New York Restaurant Lawyers Blog

The federal government's National Transportation Safety Board ("NTSB") issued a recommendation last week to lower the blood alcohol limit for driving from .08 to .05. If and when this change comes to New York, it will be a game changing threat to the restaurant, bar, and wine/liquor store industry.

For a recent news article discussing the impact of the proposal on the restaurant industry, click here.

Lowering the BAC levels for drunk driving will cause one of three things to happen: (a) alcohol sales will decline because customers will drink less, (b) table turns will slow down because customers will stay longer so that the alcohol they drank will metabolize, (c) attempts to compensate for the changes will eat into profits, i.e. lowering the alcohol content of drinks, or increasing the amount of food portions served to moderate the alcohol.

Now, it will be up to New York to decide whether and when to adopt this change, and there will be no shortage of political lobbying on both sides of the argument.

Regardless of where you stand on this issue, it has the potential to severely impact the revenue and profits of the hospitality industry in New York.

So, my suggestion is that you stay in touch with your political and industry contacts and keep an open eye and ear for any developments on this subject.

For more information on this new issue, or any other issue affecting the purchase and sale of a restaurant, bar, or wine/liquor store, please call or email me.

It is widely expected that the New York City Council will pass mandatory sick leave legislation at its May 8 meeting. The law will force all New York City employers to provide their employees with unpaid sick leave and will require many to provide paid sick leave.

These new requirements will affect every business in New York City, as well as the professionals and consultants who service them.

Here is a summary of the provisions of the law. For the full text of the bill, click here. If you would like to discuss how this law will affect your business or that of your clients, please feel free to call or email me.

Which Employers Must Provide Paid and Unpaid Leave

As of April 1, 2014, all employers must provide sick leave. Businesses with 20 or fewer employees must provide unpaid leave, and those with 20 or more must provide paid leave. As of October 15, 2015, the cutoff number drops to 15 employees.

Accrual and Amount of Leave Time

Leave time starts to accrue when the employee begins work, but cannot be used until the employee is in the job for at least 120 days.

An employee earns leave time at the rate of 1 hour for every 30 hours worked, with a maximum of 40 hours per year.

At the end of the year, the employee can either be paid for his or her unused time or carry over the time until the next year keeping in mind the 40 hour maximum limit.

Paid leave is calculated using the employee's base rate of pay (not including tips or tip credits) at the time the leave is taken.

Use of Leave Time

Available leave can used by the employee to care for themselves or a close family member. If the need for leave time is foreseeable, then the employer can require up to seven days advance notice. Otherwise, the employee must provide as much advance notice as is practicable under the circumstances.

Employers cannot condition the use of leave time on either finding a replacement for the employee's missed time or on the employee making up the lost time or work at a later date.

Enforcement and Penalties

Violations of the law will be enforced by the Department of Consumer Affairs. Employees cannot sue employers for violations directly. Violations can result in payments to affected employees ranging from $250.00 to $2,500.00, depending on the nature of the case, and in addition the Department of Consumer Affairs can impose penalties (paid to them, of course) of $500.00 to $1,000.00 per violation.

These new rules are going to be complicated, difficult, and burdensome for employers in general and restaurant and bar owners in particular. Employee handbooks and policies are going to have to be reworked, training and retraining will have to be done, and back office administration must be updated.

If there is something I can do to help you or one of your clients understand and deal with this new reality, please don't hesitate to ask.

Restaurants and bars in NYC are required to post an incredible number of signs and permits in their establishments for their customers, employees, and inspectors.

Keeping track of them all takes a huge amount of time and effort, and can be awfully confusing under the best of circumstances.

To solve that problem, and help owners get into and stay in compliance will of this regulation, the New York City Hospitality Alliance has created a checklist of all of the required signs.

The checklist should help save owners and operators valuable time which can be better used to manage and grow their businesses.

To download the checklist, please click here.

If you or someone you know has any questions about this checklist, or any other restaurant, bar, or liquor license issue, please call or email me.

p.s. Looking for financing for an existing restaurant, bar, or other hospitality business? I've got connections to specialized private lenders. Please call or email me to discuss what you need, and how I can help.

