I read an article recently in the Wall Street Journal about the rise of pop-up restaurants. Pop-up restaurants are temporary eateries that set up shop for a few days, weeks or months in spaces such as hotel lobbies or other restaurants that close for the night. The concept is definitely interesting, and I'm amazed at how quickly these pop-ups come, go, and change.
But being the lawyer that I am, I could not help but wonder about how these pop-ups work from a legal standpoint, and whether the operators have considered all of the legal issues involved.
So, here is my list of 5 questions every pop-up operator must ask to make sure the operation is legal and the operators are legally protected as much as possible under the circumstances.
1. Whose Liquor License Are You Using? This is a critical issue for pop-up operators. Are you going to get a temporary liquor license and buy your own alcohol, or will you order and sell under the property's license. If so, who is responsible for violations and compliance? These issues must be discussed and agreed to in advance, since a violation or mistake can result in license suspensions.
2. What Happens If Something Breaks or Someone Gets Injured? What insurance is in place for accidents involving customers, vendors, or employees? What insurance is there for damage to the building, equipment, etc? Again, the parties should sort these questions out in advance, and all required insurance should be in place when the doors to the pop-up event open.
3. Who Collects Sales Tax? Collection and payment of sales tax is a huge issue in the restaurant industry. In the case of a pop-up event, the parties should agree in advance regarding who is responsible for the collection and payment of sales tax. If this is not done, and the taxing authorities become involved, the costs and penalties of noncompliance (including legal and accounting fees) could be substantial.
4. Who Employs the Staff? The first issue here is: is the pop-up operator bringing in their own staff, some of their own staff, or none? Either way, the staff have to be paid, tips accounted for, and insurance provided for unemployment and workers compensation. The property owner and pop-up operator should discuss these issues in advance and decide who is responsible for paying and insuring which staff. If this not done, the Department of Labor (at least in New York) can be brutal in imposing and collecting fines and penalties for any mistakes.
5. Who Pays For A Violation? Generally, a government inspector (health, code enforcement, building department, police, fire department, etc), will write summonses to the tenant/operator of the property. Most restaurant leases require the tenant/operator to be fully responsible for paying all summonses or violations issued because of the conduct or condition of the restaurant or its employees or customers. In the case of a pop-up, the property owner/operator and the pop-up operator should consider and agree in advance who is responsible if a violation is issued during the time the pop-up is in the space.
If you have questions about this post, or about any legal issue affecting a restaurant or bar, please feel free to call or email me.