Big HL 2025 Preview!!

INDIES BAND TOGETHER!

CHEFS AND OWNERS EMBRACE INTEGRATION

PLUS:

* F&B OWNER’S 2025 FORECAST

* BUY YOUR RESTAURANT!

* GROWTH TIPS FROM HL CHAIRS

* THE NEW FEDERAL LANDSCAPE

* JOEY REGS

…And so much more!

Dear HL Clients and Friends,

Can you feel the hospitality galaxy expanding? In recent months, so many of our indie restaurant clients have been approached by venture capitalists, real estate developers, seasoned industry veterans with powerhouse hospitality groups, and more. The pitch? Sell out, team up, earn more and work less. It’s no surprise that owners and chefs are now listening with open minds.

The old-school approach to growing hospitality groups, which has too often been slow, steady, and painful, is undergoing a seismic shift. Owner-operators, weary of playing P&L pirates chasing elusive profits, are increasingly open to anything that will relieve them of the pressure of hitting that golden 10% (yes, ten percent now!) profit margin and many are reconsidering their independence as they struggle to adequately support their senior staff, their hourly employees, their families, and themselves.

Enter the hospitality group motherships. Imagine having partners who can handle the back-office drudgery of bookkeeping, HR, legal, accounting, taxes, investor relations, PR/marketing, biz dev and more. Think about the time and brain space that would free up allowing you to improve your existing shops, plan exciting new ones and finally focus on what you love: creating exceptional restaurants, building inspired teams, and fostering a vibrant culture.

Okay so what’s the rub? Well, you will lose some independence meaning that you don’t get to make every decision yourself. But that doesn’t mean that you can’t retain control over what’s important to you. The mothership will want a return on their investment but so do you right? They will want to dictate the deals that you enter and will also want control over many of the P&L line items but, as long as you are philosophically aligned and they are not just-for-the-money-jerks, it can be the beginning a beautiful friendship. You, as the owner and embodiment of your brand, would control the F&B menus, key hires, culture building, and some PR, and those are the fun things right? Let the mothership handle the biz dev, hook you up with some lucrative licensing and management deals, expand your brand to other cities and maybe a CPG line and make you more money and get you paid for your talent and very hard work.

This is not just a shift we are starting to see—it’s a transformation. And it’s redefining what it means to thrive in the hospitality world. After all, nobody works harder than restaurant and bar owners so isn’t it time that you had other options to get paid and create good life for your years of sacrifice and devotion to your art and to the industry? More to come on this but please reach out to me if you want to explore further.

Also transforming is the current NYC restaurant scene. We are having a moment as creative, original and daring restaurants and bars have returned to the city generating a new wave of buzz and excitement and everyone is in on the action. Hall-of- famers, first-timers, almost-over-it old timers and cheffy chefs all adding to the mix to create a NYC restaurant renaissance. Borgo, Bridges, Bar Asoko, Zimmi’s, Cecchi’s, Carnitas Ramirez, Dinner Party, Corner Store, Sailor, Le Veau d’Or and others are grabbing our attention and our reservations because they feel like the NYC we used to know. Some mature and refined, others innovative and hip, all very personal with owners touching tables, connecting with their guests and kickin’ up good vibrations. The restaurant scene in NYC hasn’t been this vibrant or relevant in years and we can confidently say that we are amongst the best in the world again after a brief hiatus.

And the word on the street, which you can read in the quotes from restaurant owners below, is that 2025 is going to be a year of, well, it depends what kind of business you run and where. Manhattan-based hospitality groups seem happy as the island has seen a huge return of tourists and the city has been jam-packed. Brooklyn-based operators seem less optimistic as diner turnout has been thinner and check averages lower. Heard from a few that the AirBnB shutdown has hurt tourism in Brooklyn and so has legal weed (puff, puff, drink replacing drink, drink, drink) and now (gasp!) Brooklyn owners are considering opening restaurants in Manhattan! Everyone is also concerned about about kitchen raids, tariffs on imported food and wine, congestion pricing, ADA lawsuits, alien invasions and more.

Lastly, and certainly not least, HL is proudly celebrating its 20th anniversary this year. On January 1, 2005, I hung out a shingle after a lifetime in the hospitality industry, determined to make a living as a new lawyer by supporting my friends and colleagues in the field. I was fortunate to have Joseph join me in 2008 (we shared one desk with two chairs for three years), and, together with the incredible attorneys, licensing clerks, and administrative staff who have worked alongside us over the years, HL grew alongside you as you built your amazing restaurants and bars.

