Zeidel & Associates Negotiates Management Agreement for Unique Southern California Dining and Performing Arts Destination

Situation

Zeidel & Associates represented an executive in the firm industry in connection with his new venture: the development and operation of a unique dining and performing arts destination in Southern California. The client had purchased a building that he intended to transform into a high-end restaurant and one-of-a-kind performing arts venue designed to provide a platform for underseen, up-and-coming, and non-traditional artists.

The contemplated facilities included the main dining and performance spaces, an adjacent patio, as well as banquet, private dining, and other special event spaces.

The client had a strong creative vision for the project, and wished to remain firmly in control over many aspects of the operations, and not cede authority to the manager. However, he recognized that he did not have experience operating a performance venue, and retained Zeidel & Associates because of the firm’s experience negotiating hospitality management agreements and to guide him through the process of engaging a third-party manager for a highly customized venue in which the client intended to remain actively involved.

Prior to the firm’s involvement, the client and the manager had extensively negotiated a letter of intent for the management agreement.

The client and manager had also developed a strong working relationship and were enthusiastic about the project. Zeidel & Associates therefore needed to establish appropriate protections for the client while preserving the collaborative relationship between the parties.

Approach

Given the highly personal nature of the client’s vision, Zeidel & Associates focused on preserving the client’s control over the creative, operational, and financial matters that were fundamental to the concept.

The firm negotiated extensive owner approval rights covering themes and concepts, designs and floor layouts, menus, décor, uniforms and dress codes, pricing, marketing plans, trade names and related trade dress, and the operating budget.

The agreement also gave the owner approval rights over key personnel. Additionally, the owner also retained approval over operating hours and the right to temporarily close all or any portion of the project for legitimate business reasons, and to re-concept the venue.

The firm also focused closely on the employment structure. It was imperative that neither the owner nor its affiliates become the employer of personnel working at the venue. This included both permanent facility personnel and performers and production personnel engaged on a temporary or limited basis, such as stagehands, artists, entertainers, and other production personnel. The agreement therefore clearly allocated responsibility for these personnel to the manager.

Intellectual property and guest data were also important to the client. Given the creative nature of the project, Zeidel & Associates negotiated provisions preserving the owner’s rights in intellectual property generated at or in connection with the venue, as well as ownership and control of guest data.

Finally, although the extensively negotiated letter of intent did not contemplate parent-company backstop of the manager’s obligations, Zeidel & Associates negotiated a limited joinder/guaranty from the manager’s corporate parent, providing the owner with additional protection.

Throughout the negotiations, the firm balanced these protections against the client’s desire to maintain the strong relationship that had developed with the manager, while clearly distinguishing between the manager’s day-to-day operational authority and the matters over which the client intended to retain control.

Result

Zeidel & Associates helped the client complete a management agreement that provided the manager with the authority necessary to operate a sophisticated restaurant, event, and performing arts venue while preserving the client’s control over the elements fundamental to his vision.