'Members only' clubs bypass restrictions

PUBLISHED : Saturday, 17 April, 2010, 12:00am
UPDATED : Saturday, 17 April, 2010, 12:00am

Membership has its privileges - especially when it helps 700-odd eating, drinking and entertainment establishments bypass licensing rules and avoid food and hygiene restrictions.

These outlets, which include the city's dominant karaoke chain, operate as clubs under a legal loophole.

Their patrons can sign up as permanent members for a little as HK$10 - sometimes nothing at all - and enjoy entertainment, food and drink as they would at fully licensed bars and restaurants but without going through the membership requirements of established clubs.

'This is an abuse of the system, because any member of the public can essentially be a member of these clubs,' said Daniel Wong, a former chairman of the Liquor Licensing Board. He referred to such places as 'sham clubs'.

'People can become members simply by filling in a form, and referral from existing members is not necessary.'

This legal loophole exists because two combinations of licences regulate premises that sell alcohol, depending on whether they are open to the public or to registered members and their guests only.

The former require a liquor licence from the Liquor Licensing Board and a food licence from the Food and Environmental Hygiene Department. The food licence can either be a general restaurant licence or a light refreshment restaurant licence, which only allows the sale of a restricted range of food.

Clubs require only a certificate of compliance issued by the Home Affairs Department and a club liquor licence. According to the Home Affairs Department, there were 716 clubs in 2006 and 753 last year. In 2006, 442 clubs held a club liquor licence. There were 476 last year.

Tong Wing-sze, owner of a bar operating as a club in Causeway Bay, keeps a list of members' names on site in case of inspection by officials from the Home Affairs Department.

Membership is free, but in reality, anyone can drink in her premises, and she does not ask patrons whether they are members.

She also serves food at her club - without food safety inspections by government officials.

'Even when [officials from the Home Affairs Department] saw me cooking noodles for guests, they didn't say anything,' Tong said.

A spokesman for the Home Affairs Department said the certificate of compliance for clubs dealt with matters such as building safety and fire safety. How the business operated and whether it sold food was outside the department's scope.

Clubs are not considered food businesses under the Food Business Regulations, the legal basis for food safety and hygiene inspections at restaurants and food factories, carried out by the Food and Environmental Hygiene Department.

The department says a club providing catering facilities for exclusive use of its members and accompanied guests does not need a licence from it.

Tong said it was quite common for bars and 'private' restaurants hidden in commercial buildings to operate as clubs, thus bypassing the need for a food licence.

Unregulated food services aside, people establish 'members only' clubs because licensing requirements are less stringent than for restaurants, and the application process is quicker and simpler.

Wong said control over the sale of liquor in clubs was lighter than in bars and restaurants. 'There is an assumption that rules of the clubs will govern how members behave.'

Licensing conditions for a liquor licence are stricter than for a club liquor licence. Additional conditions for the former include a ban on patrons playing games of chance on the premises and dancing, unless endorsed by the board.

Moreover, while written rules on building or fire safety are similar for light refreshment restaurants and clubs, Wong said that inspections carried out for members-only clubs were more lax.

There is one big difference though, in that applicants for restaurant licences from the Food and Environmental Hygiene Department also have to submit papers to the Fire Services Department and the Buildings Department, while the Home Affairs Department is a 'one-stop shop' for club applicants.

Wong said club applications took at least a month less than restaurant or bar applications.

The Home Affairs Department promises to approve club applications in as little as 26 working days, while a food licence takes at least 35 working days, and even longer if applicants fail to meet layout requirements in preliminary screening.

Tong says rent is too expensive for businesses to afford the longer wait.

Last year 4,742 liquor licences were in force, meaning the few hundred establishments that use the members-only loophole are in a minority. But a large proportion of karaoke outlets take advantage of it.

These include the Neway Karaoke Box chain, which has more than 90 per cent of the market since acquiring California Red last month. The company operates 35 outlets, which include 23 under the Neway brand and 12 California Red outlets that retained their original names. All are licensed to sell alcohol.

All 23 of the Neway outlets offer dinner buffets. Seventeen operate as members-only clubs, while the other six operate as light refreshment restaurants.

At least one person in each room has to be a member. Permanent membership costs HK$10 and can be applied for immediately before hiring a room. California Red outlets do not operate as members-only clubs.

Wong said karaoke establishments were switching to be 'clubs' for the same reason as bars.

The licensing system for karaoke establishments is further complicated by the requirement of karaoke permits that regulate layout of the establishment and equipment. The permits do not regulate food services and alcohol, and are additional to liquor and food or club licences.

The Home Affairs Department is responsible for karaoke outlets in hotels, guesthouses and club houses, while the Food and Environmental Hygiene Department approves karaoke establishments in restaurants.

With the myriad of licences in place, not only are members-only karaoke outlets getting away without food safety inspections, but those licensed as light refreshment restaurants are also serving more types of food than they are supposed to. This is because restaurant licences are harder to get, with more stringent requirements on the size of kitchens.

Karaoke buffets offer a variety of food, such as fried rice, sushi, spring rolls, chicken wings, seafood pasta and steak. But a guideline issued by the Food and Environmental Hygiene Department states that a light refreshment restaurant can only sell one of the six categories of food from an approved list.

According to the public database of licensed premises, none of the original Neway outlets is licensed as a general restaurant. Only two of the California Red outlets operate as a general restaurant, while the rest are light refreshment restaurants.

Neway did not respond to a Post request for comment and declined to disclose information about its licences.