers.

Scott Ellis, executive director of the Michigan Licensed Beverage Association, recalled attending college at Ferris State University in the 1990s when Big Rapids had a laundromat (ironically named Suds and Duds) where patrons could consume alcohol.

“I’m not going to throw the commission under the bus … but as far as not allowing it, I don’t see an issue with the concept” of serving alcohol in a laundromat, Ellis said. “Obviously, they’d have to follow the rules of any other establishment with a liquor license. I think it’s a neat concept. People need to do laundry and they may want to have a drink doing so.”

Liquor Control Commissioner Kristin Beltzer, a business consultant and longtime former executive at the Lansing Regional Chamber of Commerce, initially voted to deny Bates’ license but was the lone vote to reverse the denial upon appeal.

Although she maintained public health, safety and welfare questions, she disagreed that the MLCC should close the door on the concept, calling it “very unique.”

“Sometimes there are a lot of firsts for us and … I’m going to be honest with you, that in regards to this particular license and what you are seeking, I am not so sure that it actually fits the bill either,” according to the Jan. 10 meeting transcript. 

“I could see a lot of moms potentially calling each other to find a Tuesday night where they would potentially be able to go and get their laundry done and sit and converse and share and have an opportunity to have a beverage,” Beltzer said. “I think it is a very unique concept. I am a little torn on this. … I find it pushing the envelope a little bit, but I do know that we have had to do firsts a lot of times before, too. So I am just not exactly certain where I line up on this one.”

MLCC direction

Bates’ request, albeit for a specific business, revealed the MLCC’s discretionary approach to liquor license applications, industry observers told MiBiz. Gartman noted the MLCC had no concerns involving Bates’ personal, financial or civil background.

“The main concern was: ‘Well, we haven’t done this before, it’s unusual,’” Gartman said.

The MLCC’s concerns about Bates’ “family-style business” also appears to ignore the fact that the MLCC routinely approves licenses for such operations, including Chuck E Cheese restaurants, zoos, bowling alleys, community festivals and even churches, to name a few. As well, Bates’ business closes at 6 p.m.

Sources point particularly to the MLCC’s direction under Gagliardi’s leadership. A former state representative who served for nearly a decade as the Democratic floor leader, Gagliardi was initially appointed to the MLCC by former Gov. Jennifer Granholm, serving from 2003-2011. Gov. Gretchen Whitmer in August 2019 appointed Gagliardi for a term that expires this June. Whitmer also named him chairperson at the time of the appointment.

Bates’ denial, for instance, was based on an administrative rule that gives the MLCC wide discretion, as opposed to a statutory requirement.

“It’s the policy of the current commissioners — we run into that frequently,” said Gartman, who has experience in alcohol law and regulations, and even served as the assistant head brewer and quality manager at a brewery in London, England. “The policies are based on who holds that office, and they’re just not hearing anything further. … What I’ve run into a lot more are internal policy decisions when we don’t find out what the policy is until after we’ve run afoul of it. By then, it just causes us time and costs our clients time and money.”

Over the past five years, Gartman said he’s managed roughly 200 liquor license applications.

“Of those, maybe 10 percent get denied, and of those, this is the first one ever where the denial has been upheld — only one,” Gartman said of Bates’ case.

In an emailed statement, Gagliardi highlighted the economic benefits of the state’s wholesale spirits business, which he said has grown by nearly 30 percent over the past three years, including $1.9 billion in gross sales for fiscal year 2022, which ended on Sept. 30, 2022.

Gagliardi also said that more Michigan businesses hold a liquor license than ever before. The MLCC approved 10,832 license applications last fiscal year — more than double the number that were approved in FY21. Meanwhile, fewer than 3 percent of applications were denied in FY22.

“Most denials were reversed by the Commission after the applicant’s hearing. Approximately 10 denials were not reversed after the appeal hearing,” Gagliardi wrote. “Essentially, the Commission is approving almost every application it receives.”

“These licensing data points (sic) refute any unfounded claims of an increasing frequency in denials of license applications,” Gagliardi added. “Rather, these numbers soundly support the Commission as pro-business. The greater the number of licensees, the higher the alcohol sales, and subsequently, the greater the revenue sharing back to state coffers. The Commission continues to provide a significant return on investment for the benefit of all Michigan citizens.”

Bates now has two options. He can submit a new application to the MLCC, or he can appeal his case to the Michigan Court of Claims, which would be heard in Kent County Circuit Court. A court appeal, which involves a three-pronged standard of review examining the MLCC’s decision, could cost him roughly $5,000 to $10,000.

“I’m a little optimistic now if it goes to court, which is going to cost me quite a bit,” Bates said. “But I’m at the point of no return. I’ve got so much invested now, I can’t afford to lose all my money. I have to keep fighting and go up the mountain.”

Duds N Suds, 1517 Langley St. SE in Grand Rapids. MIBIZ PHOTO BY ANDY BALASKOVITZ