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Introduction

Owning a restaurant has to be one of the most tiring yet rewarding businesses to run. Often stemming from one’s own cooking passion or beliefs, a family tradition or heritage, a restaurant is most likely a very personal venture. This is why you should take no chances in making sure your contracts and legal arrangements are watertight and that you fully understand them. A lack of success can often be down to not having the right restaurant in the right place at the right time, marketing it wrong, running out of money or poor management (amongst many other things). However, a lot of these common problems can be alleviated, and you can protect yourself through knowing your rights and obligations with regards to the law and having the correct contracts in place. At the end of 2016, YouGov interviewed over 1000 UK SMEs and we had the stats analysed by the Centre of Business and Economics Research (CEBR). According to this research, the Food and Beverage Sector loses over £1.5 billion through not taking care of their legal business. Ignoring the law means legal problems will eventually bite, and we cannot express how important it is to protect your ideas and the foundations of your restaurant from the outset. We hope you enjoy this plain-English LawBite (we realise our name is quite apt here!) guide that we have created, keeping the business’s property and compliance legal needs in mind. Please note, some of these stages will of course over-lap and some things may not necessarily apply to you...

Finding a Location and Negotiating Your Lease

Finding and keeping a winning location

It should go without saying that finding the right location is extremely important for the success of your restaurant. A quick Google-search will bring up countless articles about what due-diligence you should be conducting on the area you have found e.g. its demographics: age, household type, income or its potential ‘foot traffic’(how many people pass that spot every day). If it’s a congested office-heavy location, a lunchtime restaurant might be an easier win, for example. Think about it - there are so many average restaurants that do well because they have smashing locations. We’ve all been there, sitting with your average yet over-priced main which is quelling the hunger pang but it’s certainly not the most tastiest thing you’ve eaten of late; you’re only there for convenience. Yet you’re STILL a customer. This is why fantastic food plus a great location makes for a winning combination.

It is imperative to not only find a great location but to negotiate the best possible deal with the landlord to KEEP it. Did you know you can and should negotiate most items on the commercial lease? For example, you may wish to negotiate the inclusion of better renewal options as an added protection as your location is so critical. There are some clauses which are non-negotiable such as business tax rates but factors such as the length of the lease, the deposit, and rent are all negotiable. It is even worth trying to negotiate a rent free period and a break clause giving you the flexibility to move should your restaurant requirements change.

Applying for licences

Firstly, you must register your restaurant with the government via your local council e.g. if you wanted to set up a restaurant in Dulwich, London, you would contact Southwark Council. This must be done at least 28 days before your restaurant opens. It is a very simple process and doesn’t cost anything. You could face a heavy fine and even prosecution if you don’t do it, so don’t get caught out!

Secondly, if you plan on selling alcohol, you will need a licence to do so, granted under the Licensing Act 2003. As a restaurant that will be in a permanent location, you will need a ‘premises licence’. For more information about this and to register, you should go to the government alcohol licence page and download the premises licence forms.

How could a lawyer help you?

It would be advisable to ask a legal expert to check what you’re signing up to before you sign it! In the beginning, they can review your lease to see if it is industry standard and fair to your business, highlight any onerous terms and what specific clauses you would want to negotiate. For example, if location is highly important to you we would suggest including certain statutory sections which gives you, in certain circumstances, the opportunity to ask the courts for a further lease even if your landlord objects.

It would be advisable to ask a legal expert to check what you’re signing up to before you sign it! In the beginning, they can review your lease to see if it is industry standard and fair to your business, highlight any onerous terms and what specific clauses you would want to negotiate. For example, if location is highly important to you we would suggest including certain statutory sections which gives you, in certain circumstances, the opportunity to ask the courts for a further lease even if your landlord objects.

Towards the end of your lease or licence, a lawyer can help to negotiate a new contract as well as advising on any disputes that may have arisen due to breach of the lease terms. They could even draft bespoke terms for your lease ensuring that what is most important to you and your restaurant is protected.

