This event explored several strategic considerations unique to the restaurant industry. Using a mix of legal insights and case study examples, Kegler Brown attorneys looked at Employment, Real Estate, and Intellectual Property issues that can have significant impacts on owning and managing a growing restaurant:  Brendan Feheley: Common Employment Mistakes Restaurant Owners Make  Jeffrey Stiltner: Restaurant Specific Lease Provisions + Lease Negotiation Strategies  Steve Barsotti: Branding + IP Strategies for Scaling Your Concept

1. z

2. z
Dirty Dishes:
EMPLOYMENT
Issues in the Restaurant Industry
Presented by Brendan Feheley
October 31, 2017

3. z
600,000

4. z
600,000

5. z

6. z
3-4 mil

7. z
You’re a target for
Plaintiff’s lawyers

8. z
Major Employment Issues
in the Restaurant Industry
Tip Pools
Misclassification of Managers
Harassment
Predictive Scheduling

9. z
What’s the big deal
with tip pools?
Who’s allowed
in them?
What options do I
have for how to pay
tips?

10. z
$7.25FLSA minimum wage
requirement
$8.30Ohio minimum wage
as of January 1, 2018
$2.13FLSA tipped minimum
$4.15Ohio tipped minimum
as of January 1, 2018

11. z
I have only two options to comply with minimum
wage for tipped employees, I can either pay the
full minimum wage or I can take the full tip credit
and pay the tipped minimum wage.
1. True
2. False

12. z
May 5, 2011:
Tips are the property of
the employee whether or
not the employer has
taken a tip credit under
section 3(m) of the FLSA

13. z
vs.

14. z

15. z

16. z
It’s OK for me to deduct money from my
tipped employees wages for broken
dishes or customer walk-outs
1. True
2. False

17. z
It’s ok for me to simply pay my managers
and assistant managers a salary (above
$455 a week) + never pay them overtime
1. True
2. False

18. z
Exempt duties are not

19. z
How to avoid misclassification
Have managers handle hiring,
firing + discipline (train them first)
Scheduling
Involve them in marketing + get
their input

20. z
Harassment

21. z
60%

22. z
>30%

23. z

24. z
Don’t allow managers
to be involved in
reporting procedure

25. z
Consider a
fraternization policy
+ actually enforce it

26. z
Create pathways
for discussion

27. z
San
Francisco
Seattle
New York
City

28. z
Good-faith estimate
Expected dates, times + locations
Must span 7-day period

29. z
Brendan Feheley
Kegler Brown Hill + Ritter
bfeheley@keglerbrown.com
keglerbrown.com/brendanfeheley
614-462-5482

30. z
Restaurant-Specific Lease
Provisions + Lease Negotiation
Presented by Jeffrey W. Stiltner
October 31, 2017

31. z
Permitted Use
Exclusive Use
Continuous Operations
Percentage Rent

32. z
PERMITTED
USE
Defines the scope and limits of
Tenant’s permitted activities
and use of the Premises

33. z
Be as broad as possible
Allow the most flexibility for future
uses and changes in use and/or
particular concepts
FOR TENANT:

34. z
Be as specific as possible
Tenants shouldn’t be able to freely
change their concepts or uses
Combination of outright restrictions on
tenant’s use and changes to such use
Requiring landlord’s prior approval in
order to change use
FOR LANDLORD:

35. z
Specific prevails but look for other opportunities in the lease

36. z
Ancillary Uses

37. z
Tenant’s

38. z

39. z
EXCLUSIVE
USE
Representation by the Landlord that the
Tenant’s use shall be the only such use in
the Center or in a certain area

40. z
Be as broad as possible
But protect key concept or key
components of its business
FOR TENANT:

41. z
Don’t grant exclusives
Be as restrictive as possible as it
reduces options to lease other space
in the center
Restrict the “primary” use of
another tenant from competing
with the granted exclusive
FOR LANDLORD:

42. z
Review previously granted exclusives to make sure your use does not violate
those exclusives
Landlord representations and warranties that your use does not violate any
other exclusives in the Center
OR

43. z
Remedies
requirements that Landlord take all actions to terminate
a violation or threatened violation
the ability to seek injunctive relief
the ability to act to enforce the restriction on behalf of
the Landlord if the Landlord fails to do so
the right to collect costs, expenses, and/or damages
incurred as a result of the breach of the exclusive
the right to reduce rent or move all base rent to
percentage rent during period of the violation
the right to terminate the Lease and seek damages

44. z
Most common is
temporary percentage
reduction in Base Rent
with one-time future
option to terminate

45. z

46. z
Limits
+
Exclusions
“primary sale” limitation
exclude current leases
exclude anchor tenants or spaces over a certain size
limitations on “area” of exclusive
not applicable if tenant defaults or ceases operations
rogue tenants

47. z
CONTINUOUS
OPERATIONS
Requires Tenant to be open and
operating continuously throughout the
term of the Lease

