Bloomberg Law
Free Newsletter Sign Up
Login
BROWSE
Bloomberg Law
Welcome
Login
Advanced Search Go
Free Newsletter Sign Up

Restaurant Practices Leap to Action as Virus Ravages Industry

May 20, 2020, 9:40 AM

Restaurant and food and beverage practice groups rarely get much of the glory at law firms, but they are having an undeniable moment as they seek to help their battered clients dig out from under the damage inflicted by coronavirus.

In addition to handling routine issues like leasing, acquisitions, employment, and pay, restaurant practice lawyers are squaring off against insurance companies to recover some of the billions of dollars lost from having to close down their establishments.

More than 8 million restaurant employees have been laid off or furloughed, and the industry has estimated losses of over $80 billion in sales, according to figures from the National Restaurant Association, the largest food service trade association.

In recent weeks, restaurant clients began flooding their lawyers with questions about how to qualify for government assistance, and to navigate new twists on traditional issues, like employment and leases, where all the parameters have shifted.

“It’s been crazy here. We’ve been running nonstop. I worked until 5:30 a.m. this morning working to help our clients understand new government requirements,” said Anna Graves, partner and co-leader of the restaurant, food and beverage industry group at Pillsbury Winthrop Shaw Pittman, in an interview last week.

A Long Menu

Though many law firms have food and beverage or restaurant clients, not many have practice groups aimed specifically at these clients.

A handful of large law firms such as Pillsbury, Davis Wright Tremaine, and Pryor Cashman have major practices where dozens of lawyers with various specialties, from employment law to real estate to IP, are on tap to serve clients. These clients range from restaurant chains to startups, and from wineries and breweries to food and beverage makers as well as brand licensors and franchisors.

Numerous smaller law firms also handle aspects of food service, from negotiating a lease to working conditions and hourly compensation to meet state and federal laws.

Whereas some Big Law practice groups have seen a slowdown in work due to coronavirus and its economic effects, restaurant focused lawyers have seen a spate of new matters and novel work.

One key area has been the federal Paycheck Protection Program, where many establishments have turned to lawyers for help navigating the changing requirements for loans in the “accommodation and food services” category.

Restaurant practices have had to be agile in guiding clients through the government-backed loan process, which required their clients to use the money to rehire a certain percentage of employees. But restaurants are still mired in questions such as how to revamp their premises to safeguard staff and customers.

“Restaurants don’t want to rehire if they don’t know when they can reopen,” said Richard Frazer, co-chair of Pryor Cashman’s restaurant, food and beverage group.

“It’s all defense now, to protect our clients from individual restaurants to big hotel groups,” he said. Pryor Cashman has represented restaurants such as Burger King, Arby’s, and Five Guys Burgers and Fries.

“There are so many conflicting issues that’s it’s been a morass for clients to make sure they can be certified,” Graves said. Among others, Pillsbury’s practice has represented brand-name restaurant chains such as In-N-Out Burger, Jack in the Box, Nando’s Restaurant Group, and California Pizza Kitchen.

Similar legal challenges are on the horizon, she said, as restaurant and other hospitality groups strive to meet the specific requirements of state and local mandates on re-openings and their liability if employees or customers come down with the virus.

At the same time, Graves noted, the pandemic has sparked new twists on routine issues like leasing restaurant space. It’s frequent now, she said, for clients to ask: “’Do you negotiate a rent deferral or holiday?’ Most big landlords have spent time getting the right mix of commercial tenants, so they are willing to negotiate.”

Other novel legal matters, she said, have been whether restaurant owners should furlough employees, reduce their hours, or take other options. Restaurants are also trying to figure out the legal ramifications of first-time issues such as how to protect customers and employees from the contagion, including adding glass barriers, wearing masks, and using disposable paper menus.

“Every situation is starkly different,” she said. “There is no shortage of things to figure out. It’s been crazy with so many issues to navigate.”

The Road Back

Some of the most abundant work for lawyers representing restaurants may come from business interruption insurance litigation which Graves described as “huge, huge, huge.”

Restaurant businesses large and small are already filing lawsuits challenging insurers’ decisions not to cover the cost of virus-related closings.

High-profile chef Thomas Keller, who runs culinary establishments like the French Laundry and Per Se, has sued his insurer over payment for mandated coronavirus closures. Keller is represented by Gauthier, Houghtaling. He and other restaurant owners forced to close their doors, say their business interruption insurance covers some of the considerable losses caused by Covid-19.

Riley Lagesen, chair of David Wright Tremaine’s national restaurant industry practice, said that litigation is not the sole answer for restaurants, and resolution will not come quickly because most courts remain closed.

“There will be litigation for sure on business interruption insurance. It involves a ton of money but it only covers a definite period of time,” said Lagesen, whose firm client list includes restaurants and chains like CAVA, Mendocino Farms, Modern Market, and Protein Bar.

“There are going to be changes to how restaurants look and feel. We are working to help clients formulate policies to allow restaurants to prosper, and are working on the local and national levels to help get our clients to be protected business of a sort,” Lagesen said.

As they begin to re-open, restaurants, especially larger ones, according to Lagesen, may turn their attention to advocating for changes to the law that they believe will help protect their bottom lines from future pandemics. That’s another area where lawyers can be helpful.

For example, he said that states like California could allow restaurant owners to apply tips to the hourly wage that restaurants pay their workers. He said the tip credit policy would reduce restaurant operating costs and encourage more hiring.

“It’s going to be a long road for restaurants to get back to financial viability,” said Lagesen, who also launched a restaurant workers relief fund in March with longtime client and celebrity chef Guy Fieri. “In the meantime, there needs to be legislation to give restaurants some relief from requirements that may be too onerous now.”

To contact the reporter on this story: Elizabeth Olson in Washington at egolson1@gmail.com

To contact the editors responsible for this story: Tom P. Taylor at ttaylor@bloomberglaw.com; Rebekah Mintzer at rmintzer@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com