Opening and establishing a successful restaurant, catering or food service business can be an incredibly daunting task. There are various legal pitfalls to navigate from forming the proper entity, insurance concerns, intellectual property protection, regulatory and municipal issues to food service and food safety concerns. Regardless of prior experience in the service industry, an experienced bar and restaurant attorney can assist in navigating all of these issues and other problems that may arise.
Entity Formation
Most small businesses operate as Limited Liability Companies, also known as an LLC. These entities operate under various state laws permitting their formation. An LLC allows a business owner to obtain the protections typically associated with a Corporation without many of the corporate formalities that may be required by an S-corporation or a C-corporation. Although many businesses operate as an LLC, every case is different, and other options may be better for specific restaurant or service businesses. An experienced bar and restaurant attorney would be in the best position to provide advice regarding the best entity for a specific business owner’s needs.
Liquor Licensing
In the State of Connecticut, licenses to dispense alcohol are issued and regulated by the Department of Consumer Protection. Liquor licenses are issued in various forms including those for the consumption of alcohol on the premises and off the premises (package store). Liquor licenses for consumption on premises come in various forms and depending on the form of the license obtained, may restrict the type of alcohol that may be served in an establishment. For example, a business with a restaurant liquor permit may serve beer, wine and liquor, but must serve food within the parameters of the Connecticut liquor laws. In contrast, an establishment with a café liquor permit may serve beer, wine and liquor, but is not required to serve food. The municipality in which a business intends to operate may also limit, restrict, or otherwise regulate the types of establishments that may operate within its borders. In order to obtain a permit, an applicant must first get the signatures of the zoning officer, fire marshal, and town clerk for the municipality where the business will be located. Obtaining these signatures is not always a straightforward task and may involve inspections, site visits, and or zoning approval. It is best to discuss the type of permit that best fits the business with an experienced bar and restaurant attorney.
The liquor licensing process can be overwhelming at first sight and is for some businesses, the most rigorous and difficult part of establishing a restaurant business. The application process itself takes a significant amount of time so it is best to begin early in the buildout phase of the business. Moreover, the application process requires the business owner to select a permittee which is a complex and important decision.
The Permittee
A permittee is responsible for ensuring the proper distribution of alcoholic beverages and compliance with the General Statutes. The permittee is not the owner of the liquor license rather the backer owns the license and typically the business itself. In addition, the permittee may be replaced at any time and at-will by the owner or backer. Given the potential liability for statutory violations and the potential for imposition of personal liability pursuant to Connecticut’s Dram Shop Act, the permittee decision should not be taken lightly. Although potential liability can be limited through appropriate insurance coverage, the selection of a permittee is a decision that requires thoughtful consideration and discussion with an experienced bar and restaurant attorney.
Contractual Issues
Written agreements are commonplace in the restaurant business. These agreements can range from contracts with food and beverage suppliers to agreements regarding music, television and entertainment. However, the most common contracts in the restaurant business are franchise agreements, commercial lease agreements and employment agreements. Regardless of the type of agreement, it is imperative that the agreement be carefully negotiated and/or drafted to meet a business’ needs. Well drafted and negotiated agreements are far more likely to protect a restaurant business and its owner(s). An experienced bar and restaurant attorney can assist with drafting, evaluating, and negotiating the various agreements that may arise in establishing a restaurant business. Having well-crafted agreements in place at the outset of a business can assist with avoiding disputes, breakdowns in business relationships and future breach or costly litigation. Moreover, and perhaps most importantly having well drafted agreements in place at the outset of the business assists in establishing and making clear the roles, responsibilities and expectations of all involved.
Intellectual Property
Most restaurant businesses establish themselves through the use of a distinct logo or unique or catchy name. Many business owners don’t realize that these logos and/or names can be a valuable asset that establishes good will and recognition of the business by the general public. The value and recognition associated with a restaurant’s intellectual property can be significant. As a result, it is extremely important to put the proper protections in place. Trademark protection is a central consideration in protecting a name or logo, but more importantly, for the brand recognition that may be essential to a restaurant business’ growth and expansion. Trademarks can apply to the name and logo of a business. However, trademark protections are not isolated to the name and logo of a business. These protections can also be valuable when applied to specialty drinks and dishes that might be served at a restaurant (consider the “Big Mac,” for example). An experienced bar and restaurant attorney can assist with establishment and enforcement of trademarks and help to establish and protect a restaurant brand.
Employment Agreements
Restaurant owners typically don’t consider employment agreements when establishing a restaurant business or even at the stage where the business begins hiring employees. However, just as trademarks can be used to protect a name or logo, an employment agreement can be used to protect the trade secrets of a restaurant business. Many restaurant businesses possess trade secrets, such as special recipes or particular business operations or marketing methods. Putting the appropriate protection mechanisms in place to secure these business secrets is just as important as the other intellectual property protections used by a restaurant business. Trade secrets are can be secured through properly drafted employment agreements that contain non-disclosure, confidentiality or non-compete agreements. An experienced bar and restaurant attorney can help protect the trade secrets of a restaurant business, by drafting enforceable non-disclosure, confidentiality or non-compete agreements for restaurant employees.