Zeidel & Associates Drafts and Negotiates Food & Beverage Management Agreement for Luxury Boutique Hotel to Facilitate Complex Changes to the Brand

Situation

Zeidel & Associates was retained to represent the owner of a luxury boutique beachfront hotel in South Beach, Florida. It is a family-owned and operated property that had been working with a “celebrity” chef as the manager of its food and beverage facilities, including the lobby and pool bars, event space, a gourmet steakhouse, a coffee bar and others, for years. He also managed room service.

Our client, however, was dissatisfied with the chef’s increasingly passive approach as the operator, but they still valued him as a highly regarded chef and creative contributor. As a result, the owner wanted to take over control of the reservation and booking responsibilities from the chef and reactivate, upgrade, and perhaps reconceptualize the existing space.

To advance their plan, our client negotiated a Letter of Intent (LOI) with a new restaurant operator who would handle the possible rebranding of the facilities and the operations, with the expectation of retaining the chef in a narrower role. The owners hired Zeidel & Associates to prepare the food and beverage management agreement to ensure that they were appropriately protected with the new operator in place.

Approach

Zeidel & Associates was instructed to keep the agreement simple, so we initially drafted a short form management contract. However, after our client gave us feedback, it was clear that we needed to address several additional specific concerns. One, for example, was that our client wanted the new operator to perform an in-depth analysis of the current operation to determine whether a new concept was needed or whether to keep the existing brand under the chef’s name. They also wanted existing employees’ performances evaluated and recommendations to improve staffing. Once this initial reporting was completed, the parties would determine the scope, nature and budget for necessary upgrades and finalize changes to the concepts, menus and related elements, with the chef’s input. We modified our agreement form to address these and other client concerns.

Another complex issue was related to the ownership of intellectual property. We needed to address several possible scenarios: 1) keeping in some form the existing brand with the current chef’s name, 2) the new manager replacing the established brand with its own existing concepts, and 3) developing entirely new concepts explicitly created for this property. Given the number of food and beverage outlets on the property, a combination of these could be implemented. Accordingly, we needed to parse through who would own the rights to the concepts under each scenario and each party’s respective rights to the contributions made by the others. It also had to address if and when the concepts could be replicated at other locations and by whom.

Result

Zeidel & Associates reworked the agreement to address these complexities to the client’s satisfaction. We also worked with liquor licensing counsel and employment and labor counsel to address their concerns appropriately. In addition, the management company raised concerns about the language in our agreement, which required negotiation. One sticking point of paramount importance to us was for the manager to provide an entity, under a joinder or a guaranty, to stand behind its obligations under this agreement, which was ultimately agreed upon. We then drafted the agreement with the chef, which incorporated a reduction in his fees, clarification of the IP concerns, and a modification of his scope of services to provide for collaboration with the new management company.