Restaurant, Bar, Tavern, Nightclub Law

A case filed in federal court this week brings up some important issues for bar and restaurant owners to consider. Are you legally permitted to play music at your establishment? If you do so without prior approval or licensure (from the Artists themselves), you may face large penalties.  Even if you legally purchase music from iTunes, you are still prohibited from playing your downloaded music without obtaining the appropriate music distribution license; this is because your use of the music is for a “commercial purpose” rather than personal enjoyment. This is also true if you have a cover band play at your establishment. 

“Commercial purpose” or “commercial use” is defined as any use of a copyrighted song that somehow helps a person earn money. It is assumed that restaurant and bar owners play music at their places of business to draw in crowds, and thus, to earn money. 

Business owners form legal entities such as corporations and limited liability companies in order to protect themselves from personal liability. Before you choose which type of business entity is best for you and your company, consider the different types of protections offered by each of the business forms.

Corporations

New York does not allow corporate shareholders to be completely shielded from liability for their corporate debts. New York is the only state in the country that holds a corporation’s top ten shareholders personally liable for the unpaid wages of the corporation. Section 630(a) of the New York Business Corporation Law states, in relevant part:

“The ten largest shareholders …shall jointly and severally be personally liable for all debts, wages, or salaries due and owing to any of its laborers, servants or employees other than contractors, for services performed by them for such corporation.”

81% of New York City adults reported seeing the letter grades in restaurant windows. 88% of those who see the letter grades consider these grades when making their dining decisions.  As discussed in an earlier blog entry, sites like www.Yelp.com are planning to add restaurant grades to its restaurant review sections, and the iPhone App “ABCEats” provides restaurant grades and inspection reports for all New York City restaurants. Thus, it is easier than ever for a patron to find out about a restaurant’s letter grade, making the importance of that “A” grade even greater.

What can you do to best prepare your restaurant for its Department of Health inspection?

In association with NYC Business Solutions, the DiPasquale Law Group will be providing a free seminar for restaurant owners on issues relating to the New York City Health Code on July 15, 2013 between 5:30 p.m. and 7:30 p.m.  The seminar will focus on (1) preparing for your inspection, (2) monitoring the inspection process, and (3) preparing for and defending yourself before OATH.  You can register for the course by either: (a) emailing an RSVP to fchavez@nycbusiness-solutions.com with your Full Name, Email, Phone and Business Information, or (b) by registering directly through NYC Business Solutions at:  http://www.nyc.gov/html/sbs/nycbiz/html/summary/courses.shtml

Outdoor seating in New York City has the ability to draw large crowds when the weather gets warm, so it is no surprise that as the summer approaches, more clients contact our offices inquiring about how to get sidewalk café permits for their restaurants. Before applying for your sidewalk café permit, there are several things you should consider.

The following is courtesy of the New York State Division of Taxation and Finance.

If you're starting a new business or purchasing an existing one, there's a publication you might want to add to your reading list, the "Tax Guide for New Businesses" (Publication 20) from the New York State Department of Taxation and Finance.

This practical guide, freshly updated from cover to cover, provides basic information about New York State's tax laws and regulations for business of all sizes.

It highlights tax responsibilities related to sole proprietorships, partnerships, and corporations. It spells out filing requirements for employers and provides guidance on sales tax, the Metropolitan Commuter Transportation Mobility Tax, and other taxes such as the alcoholic beverage tax. It also provides information on New York City licenses, permits, and dozens of other tax-related topics.

Some former employees of Juventino Restaurant in Park Slope have taken to the internet to lambaste management for sexual harassment they claim occurred while they were employed. Through their new website "Juventino Disclosed" Staffers are hoping to "bring awareness to sexual harassment in the restaurant industry and maybe deter some prospective customers in the process." Some readers have left comments on the website promising not to frequent the establishment in support of the ex-employees. Undeniably, social media is a powerful tool that can dramatically impact one’s business in a good way, or in this case, a bad way. But is it ethical or for that matter legal? Can restaurant owners protect themselves from this sort of backlash? Can they file a defamation suit against their employees the way that the owners of Bar Veloce have? Unfortunately, each situation must be handled on a case by case basis, so before you do anything to defend or retaliate, seek legal advice.

Restaurant operators frequently come to me with their original operating agreement asking me to amend it to include one or more new investors that they have brought on-board (i.e. actually obtained money from and promised a membership interest to). I immediately cringe. Bringing in an investor is not always as simple as owners would like to believe. You are offering a security interest in your business which may need to be registered with the Securities and Exchange Commission. Keep in mind that all securities transactions, even your small transaction, are subject to the antifraud provisions of the federal securities laws. In other words both you and your company can be held responsible for any false or misleading statements, whether oral or written. The government enforces federal securities laws through criminal, civil and administrative proceedings and jilted investors can enforce these protections through private lawsuits and obtain a full refund of their investment plus interest.

CHECKLIST FOR NEW RESTAURANT FORMATION

CONCEPT

• Create your own concept
• Consider buying a franchise
• Consider purchasing an existing restaurant
• Draft a business plan

I just came across this list.  “The Top 15 Reasons why Restaurants Fail:

1. Lack of experience, 2. Lack of capital, 3. Poor locations, 4. Inventory, 5. Equipment, 6. Poor credit practices, 7. Personal expenses, 8. Premature expansion, 9. Bad attitude, 10. Too many expenses, 11. Poor collections, 12. Low sales, 13. Inventory mismanagement, 14. Competition, and 15. Crime

I’m not sure that I agree with the list entirely.  Let me start by saying that I am not a restaurant owner.  I am a restaurant attorney.  So, I may be wrong ( and often am)  but many of my clients who have sold their business express different reasons as to why their business failed.  This is what I’ve gathered to be their top reasons why restaurants fail: 

A Dram Shop Claim in New York City can be devastating to a tavern, bar or restaurant.

New York City restaurant attorneys understand that busy Friday and Saturday nights -- or busy holiday weekends like Memorial Day -- are often what push a small business over the line and into profitability. Responsible waitresses or bartenders do not serve intoxicated patrons. But neither should you be charged with babysitting grown adults.