Zeidel & Associates Protects Museum with Creative Problem Solving in Contract Negotiation with New Food & Beverage Manager
Situation
Zeidel & Associates was retained by a privately owned nonprofit museum in New York City. The museum was unhappy with the company that had operated and managed its restaurant, café, and event space for the past 10 years. When the firm was hired, the museum had already completed an extensive RFP process with a food and beverage consultant and selected a new operator that would re-concept the space and deliver the upscale experience the museum was known for. The new operators had also been approved by the board of trustees, comprised of a who’s who of prominent, wealthy New Yorkers.
Zeidel & Associates was charged with drafting and negotiating a new management agreement. The timing of this deal was critical as the museum wanted to transition to the new operator during the summer so it would be ready to welcome guests and event clients for the busy fall and holiday seasons.
The museum informed us early on that the agreement should be akin to a lease in that the operator would bear the expenses and keep the revenue. The museum would contribute a limited amount towards the operator’s renovation construction costs, and the operator would pay the museum a percentage of sales from the restaurant, café and event space, which typically hosted more than 100 events a year.
Approach
With extensive experience structuring food and beverage arrangements as management, consulting, licensing, leases and every combination of those, the attorneys at Zeidel & Associates were well positioned to execute the assignment within our client’s desired timeframe.
There were many documents and opinions to cull through, including the response to the RFP and input from numerous museum stakeholders who wanted to ensure a more positive experience with the new operator. We parsed through and synthesized the clauses the general counsel drafted and the significant input he garnered to resolve conflicting, vague and problematic requests. This was a painstaking process that required our keen understanding of these types of agreements.
Once the firm finalized the initial draft of the agreement and it was presented to the management company and its lawyer, we received proposed changes as is standard. We negotiated the changes with numerous all-hands calls, redrafts, and other negotiations. Among the issues of concern were:
- Our need for a guarantor for the newly formed manager entity
- The ownership of intellectual property
- Contract termination rights
- Insurance levels needed
- Payments associated with internal museum catering events.
It was agreed that the manager would be the museum’s exclusive caterer, with some limited exceptions.
Of major concern was the backlog at the New York State Liquor Authority and the possible delay in securing the appropriate liquor license. As a result, Zeidel & Associates suggested using the draft agreement to apply for the license rather than waiting for the executed agreement, a strategy that enabled us to keep both tracks progressing at the same time.
While negotiations were advancing at a good pace, the new manager hosted a gala for the museum to showcase its capabilities, which the museum stakeholders, including the board chair, considered a failure both in quality of food and service, making all parties concerned about the manager selection. Given the time constraints, they decided to move forward but amended the agreement to include a six-month probationary period for exclusivity, which would require the manager to satisfy certain measurable conditions and key performance indicators, such as guest satisfaction metrics, pursuant to a survey that the museum would develop and administer. We also included ongoing metrics that would need to be satisfied to maintain exclusivity, and the inability to achieve them would be a breach of the agreement and permit termination.
Result
Once everyone agreed to the threshold concept, we negotiated the remaining outstanding items and were able to successfully complete the agreement. The agreement was accepted and executed by the manager on the day that the restaurant was slated to open.