FSA (Food Standards Agency) Compliance

As you are a business that deals with food and drink, you will need to abide by the FSA’s health and food hygiene laws and advice. Alongside registering your business with the local Council, these are in place to keep your customers safe and at the same time, protect your business. In short, there are legal requirements around:

  • Food safety management procedures e.g. keeping up-to-date records of your procedures;
  • Registering your business (as above);
  • Your premises- keeping them cleaned, in good repair and condition;
  • In rooms where food is prepared, treated or processed, there are special requirements here in that the room must facilitate good hygiene practices;
  • Transport- the vehicle in which the food is transported must be clean and in good condition;
  • Equipment- everything that touches food must abide by their cleanliness and safety rules;
  • Food waste- how to handle food and drink e.g. safe storage and disposal;
  • Water supply- having drinking (potable) water and how to handle other types;
  • Personal hygiene- high levels of personal cleanliness and the rules around illness;
  • Food itself- storage and production;
  • Temperature- how temperature affects food and how to control it;
  • Defrosting- how to do this safely without fear of making it unsafe to eat;
  • Packaging and wrapping- how this should be dealt with when your supply comes wrapped;
  • Training- staff and people working with the food must understand these regulations;
  • (Movable and temporary premises- slightly different rules here but you should be familiar).

There is a general ‘Food and Hygiene Guide’ provided by the FSA that goes into detail about the laws you need to comply with and it is recommended you read this. For start-up caterers i.e. restaurateurs, the FSA also has a helpful new scheme called ‘Safe food, better business’ (SFBB England and Wales) with handy guides and booklets to help you. Download them for free here.

It is important to have a system in place to deal with all of the compliance issues that have been set out above. You should have regular (monthly) meetings or sessions, which are recorded to show what has happened in respect of each of the issues. It would help to have a file/check list which allows you to record your consideration of each issue.

Everyone makes mistakes, what is important is how you respond to issues that arise. You need to have a plan in place to deal with problems, and then record what happened if something went wrong, so that you can learn from your mistakes and continually improve your compliance.

It is often very helpful to bring in an independent person to conduct a review, even if you feel that you are doing everything properly, as people often become complacent and lapse into mistakes.

The local council who you have registered with is responsible for enforcing these regulations and they do so by inspections. This could either be a simple routine inspection or if you’re unlucky it might be from a complaint. If you have a fully documented system in place they are less likely to take action against you. They can take what is known as ‘enforcement action’ which includes: taking food samples, inspecting records (mentioned in the list above), write letters to you to fix the problem, serve formal legal notices or even recommend a prosecution in serious cases.

Health and Safety Insurance

As a business owner, you are responsible for the health and safety of your visitors, customers, employees and premises. Due to the nature of your business (think food contamination, fire, ovens, stairs, knives!), restaurant owners must comply with a unique and rigorous set of checks. So, let’s go into that in a bit more detail to see what you need to do

  • Carry out basic health and safety assessments, creating a policy for your restaurant. The Health and Safety Executive has the guidelines you need to follow and the forms you should complete to show the inspectors from the council who come in for their routine checks. You could even hire your own restaurant health and safety expert to carry this out effectively for you, who would be able to recognise hazards you would otherwise miss (especially if it is your first restaurant)
  • Get a Food Hygiene Certificate. You can do this online, takes a couple of hours and costs around £20. This MUST be held by every member of staff who handles food and be displayed to the public on the premises. You can find an example online course here.
  • Again it’s important to have a fully documented system in place which includes regular review meetings. Don’t be afraid to record incidents that have happened, provided you also take steps to see that the events are not repeated and your actions to remediate problems are recorded.

Insurance

Finally, and of utmost importance, you must get insurance for your restaurant against any possible problems. Again, as it is quite a specialised and complicated business premises, it requires appropriate insurance. The one major policy type you need to have is public liability insurance. This covers the cost of claims made by members of the public for incidents which happen in connection to your business, for example, if they get seriously ill on your prawns or your if your property gets damaged. Employers liability insurance is another for when you are hiring staff and is a requirement by law to ensure that if a member of staff is injured as a result of working for you, you are covered.

Conclusion

We hope you enjoyed Part 2 of our plain-English guide to setting up a restaurant. Parts 1 and 3 will go into detail about setting up, IP and actually running your business so do have a look at them too. Of course none of this information is a complete substitute for professional legal advice so if you’re confused about any of the above or would simply like the reassurance of a solicitor, LawBite offers a free 15-minute consultation, which you can access by submitting an enquiry here. Good luck!

Contributors:

Lizzie Knight, Head of Marketing
Jeremy Barnett, Regulatory and Food Safety Barrister
Hannah Newell, Corporate and Commercial LawBrief (LawBite lawyer)