Zeidel & Associates Restructures Private Club Agreements to Comply with Local Law While Saving the Client Money and Preserving its Earning Potential

Situation

A high-end restaurant group was assuming the management of food and beverage operations in a new, high-profile mixed-use urban development. It would include both public and private club dining establishments.

The initially conceived arrangement, which was captured in a letter of intent, involved a single agreement giving the restauranteur control over the operation of the businesses and specified a compensation structure based on percentages of revenue and profits. However, the plan dissolved when it was discovered that local law required private dining clubs to be operated as a non-profit that a third party could not manage. Hence, the agreed-upon compensation and organizational structure were no longer viable. This development caused our client concern about its earning potential if a profit was not legally permitted; maintaining brand standards, as it could not oversee operations; and the legal expenses to analyse these issues and restructure this transaction.

Approach

Zeidel & Associates, with the owner’s counsel, created a new structure with three separate agreements: a restaurant management agreement for the public restaurant, a consulting agreement for the private dining club that would operate at breakeven, and a management contract for all club facilities other than food and beverage, unrelated to the physical space.

Zeidel & Associates reduced the level of complexity by rejecting opposing counsel’s drafts of wholly distinct, unrelated agreements, and successfully advocating for integrated documents that mirrored each other as much as possible. This mitigated duplication of efforts and increased legal costs, and expedited the completion of the transaction, as the firm would not be forced to negotiate three independent agreements in a conflicting fashion.

Result

The firm convinced the parties to use a single form as the basis for all three agreements. This meant only certain critical terms needed to be changed, which saved our client time and legal fees. Next, the firm re-negotiated the business terms to protect our client’s position by splitting economic terms across the three agreements. We bifurcated the economics to come as close to the original business deal as possible while complying with local liquor laws.

In addition, Zeidel & Associates determined which business terms would be embodied in each agreement for our client’s protection and how to interrelate them so personnel could easily administer the relationship in the future.

The client was thrilled with the firm’s ability to synthesize the legal complexities and close the deal quickly and cost-effectively.