48. z
Operate on days and times that are
most profitable for its business
Close the restaurant to reduce
losses/cut expenses for an
underperforming business
FOR TENANT:

49. z
Want tenant to maximize sales
Maximize traffic flow and sales to the
center for benefit of all tenants and
landlord
Promote positive image and value
FOR LANDLORD:
Satisfy co-tenancy

50. z
Best
Practices
adjust hours as needed to fit tenant’s operation
allow for closure on holidays or other times applicable
to tenant’s business
allow for periodic longer closure periods for remodeling
or reformatting
have an exit strategy

51. z

52. z
GOING DARK

53. z

54. z
Kick-out clauses or other termination rights

55. z
PERCENTAGE
RENT
Form of rent which requires Tenant to pay
Landlord additional rent based on a
percentage of Tenant’s gross sales

56. z
Don’t want to pay any percentage rent
Don’t want the breakpoint high enough
that if it achieved that level of sales,
paying some percentage rent would be
acceptable
Receive a lesser base rent
FOR TENANT:

57. z
Landlord shares in the risk and
reward of the business
Landlord should receive higher rents
in form of percentage rent
FOR LANDLORD:

58. z
OF SALES POINT
+

59. z
POINT
be a fixed number agreed to by the parties
as the appropriate level of gross sales based
on negotiation of the parties
can be a “natural breakpoint”

60. z
Base Rent
Applicable Percentage
Natural Breakpoint
$75,000
4%
$1,875,000
Tenant would pay 4% of every dollar in gross sales over $1,875,000

61. z

62. z
MONTHLY QUARTERLY ANNUALLY

63. z
GROSS
SALES
employees meals or employee discounts
off-site sales filled by another store
refunds
food/beverage given without a sale for
complementary or promotional purposes
tips
discounts to customers or through coupons
or other credits from gross sales
sales not in the ordinary course of business

64. z

65. z

66. z
Restaurant Specific
Lease Provisions and Issues

67. z
Liquor License

68. z
Tenant shall have the right to terminate the Lease or not be
required to open its business until the license is obtained
Tenant’s ability to obtain its liquor license is a condition
of the Lease

69. z
Noise, Odors,
Grease, Waste
+ Pest Control

70. z
NOISE ODOR GREASE WASTE
PEST
CONTROL

71. z
Outdoor

72. z
specify in your Lease the specific
terms and obligations related to
an outdoor seating area
Size and include on LOD or site
plan exhibit
What approval rights does
Landlord have over Tenant’s use of
the patio?
What rights, obligations and
liabilities does Tenant have with
respect to the use of the patio?
What is Landlord required to
deliver as part of Landlord’s Work?
Be careful that the patio provision
of the Lease does not alter notice
and cure periods as otherwise set
forth in the Lease

73. z

74. z
Is parking sufficient for Tenant’s
needs?
Can Tenant designate certain
spaces as short term parking or
carry-out?
Does Tenant receive any exclusive
spaces?
Is valet parking provided by
Landlord? If not, permitted by
Tenant?
Does Landlord have designated
Employee Parking Areas?
Tenant’s rights to drive-thru or other
common areas

75. z
BEST
PRACTICES

76. z
spend time on letter of intent

77. z
address these key items in your LOI

78. z
Landlord’s Work
Delivery Date
Rent Commencement Date
BASICS
Premises
Initial Term + Renewal Options
Rent + Additional Rent Tenant Improvement Allowance

79. z
Kick-Out Clauses
Co-Tenancy
Contingencies
ADDITIONAL
Permitted Use
Exclusive Use
Continuous Operations/Go-Dark Black Out Period

80. z
have an exit strategy in your lease
Go Dark
Clause
Kick-Out
Clause
Assignment
+
Subletting
Flexibility
on Change

81. z
Jeffrey W. Stiltner
Kegler Brown Hill + Ritter
jstiltner@keglerbrown.com
keglerbrown.com/stiltner
614-462-5466

82. z
Presented by Steve Barsotti
October 31, 2017
Branding + IP
Strategies
for Scaling Your Concept

83. z
The IP
STRATEGY

84. z
What is Intellectual
Property?

85. z
Company Value
Hard Assets?

86. z
BRAND
Processes People
Recipes Design
Relationships

87. z
Intellectual Property ASSETS

88. z
Protects consumers
from market confusion
Legal protection
for your brand

89. z

90. z
TIPS
Practical

91. z
Put Someone in Charge
1

92. z
Ensure Business + IP
Strategies are Aligned
2

93. z
Raise Employee Awareness
3

94. z
Think About Social Media
4

95. z
Actively Protect Your IP
(excluding Guacamole)
5

96. z
Steve Barsotti
Kegler Brown Hill + Ritter
sbarsotti@keglerbrown.com
keglerbrown.com/barsotti
614-462-5458