Restaurateurs are no doubt familiar with the concept of the "two-drink minimum" and "three-martini lunch."
"Gerald Ford once remarked in a speech to the National Restaurant Association, 'The three-martini lunch is the epitome of American efficiency. Where else can you get an earful, a bellyful and a snootful at the same time?' So whenever a new restaurant client comes to me to help to structure a start-up restaurant business from a corporate legal perspective, I reply, "There's a three-LLC (limited liability company) minimum," Richard Frazer wrote in a recent article for Total Food Service.
Frazer, who co-chairs Pryor Cashman's Restaurant, Food + Beverage Group, represents celebrity chefs, food manufacturers, independent restaurants, specialty food stores, local chains and some of the nation's largest franchisees.
After reassuring a client that his three LLC minimum policy is not intended to increase legal fees or create unnecessary bureaucracy, Frazer explains the two-fold rationale for forming three separate LLCs, namely: (1) to insulate the client from liability and (2) to maximize the client's potential profitability.
"Looking at the liability side first, ownership of a restaurant is fraught with risk. There are the risks associated with leasing real property, with being an employer, with dealing with customers and the general public, as well as the risk of claims by equity investors in raising capital and the claims of general creditors of the restaurant including vendors and lenders," Frazer wrote.
Read the full article in Total Food Service.
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