OK team, huddle 'round and take a knee. We realize we cover a lot of topics pertaining to burgers, beer and tacos here at the City of Ate. And that's all fun and games until someone gets an eye poked out. And by that we mean jabbed in the eye socket with a lawsuit.
Suppose an errant knife or deep-fried jalapeño popper flies across a dining room and assaults a diner. Then after the pain sizzles, fingers get to pointing, the entire thing is caught on 27 different iPhones, and the videos are being uploaded to the Internet faster than the victim can call their attorney, in which case the owner of said restaurant better have their hind-side covered. Not so much fun anymore, huh?
Or sometimes diners steal things, like four place settings. Operating on tight margins, restaurant owners and chefs are none too happy about those kinds of shenanigans. So, what should a restaurant owners do to protect their asses in each situation?
Matthew Sanderson has practiced law in Dallas for the past 10 years and handles many issues concerning the restaurant industry. He was kind enough to go through a few questions for us.
(Disclaimer: We are not endorsing any legal services at all, from anyone, ever. This is just an interesting topic for anyone in the restaurant biz.)
If your little brother came to you and told you he wanted to open a restaurant, what advice would you give him from a legal perspective (knowing full well he wants to sponge off you)? The absolute primary thing is to do your homework in terms of location and operations. From a legal perspective, however, the key thing is make sure you're adequately insured and have some kind of corporate entity, like an LLC, that limits the owner's liability. Otherwise, what a lot of owners do is open up in their own name and that makes them personally liable.
So, if someone chokes on a bone they could go after the owner's personal assets? Absolutely. A lot of restaurant owners take that risk though because the margins in the restaurant business are very tight and every dollar really does count. But, from a legal perspective, I've helped people out of legal trouble that cost a lot more than it would have on the front-end.
What can restaurants do to protect trade secrets and recipes? Restaurant owners need to know they cannot protect their recipes through any kind of a patent. So, if they have a particular way they run their restaurant or a particular recipes that customers continue to come back for, the trick to is make sure they have adequately protected it for the secret that it is -- which means, you just can't tell the world. If a recipe is mixed on the premise, make sure as few people know about it as possible. If it's mixed off premises, have it done by two different groups, then combine at their place. And make sure to have a nondisclosure agreement for anyone outside the company.
What about restaurant employees? Or a pissed off ex-line cook? Owners need to make sure all employees sign some kind of nondisclosure or noncompete that prevents secrets from walking out the door.
What can restaurant owners do when people try to steal things from their restaurant -- like silverware, napkin rings, place settings, etc? Frankly, from a legal perspective there's not much they can do. It's more of an operations question. They really just have to keep a good surveillance system if it becomes a big problem.
From a legal perspective, they need to know what to do with those people if they do catch them. The dollar value for those kinds of thefts is surprisingly low. People are sometimes amazed when they learn that. Owners can always call the cops and then be known for the fact that they criminally prosecute anybody that steals from their restaurant.
(Note: According to Texas Penal Code Title 7, Chapter 3, theft is a class C misdemeanor if the value is less than $50. Class B misdemeanor if the value is more than $50 but less than $500, Class A for more than $500 and a state jail felony if the value is more than $1,500 but less than $20,000, or the property value is fewer than 10 head of sheep, swine or goats. Think we need to update that?)
Basically make an example out of someone? That's fun... Right. Then if they get written up in the Observer the whole world knows.
Exactly. The whole world. ... What are restaurant owners liable for if a fight breaks out? Obviously, if they don't have an entity, LLC or corporation set up, then they could be personally liable for whatever goes down. But, one of the first things owners need to do is have a plan -- like to stand back or break it up. Make sure all the staff and managers know what to do in that situation. Owners also need to make sure they have the insurance for something like that happening. So, have a plan, have insurance and a corporate entity to protect themselves as well.
What are some of the biggest mistakes restaurant owners make? What we mostly see is, again because margins are so tight, a lot of restaurant owners think the liability is so little that when they're buying a restaurant that they don't need to hire a lawyer ... or an account or a broker. I hate to sound like I'm pitching myself, but as long as the restaurant owner has adequate advisers and spends the money where they need and, again, does their homework, it can really save them a lot of heartache later when they realize that something that really wouldn't have cost that much on the front end, can cost a lot more later.
I keep thinking about those tight margins. Is there any help out there for restaurant owners that you know of? There are two sources that I can recommend, again I'll admit pitching myself here, but TexasRestaurantLaw.com -- that's why we do that, so that anybody can go on that website and get a lot of free advice and information. Hopefully, it gets some people pretty close to where they need to be in a legal terms.
I've also heard great things about the Texas Restaurant Association. They have in-house attorneys, and I've heard from people who have used them. They take the occasional call from members and give broad-based advice on things.