All restaurants holding an on-premises licence need to meet the 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:
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.
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 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.
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:
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.
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.
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.
Find out about a Small bar licence.Find out about a Hotel - general bar licence.Find out about an On-Premises licence.