Great Taste Magazine

by Andrew Kienle Jan/Feb 2008 Issue

Owning and operating a successful restaurant can be an extremely rewarding and profitable experience. It takes a strong vision and a dedicated determination to succeed. But as every restaurateur knows, legal challenges arise and the best way to handle them is to be prepared. Are you prepared to protect your business?

1. Maximize Gains, Minimize Losses Using Corporations, LLC’s and LP’s

Before opening a restaurant, the first issue to consider is whether you should operate as a sole proprietorship or as a business entity such as a corporation, limited liability company or limited partnership. While each of these business entities offers some protection against personal liability for its owners and do have certain tax advantages, each has its own form of management/control, degree of owner liability and mechanism for continuing the business indefinitely. Consult with an attorney to determine which business entity is right for you and your restaurant.

2. Protect Your Creativity Using Copyright and Trademark Laws

Once you have decided which business entity form is best for your restaurant, the next issue to consider is which, if any, of your creative works can be protected. The types of protection available to you include Copyright, Trademark, Trade Dress and Trade Secret. Examples of the types of creative works which can be protected include the artwork on your menus, the font used in your restaurant name or logo, your secret recipes and your individualized concept for your restaurant. You have spent a significant amount of creative energy to make your restaurant stand out from the crowd, so don’t let others profit from your hard work!

3. Make the Most of Landlord/Tenant Relationships

After your business entity has been set up and you have protected your creative works, the next step is finding a place to operate your restaurant. To do so, you will likely have to enter into a lease. There are a number of issues specific to restaurant locations which must be considered in preparing the lease. Signage is critical for the success of a restaurant. So, in the lease, it is important to address the issue of what type of sign you will get and where, and who will be responsible for maintaining it. Competing restaurants within the same center will also have a huge impact on your success. Therefore, exclusive use provisions in the lease are extremely important. The ability to have patio seating in our mild Southern California climate is an important consideration that should be spelled out in the lease as well. Finally, common area maintenance charges can have a significant impact on your profitability. Make sure the lease is very specific as to what exactly is included and excluded in those charges.

4. Employment Agreements & Handbooks

You can’t do it all yourself, so you will need to hire the best and the brightest to ensure the success of your restaurant. For your managerial staff (i.e. managers and chefs) you should consider having employment agreements. This will help to ensure that they do not solicit your customers and end up opening a competing restaurant down the street using your secret recipe. For the rank and file employees, (i.e. wait staff and host/hostess) make sure you have a very detailed and thorough employee handbook, as well as a written employee file on each of them, to minimize the possibility of labor board claims or wrongful termination lawsuits in the future.

5. Limit Liability with ADA Compliance

There is no question that everyone should have equal access to public places, such as restaurants. It is unfortunate however, when certain individuals take advantage of the Americans with Disabilities Act (”ADA”) and use it to extract money out of hard-working restaurant owners. The federal and state laws governing equal accessibility to those with disabilities has now become a fertile area for frivolous lawsuits. The old adage “an ounce of prevention is worth a pound of cure” is especially relevant to this issue facing restaurants. Therefore, consider retaining an expert in this field to “audit” your restaurant for ADA compliance. You should also limit access to “non-public” areas of the restaurant (i.e. back office, staging areas) to avoid the argument that the ADA somehow governs these areas as well. If a lawsuit is filed, you should carefully weigh the cost of an immediate “fix” and settlement for “nuisance value”.

Andrew C. Kienle is a partner and member of Hart, King & Coldren’s litigation department. Since its founding in 1982, Hart, King & Coldren has earned the reputation as one of Southern California top law firms. Specializing in all aspects of litigation and business transactions, HK&C has successfully represented a wide range of restaurant clients from individual entrepreneurs to large national chains. For more information, please contact Andrew Kienle at akienle@hkclaw.com or 714-432-8700 x. 362.