An article in today's Wall Street Journal by Sophia Hollander discusses a problem facing mid-priced Manhattan pizza restaurants: the rise of the $1 slice. According to the article, the $1 slice is putting substantial pressure on the mid-market pizza places in Manhattan.

The $1 slice business model requires a very high volume of customers, which means that almost all of the $1 slice stores are in Manhattan, leaving the other boroughs largely unaffected.

Pizza shops are coping and adapting to this development in different ways: expanding menus, cutting costs, adding locations, and focusing harder on making a better mid-price. It is trial and error, and operators will either adapt and survive or they will fail and close.

To me, this development is an interesting microcosm of the relentless competition facing all New York bar and restaurant owners every day. The level of detail which separates winners from losers is amazingly fine. There is no 'legal' solution to this problem. And, for once, there is nothing the government regulators are doing to make it better, different, or worse. Either you make a slice customers want to buy or you don't. It just doesn't get any simpler.

If you have questions about this article, or would like to discuss a restaurant related legal issue or concern, please call or email me.

p.s. The article quotes one of my clients, Frank Pinello, several times. Frank owns Best Pizza in Williamsburg. Frank is a great guy, and if you are ever near his restaurant you have to try a slice.

Running a restaurant or bar in the City is extremely expensive, and if you do not pay attention to two recent developments it may cost you even more money.

Water Is Going Up

New York City Restaurants and Bars are facing a 5.6% increase in their water bills as of July 1, according to a proposal submitted by the Bloomberg administration last Friday.

There is really not much owners and operators can do to stop the rate change from taking effect, but you should account for this new expense so that it does not come as a complete surprise.

Also, now would be a good time to take a hard look at installing or upgrading a water management or conservation system in your establishment to try and reduce your overall water usage.

Watch Your Landlord: Sneaky Tax Bill Coming?

The New York Post reported last week that some New York City landlords have been fined for failing to file required income and expense reports with the City. Since almost every restaurant and bar lease contains language requiring the tenant to pay their share of real estate taxes, I think some of the landlords are just going to try and pass along these fines to the operators under the guise of a tax bill increase/adjustment.

I strongly suggest carefully reviewing any tax increase notices that you receive from the building's owner to verify that the fines are not being 'passed through' improperly.

If you have questions about these items, or any other legal issue regarding the purchase, sale, or operation of a restaurant or bar, please feel free to call or email me.

New York City small business owners are going to be required to provide paid sick leave and/or unpaid sick leave with mandatory job protection, starting April 1, 2014, according to a deal reached in the New York City Council late last week.

Here are the key provisions of the bill, according to the City Council press release, a Wall Street Journal article, a New York Times piece, and a story in the New York Post:

1. As of April 1, 2014, city employers with 20 or more employees must provide up to 5 paid sick days per year. Employers with less than 20 employees must provide up to 5 unpaid sick days per year, with job protection.

2. As of October 1, 2015, the employee headcount trigger drops to 15 employees.

3. Full time and part time employees are covered, seasonal employees are not.

4. Eligible employees must be on the job for at least 4 months.

5. Enforcement is done through Consumer Affairs (original proposal gave enforcement
to the lovely folks at the Health Department).

6. Fines range from $500-$2,500.00.

7. Employees cannot sue employers directly for non-compliance.

This new requirement may have some 'interesting' implications for restaurant and bar owners, such as:

1. How are the paid or unpaid days off going to be accounted for in terms of tip credit, tip pool, and spread shift purposes?

2. What employee management policy changes need to be made and documented in order to handle the new rules and continue to run an establishment properly?

3. What new record keeping and documentation is going to be needed to deal with the inevitable citations and investigations from the Department of Consumer Affairs?

If you have questions or need more information on this issue or any other restaurant, bar, or liquor license issue, please call or email me.

Buying an existing restaurant has many advantages over building a new establishment. But, there are also several pitfalls as well. To avoid these traps, which can cost a new owner substantial amounts of time and money, consider these questions to make sure the deal is a good one before it is too late:

1. Learn why the restaurant is for sale. Ask and investigate until you get a real answer. Even if the owner was in personal debt and had to sell even though the restaurant is profitable, you should check to be sure that there are no new reasons that the restaurant will fail, such as a change in the neighborhood, a lawsuit, new competition, an increase in taxes, nearby new construction, etc.

