Gecko's Grill and Bar may have been acting improperly as a nightclub this past year instead of a restaurant as its liquor license requires.
The discovery, based on state tax records submitted to the city auditor's office, could put the south Fargo business's liquor license in jeopardy, city officials said Wednesday.
An FA liquor license, which Gecko's has, requires that at least 50 percent of gross revenues come from food sales. At Gecko's, food sales made up about 39 percent of gross sales, while alcohol comprised the rest.
Gecko's, 1515 42nd St. S.W., recently was the subject of a major remodeling project. The building previously was home to the Mexican restaurant Guadalajara.
License holder Bob Leslie said construction on the lounge area was completed before the restaurant, resulting in higher alcohol sales.
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"The restaurant is just starting to pick up again," Leslie said.
Norm Leslie, also named on the license, said Gecko's has been aware for several months that it may be short on food sales and is making an effort to turn that around.
"We're going to do what we have to do to meet those requirements," Leslie said.
Gecko's General Manager Sam Holland, hired in February to jumpstart the new restaurant campaign, said a new menu is being launched Monday.
One of the challenges is getting people to realize that Gecko's is not just a bar, even though many people know it as that, Holland said.
Gecko's maintains a full menu, even in the bar area, until midnight, as required by city ordinance, she said.
Still, Fargo City Auditor Steve Sprague said the city can't overlook the fact that food sales at Gecko's aren't even close to what's required.
Sprague said he sees several options for dealing with the Gecko's situation. The issue will be discussed at a Liquor Control Committee meeting Tuesday.
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One option would be for the city to take away the liquor license, requiring Gecko's to stop serving alcohol.
Another would be for the city to require Gecko's to increase its food sales and conduct monthly audits of the business to monitor progress, Sprague said.
Finally, Gecko's could surrender its FA license and attempt to buy another, less restrictive liquor license. Class A and AB liquor licenses, for example, don't require food sales, but there currently aren't any available.
Gecko's liquor license, along with Fargo's 132 other liquor licenses, were up for renewal last month. Gecko's was granted a temporary extension until July 31 because it had not met all of the city's requirements.
Several other establishments also got temporary renewals but not because of the food sale issue.
As part of the renewal process, the city requires license holders to either submit a certified copy of their state tax return or file a statement by a certified public accountant to prove food and alcohol sales.
One reason for the city's 50 percent food-sale requirement with the FA licenses is to distinguish these restaurant liquor licenses from regular bar licenses.
An AB bar license, for example, costs $150,000. But since they can be sold on the open market, the amount could be substantially higher. An FA license costs $100,000.
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Fargo Police Chief Chris Magnus said he also sees the food requirement as a public safety issue.
"If people are balancing food with alcohol, they're less likely to over consume," Magnus said.
Some cities don't even issue liquor licenses without the food component for this reason, he said.
Still, one of the potential problems Sprague sees with the requirement is that some types of food - for example chicken wings - may never cost enough to rival the cost of a drink. The question is whether a business should be penalized for that, he said.
The Liquor Control Committee meets at 10 a.m. Tuesday in the Fargo City Commission chambers.
Readers can reach Forum reporter Mary Jo Almquist at (701) 241-5531
