The Four Relationships that Can Make or Break Your Restaurant Business

restaurant kitchenThe restaurant business, like almost all businesses, is about relationships. And, of course, the most important one you will have is with your customers. If you don’t preserve that relationship, you won’t have a business for very long. But there are other relationships that must be protected just as jealously, because if any of them sour, they can bring down your business just as quickly as if customers stop coming in the door.

In our experience, these are those four relationships:

1.      With Your Partners (and Investors).

If you go into business with anyone else, that person has control over the success or failure of your business – regardless of whether they have any involvement in its day-to-day operations. If your restaurant is struggling, will your partners and investors have the patience to allow the plan to work, or will they want to bail out at the first sign of trouble? And, if they do bail out, can they pull their money out and leave you with all the responsibilities and liabilities? Alternatively, if the business is doing well, will they insist that the profits be paid out in distributions to the partners, or will you have the ability to put that money back into the business to enable it to grow and thrive? And, regardless of whether you are succeeding or failing, how will decisions be made about how the restaurant is managed? What if there is a deadlock – can a decision be made at all?

These are all questions that must be answered well before you open your doors – and well before the first sign of discord. That is why we advocate that preparing a written operating agreement should be among the very first things you do when you embark on your restaurant business. If you are in agreement on all these things – great, finalizing the agreement should be easy. But if you’re not, it’s better to find out sooner rather than later.

2.      With Your Landlord.

Perhaps no single person (or entity) has more control over the future of your restaurant business than your landlord. A tough-nosed landlord can stick you in default over the slightest deviation from the strict terms of your lease, whereas a more lenient and accommodating landlord can work with you through rough patches and allow your restaurant the time it needs to get up and running and the room it needs to prosper. So while you need to understand the terms of your lease, you also need to understand who your landlord is – and how they operate – before you sign your lease.

But even a lease with a well-meaning landlord needs to be reviewed thoroughly and completely – every word – because landlords can change, and what today is a small local landlord with a reputation for working with their tenants can tomorrow be an out-of-state investment trust that does not care that you’ve had a few tough months and it always picks up in the Spring. In those cases, your only protection will be your lease. Indeed, the lease you enter into with your landlord is probably the document that will have the greatest impact on the success of your restaurant. For all too many restaurants, whether they succeed or fail is predetermined at the moment the lease is signed. Make sure you not only sign a lease with a good landlord, but that that lease itself is top notch too.

3.      With Your Employees.

As with any service business, a restaurant’s employees are its lifeblood. They are its face to the world and, without them, the food doesn’t get prepped, cooked, plated, or served. Without good employees, even a perfectly formulated restaurant concept will assuredly fail. But taking care of your employees means more than just showing them gratitude, paying them well, and giving them appropriate time off. It also means complying with the letter of the law when it comes to wage and hour and other employment laws.

Federal and state lawmakers, for good reason, have made it a priority to ensure that unscrupulous employers do not take advantage of low wage workers, and the restaurant industry’s heavy reliance on tipped employees makes them a target for government regulation as well as lawsuits from disgruntled employees who may not have been properly paid. To protect themselves, restaurants must keep impeccable employment records and strictly adhere to all employment and wage laws. Take a lesson from those who haven’t, and have paid dearly.

4.      With the Government.

As businesses that prepare food for public consumption, and often serve alcoholic beverages to go along with that food, restaurants are among the most highly regulated small businesses in the country. From food safety permits to liquor licenses, there is almost nothing that restaurants do that does not require government approval or subject it to government oversight. The IRS is also notorious for making restaurants among its favorite audit targets. As with the employment issues highlighted above (which is another area of government oversight and regulation) strong compliance programs are essential. No one is ever going to be perfect, but if you are found to have violated a law, it is better to be able to show it was in spite of your best efforts at compliance, not because of a lack of such efforts.

 

Planning a Brewery? Think Zoning Zoning Zoning

Have you ever wondered why Annapolis, our state’s fair capital city, does not have any craft breweries?  After all, Frederick and Baltimore are home to multiple world class craft beer producers.  Well, the answer is both simple and amazing:  the zoning codes of the City of Annapolis and Anne Arundel County do not include brewing beer as a permitted use.  That means, essentially, there is no building or parcel of land in the entire city or county for which brewing is permitted.

Although, at least as it relates to the County, that may change this year.

This change, if it came, would be thanks in large parts to the efforts of two Maryland brewers — one aspiring and one established — the latter of which who was foreclosed from his first choice of Anne Arundel County and therefore opened his highly successful Jailbreak Brewing (outstanding, by the way) in the more welcoming Howard County instead.  Their efforts, and a few receptive local officials, has prompted a proposal to change to the county’s zoning laws to open the door to brewing in the county.  As a recent news article indicates, the door is not opening all that wide just yet, but it is a start.

Of course, this serves as an important reminder of how although state laws regarding beer making — be it by production breweries, microbreweries or farm breweries — get a lot of the attention, it is often the minutiae of local zoning ordinances and county alcoholic beverage laws that delineate the ability of people to make, sample, and sell their beer.

 

 

 

Montgomery County Offering New Services to Aspiring Restaurateurs and Food Entrepreneurs

If you have plans to open a restaurant or dream of starting a food-related business, Montgomery County has two new resources for you.

First, the Department of Permitting Services has launched a program called “Recipes for Success” that is aimed at assisting aspiring restaurateurs to navigate the County’s permitting system.  To open a restaurant in Montgomery County, permits or inspections may be required from multiple county agencies, an this program is aimed at greater coordination and consultation between the restaurant owner and all the agencies at one time.  The County has also published a packet of materials and information to help guide the permitting process, touting the promise that “Montgomery County Welcomes Restaurant Businesses.”  For those that have found the County inhospitable to bars and restaurants in the past, this should be welcome news and, at a minimum, a step in the right direction.  (Perhaps even better would be if the County could do what New York State is trying on an experimental basis — to allow restaurant owners to submit a single “universal application” for all required permits.)

The other bit of welcome news is that the County is supporting a food industry incubator project similar to Union Kitchen and the forthcoming Mess Hall in Washington, DC.  The incubator project, which will be based at the Universities at Shady Grove, is intended to provide workspace, equipment, and training to culinary startups who may lack the necessary funding or experience.  From where we sit, anything that helps entrepreneurs — particularly food and drink entrepreneurs — get started is a great move by the County.