2. Know what you are buying. You should have all of the restaurant's financial records, marketing materials, inspection reports, and menus from the current owner. Also, gather and learn the current customer and neighborhood demographics, as well as the pricing, square footage, parking availability, potential for expansion, utilities set-up, licenses, contracts and equipment for the establishment.

3. Know Your Lease: Before you sign the purchase contracts, you must know for a fact that the landlord will accept you as a new tenant, and that you have enough time on the lease to make the restaurant successful. If these two items are not handled properly, the restaurant will almost certainly fail before you open.

4. Limit Upfront Cash Payout: The less cash you have to lay out to get in to the restaurant, the better chance you have to succeed in the long run. Seller financing, delayed or structured payments of the purchase price, phased remodeling, and proper pre-purchase planning can all help you preserve case and increase cash flow during the critical early years of a restaurant.

5. Know The Building and Equipment: A small investment in a good, professional restaurant inspector can avoid a disaster. There are numerous critical building and equipment defects that you just cannot see because you don't know where or how to look for them. And you cannot fix or deal with what you don't know. If you can see the problem, you can negotiate a change in the financial terms to deal with it. If you don't, the costs of fixing them could very well cripple or bankrupt your establishment.

If you or someone you know would like to discuss a purchase of an existing restaurant in New York, please feel free to email or call me.

Well, it turns out state Supreme Court Justice Milton A. Tingling issued a decision late Monday afternoon which invalidated Mayor Bloomberg's proposed ban on large size sugary Drinks, which was set to take effect tomorrow, March 12, 2013.

To see the text of the decision, click here.

This decision voids the entire rule. As of now, the rule is not valid and cannot be enforced.

Of course, New York City has already said it will appeal, which means the reversal may be itself reversed in the future.

So,what is a responsible owner or operator to do? The only thing you can really do now is manage your business and wait for the next ruling.

If you have questions about the decision and how it may affect you or your customers or clients, please feel free to call or email me.

Thanks.

A manager at a New York hotel and one of my professional contacts recently sent me an email about handling a situation involving an overpayment to an employee. All identifying details have been omitted for privacy and ethical reasons. As you can see, the problem has "labor department complaint and audit"' written all over it.

My approach is always to try and do what protects my client, andt to do it in the most practical, business friendly, and simplest way possible.

Here is the question, and my answer. Please let me know what you think.

Question:

An employee has been over paid. He knew about it and did not say anything to us until we figured it out. Do we deduct money from his future pay checks or just simply ask for him to pay us in one lump sum?

Answer:

The new amendments to Section 193 of the Labor Law allow deductions for wage overpayments if they were due to an employer's mathematical or clerical error. But, the regulations implementing the deductions are not yet complete. Based on the statutory language, though, you can easily see that the regulations are going to be complex and burdensome to administer.

To be safe, and to make it as easy as possible on the employer, my suggestion would be that the employer pay the employee without deduction, and then have him write back a check to the employer or pay cash (with receipt) for the overpayment. This can be done in one lump sum or in payments, depending on the amount. I'd also have the employee sign an agreement acknowledging the amount of the overpayment, and the terms of the repayment (if it's more than one check).

If the employer finds itself in this situation often enough, it should consider having an experienced hospitality lawyer review or create its repayment agreements to make sure it complies with all existing rules and regulations.

If you have questions about employee issues involving a New York restaurant, bar, or hotel, please feel free to call or email me.

Managing staff members and their schedules in a restaurant or bar is complicated under the best of circumstances. Has it become harder as a result of ObamaCare/Affordable Care Act?

An editorial in this weekend's Wall Street Journal says that some restaurants are being forced to make adjustments to their employee rosters and schedules as a result of the new law's requirements. Keeping the headcount under 50, and making sure the hours for some employees stay at 29 or less, have become benchmarks for some restaurant companies.

Here is a link to an article discussing how employers can prepare to deal with the new rules in 2013.

