Regulatory Compliance

Beware:  If you own more than one restaurant which operates under the same name, you may have created an illegal and unintended franchise.

This sounds crazy, but it is actually very common and the consequences of creating an unintended franchise are substantial, serious, and include the possibility of both personal and criminal liability.  Many well-intentioned operators have tried to avoid the franchise tag by referring to their business relationships and partnerships as a “license,” or a “capital investment,” but the label placed on a relationship has little bearing on whether or not the relationship constitutes a franchise.

Would the same operators have pursued a different path if they had known that their mistake could result in the rescission of every one of their business transactions and the filing of criminal charges against them? It is a felony to sell a franchise without complying with both State and Federal law, and the respective agencies have the power to shut down your restaurants, freeze your bank accounts, order restitution, prevent an operator from opening new locations, impose huge penalties, award attorney’ fees to all injured parties, and rescind every one of the offender’s agreements under claim of fraud.  And, to top it off, claiming that they relied on the advice of their attorney will not help since franchise statutes impose strict liability, meaning that an owner’s intent or knowledge of the law (or lack thereof) is irrelevant.

I was charged a 20% ‘service fee’ for a private dining event in New York City. Is this type of fee permissible under New York law? 

Beginning in July, 2013, the New York Attorney General’s Office began to examine the operating structure of the luxury restaurant Per Se, located on Columbus Avenue, New York, New York. According to the factual allegations, the restaurant was attaching a significant “service fee” to the final bill for private dining services amounting to 20% of the entire check. On the service agreement, the service fee was not explicitly described, and most patrons believed it to be a fee included to ensure proper gratuity was paid to the wait staff scheduled to work the event. In reality, however, the 20% fee – which was presumably sizable considering the $310.00-per-plate prix fixe menu – was used for daily operational costs of the restaurant, and was in no way paid to the wait staff for any private event scheduled by the restaurant.

I have been getting many calls from clients asking whether their restaurant (or restaurant group) needs to provide (and pay for) health insurance for their employees.  Unfortunately, the answer is not a simple one.

Beginning this year, companies with 50 full-time equivalent employees (“FTE”) must provide health insurance to at-least 70% of their employees.  In 2016, at-least 95% of all employees must be covered starting in 2016.  If your initial reaction was “I don’t have 50 full-time employees” don’t get too comfortable just yet.  Lets look at the facts:

As a restaurant owner, what are the limits regarding requesting applicants’ personal information? 

As a restaurant business owner, employee turnaround can be one of the most frustrating aspects of running the enterprise. Moreover, the ever-changing legislation pertaining to the restaurant and alcohol service industries can be overwhelming for even the most experienced owner or manager. Fortunately, a restaurant law attorney can help you overcome the legal quagmire of the food service industry, including the finer nuances of employment and anti-discrimination laws.

In June, 2015, the New York City Council followed the lead of nearly 100 other jurisdictions by banning the inclusion of criminal history consideration in the employment process. Under the Read more . . .

My bar/restaurant is thinking of changing its menu. Are there any special compliance measures we should take? 

In a recent case involving a Lower East Side American pub restaurant, owners were shocked to learn that changes in menu offerings and bar hours could result in a revocation of their liquor license, as well as bring about hefty fines and penalties.

The restaurant, known as the Sixth Ward, was restyled in 2008 as an American/Irish pub-style bistro, offering regular bar fare and a full bar menu.
Read more . . .

I am considering opening a restaurant in Manhattan. What are some compliance issues I should consider?

Owning a successful restaurant in New York City is tough, especially given the stiff competition and crabby critics. However, one area that need not be a headache is city and state compliance, The administrative regulations that apply to bars and restaurants are lengthy and detailed. If you are considering opening a restaurant in New York City, a restaurant and bar lawyer can help you better understand some of the most common pitfalls in regulatory compliance, including: