Primary Purpose Test

Generally, an on-premises licence relating to a restaurant (a ‘licensed restaurant’) authorises liquor to be sold or supplied for consumption with a meal served to a customer on the licensed premises.

The primary purpose of restaurants, cafés and other similar venues when operating under this licence type must at all times be the business of preparing and serving meals to the public, including genuine meals consumed by a person at a dining table.

Liquor can only be sold under an on-premises licence relating to a restaurant at times when the ‘primary purpose test’ is met.

If at any time the restaurant’s business operation shifts from preparing and serving meals to the public to primarily being about the sale or supply of liquor, then the test is not being met and it cannot continue to sell liquor using this type of licence.

Where this occurs, the restaurant is likely to be in breach of the liquor laws.

A Primary Service Authorisation (PSA) can be granted to a licensed restaurant to allow the sale and supply of liquor to customers without meals.

When a PSA is in place, a restaurant must still continue to meet the primary purpose test and operate as a restaurant at all times of day or night, where serving meals is always the main business focus.

This reflects that a PSA complements the restaurant business’ operation. A PSA does not allow a restaurant business to transform or 'morph' into a bar or nightclub operation that purely focuses on selling alcohol or providing nightclub-style entertainment, rather than genuine meals.

Common examples of how PSAs are intended to be used at restaurants include:

• Four customers dine with friends at their local restaurant. They finish their meals at 10pm but wish to enjoy another bottle of wine after their meal. They sit and consume their wine over the next hour and a half.
• Customers attend a local restaurant but will have to wait 45 minutes for a table. They enjoy a drink at the bar while waiting.
• A group of six friends meet for a meal at a restaurant. One of the group has already eaten and enjoys a drink while the rest of the group consumes their meals.
• Customers attend a restaurant to have a meeting. During discussions both consume a beer and leave without eating. At the time of the meeting, the restaurant was set up with tables and chairs and had a focus on the provision of food with several other customers consuming meals.

There are many factors L&GNSW Compliance officers and NSW Licensing Police consider when assessing whether a licensed restaurant is meeting the primary purpose test. These factors can be considered at any time of day or night.

Operational considerations

• Availability of varied food options:
  • The kitchen should be operational at all times. A wide range of food options that are genuine meals, not just snacks, suggests providing food is the primary purpose of the venue.
  • A licensee may wish to limit a menu late at night, or at other times, to items that are easier to prepare, save costs and improve service times. However, the menu should still include a sufficient range of genuine meals consistent with the operation of a restaurant.
• Menus: Customers should be provided with a food menu or have no difficulty locating one.
• Invitation to dine: Wait staff should provide customers with an invitation to dine. This means an invitation to order meals rather than purely an invitation to drink.
• Promotion of food in the venue: Signage inside should promote food or detail the food on offer, rather than focus on alcohol.
• Venue setup: Tables and chairs should be present and set up in a way that is consistent with seated dining. This setup should largely remain the same throughout the restaurant’s trading hours. Removing tables and chairs to create a dance floor or provide room for standing customers is generally inconsistent with a restaurant’s primary purpose where customers sit to consume meals prepared on the premises.
• Overcrowding / customers standing: The majority of customers should be able to sit and dine comfortably rather than stand and drink, as would occur in a bar.
• Cutlery and condiments: The availability of cutlery and condiments, depending on the restaurant, helps to indicate that seated dining is the primary purpose of the restaurant.
• Food preparation time: Sufficient kitchen staff should be on duty so that food is delivered to customers in a timeframe consistent with food service being the primary service of the restaurant.
• Atmosphere: Businesses should consider the general impression and messaging their venue portrays to customers. The venue should not have the overall look and feel of a nightclub or a bar, where the atmosphere suggests there is very little or no focus on preparing and serving meals.

Staffing considerations

Enough kitchen staff should be rostered, and on duty to provide meals consistent with the operation of a restaurant. Where there is other restaurant staff on duty, more staff should be primarily responsible for the service of food i.e. wait staff, than the service of alcohol i.e. bar staff.

Marketing considerations

Marketing a venue as a nightclub or bar, rather than a restaurant, is likely to be inconsistent with having the preparation and service of meals to the public as a primary purpose. Available advertising, promotional material or social media presence should generally emphasise food.

Entertainment considerations

Any entertainment provided should be compatible with the consumption of meals at the restaurant.

Historically, licensed restaurants with a PSA were required by the liquor laws to keep records of their liquor and food sales as supporting evidence of compliance with the primary purpose test. This is no longer required, as the above factors are sufficient to assess compliance with the test at any time.

One of the most significant compliance challenges for on-premises licences relating to restaurants is ‘venue morphing’.

This can occur where a restaurant operating under this licence transforms and runs more like a pure bar or nightclub-style operation, where meals are not available or there is a significantly greater focus on selling alcohol than genuine meals.

This practice is inconsistent with the primary purpose test and is not permitted.

Trading like a bar or nightclub increases the risk profile beyond what is permitted under the on-premises licence relating to a restaurant. It also means the more rigorous licence application processes for general bars or nightclubs have not been undertaken, for example:

• the community hasn’t been consulted via a Community Impact Statement about the higher risk operation.
• licensing controls are bypassed, including appropriate conditions and plans of management to help manage elevated risks.

Licensed restaurants should be particularly mindful of the risks of venue morphing and non-compliance with the primary purpose test during late night trading hours.

If a restaurant wishes to operate primarily as a bar or nightclub-style venue at any time, it should consider moving to a different licence or holding a more appropriate class of the on-premises licence.

Small Bar Licence

Certain licensees may apply to convert to a small bar licence at no cost until 28 February 2021.

This licence, with its 120 patron capacity limit, has lower ongoing fees and an exemption from additional fee loadings that normally apply for later trading beyond midnight.

Licensees wishing to convert must first ensure their development consent permits the premises to operate as a small bar.

Other Licence Alternatives

Licensees may also wish to consider applying for a hotel (general bar) licence or on-premises (public entertainment venue) licence, which have no specific patron limit.