If you have questions or need help understand how the new health care law will affect your establishment, please feel free to call or email me.

Thanks.

Maker's Mark Whiskey announced on Sunday that they have cancelled their plans to reduce the amount of alcohol in their whiskey from 45 proof to 42 proof. The reason: customer outrage and backlash, primarily on Twitter and Facebook.

The decision to try and reduce the alcohol content in the whiskey was prompted by a shortage of available product and the company's desire to not raise prices and price themselves out of the market and to not lose 'shelf space' at the bars and restaurants where Maker's Mark is sold. Here is a detailed discussion of the business issues faced by the company when it decided to lower the alcohol volume in the whiskey.

So, here are three (3) things I believe restaurant and bar owners can learn from the Maker's Mark decision and the reaction from its customers?

1. It's the product, stupid! It's something of a mantra in the restaurant and bar business that customers patronize your establishment because of the 'experience.' That's true, to a point. But I think that the Maker's Mark episode demonstrates that, first and foremost, customers eat and drink what they like. Everything else is secondary. It might be a close second, but it's clearly second. Maker's Mark didn't propose changing the flavor, the bottle, the way it was marketed and presented, or any other aspect of the customer 'experience.' They wanted to change the product. And that and that alone, was what caused the backlash.

Continue reading "It's the Product, Stupid! Why Maker's Mark Whiskey Got It 100% Wrong and What You Can Learn From Their Mistake" »

It's February, and that means the NY State Legislature is back at work. Whether you think that's a good thing or a bad thing, I don't know. But, the fact remains that there are a number of pending pieces of legislation which affect restaurant and bar owners and operators.

Here they are, with links to the text of the proposals.

1. Changing the rules about 'bouncers.'

2. Permit co-op buying of alcohol.

3. Expanded Sunday sale of alcohol from 8am till noon.

4. Eliminate 'fruit fly' violations from the ABC law.

5. Remove the State Liquor Authority's power over health code violations.

If you have questions or need more information about any of these bills, or about buying or selling a bar or restaurant in New York, please call or email me.

So, your client tells you he is buying a restaurant (or bar) somewhere in New York. He asks you to assist with the corporate formation, the lease agreement, the asset purchase agreement, and some other things. You hear all about the location, the food, the great ideas he has for remodeling the place and making it the next big thing.

You can almost smell the food, and hear the murmuring crowd on opening night.

Somewhere in this very happy and excited conversation, this little nugget of information pops up: your client tells you that one of the reasons she is getting such a great deal is that the owner is going to 'sell' her his liquor license. The client asks what you think about that.

Here's what you think: It's 100% illegal, and cannot be done in NY. Period. End of discussion.

I get asked this question at least once a week, and the answer is the same: the State Liquor Authority does not allow the sale, rental, or other 'use' of someone else's liquor license.

Now, if you or your client would like the full explanation of why this is the case, please call or email me, and I'll be happy to go over it in mind numbing detail.

Or, if you have other questions or need help with a liquor license question or application, please call or email me.

What happens if a Subway "Footlong" sandwich is less than exactly 12 inches long? Answer: Subway gets hit with multiple lawsuits, including a class action filing.

Click here, and click here, for an article and blog post about the suits.

I was curious about the legal theory behind the case. It's the usual list of consumer tort claims. Nothing especially creative or innovative, in my humble opinion.

The interesting question that this lawsuit raises is: how can restaurant and bar owner and operators prevent this from happening to them, and how can it be done in an efficient and cost effective manner?

I've got some ideas, and I'd be happy to share them with owners or operators who are interested in this subject.

If you know someone who might want to talk about this, please have them call or email me.

Thanks.

I saw this video online about a Houston waiter who refused to serve customers he found discriminatory. Some customers were seated next to a family of a young boy with Down's syndrome and got up to move, later saying "Special needs children need to be special somewhere else."

The waiter was offended and said he would not serve them, so they left. He and the restaurant have received hundreds of messages expressing their support and gratitude.

I'd love to get your reaction to what the waiter did? How do you train service staff to deal with problems like this?

If you would like to discuss this issue, or need help with a legal issue affecting a bar or restaurant in New York, please call or email me.