Along the way, we have always been devoted to sharing our legal and licensing knowledge with our clients and friends. We hold the world record for insider hospitality webinars and we started this very newsletter out of a sense of duty to our compatriots in the industry. We published it every M-F during the first 100 days of the pandemic, distilling the confusing barrage of information coming at us and strategizing on how to deal with Landy and loan programs and commiserating with you through the madness. We survived a very tough time together and although we all emerged a little unsteady and vulnerable, we’re still standing and most of us remain firmly planted in the industry that we love.

On behalf of the entire firm, thank you all for the privilege of working with you; the most talented, kind-hearted, and wonderfully eccentric clients and friends in the hospitality industry. And thank you for everything you do to make this challenging world more hospitable, better fed, and delightfully well-served.

– David

We asked HL clients and friends: what are you expecting for the hospitality industry and your business in 2025?

“2025 should be a great year for growth in the industry. After many years of change and adapting to outside forces, it seems like things have settled to the point where we can be proactive rather than reactive. This means that I can think about my next restaurant project, and focus on building my brand. With changes in the media landscape, a lot of the promotion within the industry must be self-directed. This adds another layer of responsibility, but also a great deal of opportunity. Leveraging my profile to create a platform for new projects will be a big priority for me.

Staying ahead in the industry also requires constant innovation. There is so much talent and competition that it is important to stay on top of trends while remaining grounded in who you are. I plan to fuel my creativity through travel and exploring new cuisines and techniques. I am very optimistic about what the next twelve months will bring and look forward to making the most of every moment.”
– Ayesha Nurdjaja, Shuka/Shukette

“To be completely honest, every year in this industry gets harder and harder. The rising costs of rent, labor, food and supplies makes it increasingly difficult to sustain a viable business model. Coupled with the red tape surrounding fire department, health dept and other city guidelines- every single day feels like an uphill battle.

Even with 14 years under our belt, amazing regulars, great reviews and a wonderful staff- the climate for doing business in NYC is almost untenable. There are positives; I get to employ wonderful people, I get to be a part of a vibrant food scene, I get to engage with the wide variety of loyal guests who come into our spot- but, frankly, I would never open another business in this city.”
– Meghan Love, Mabel’s Smokehouse

“Is 2025 going to be the year when everything goes behind a paywall? So much of media is migrating to Substack. I just read about a favorite chef of mine finally coming to New York, and she’s opening a restaurant inside a private club. And given how impossible it is to get reservations for certain places these days, I wouldn’t be surprised if folks like Resy and OpenTable introduce paid tiers. Yes, you’re already paying for the meal, but maybe you start paying for priority reservations, too. They must be discussing it internally.
—–
I’m very bullish on Las Vegas. I went a few times last year as part of a special project with the LVCVA and I think every chef of note should consider opening a project there. It’s fun, it’s lively, the airport is so close to the action, and most importantly, the entire city is focused on providing good hospitality.”
– Kerry Diamond, Cherry Bombe

“Continue to find new creative, profitable, and authentic ways to build and monetize our hospitality brands outside the four walls of our restaurants.”
– Sean Feeney, Lilia, Fini Pizza

“Sustainable sourcing. Not only from a cost perspective but guests and staff are increasingly interested in where their food comes from and how it is produced.”
– Thomas Chen, Tuome

“I wish it was otherwise, but given how the last 6 months have been, I feel an overarching sense of trepidation. In Brooklyn at least, it feels like we have settled into a post COVID world, where people’s routines have changed, and with that we’ve seen diminishing demand for restaurants. My hypothesis is that our guests are working from home less (and therefore not going out on weekdays as much) leaving town more on the weekends for second homes (and doing so earlier in the week) and cooking at home more. On top of that, people are spending differently due to worries surrounding the election and inflation, and generally drinking less alcohol driving average check down. This past fall was the slowest I’ve seen in my twelve years in restaurants, when it is usually the busiest season for us, and that gives me quite a lot of anxiety going into the new year and always slow winter season.
– Nate Adler, Gertie, Gertrude’s

“New restaurants will stop feeling like sequels with emerging talent coming of age and public desire for originality.”
– John Fraser, JF Restaurants

“$30 margaritas, because house tariff tequila will start at $40 a bottle. Labor costs doubling because entire restaurants back of house is demanding cash or being deported. Insurance may drop – thanks deregulation. Perhaps some relief from these BS ADA “lawyers” but we know there’s a whole other can of worms that comes along with this… You should ask Chick-fil-A; they probably have a much sunnier scope of the future.”
– Alicia Guevara, Mekelburg’s

“We’ll advocate to further improve the new outdoor dining law, fight to preserve the tip credit, and push back against many harmful government proposals.”
– Andrew Rigie, NYC Hospitality Alliance

“In 2025, restaurants will seek innovative ways to enhance the guest experience without increasing costs. This will involve more activations, strategic partnerships, and the integration of AI to elevate the dining experience. By leveraging technology, restaurants can minimize operational costs through digital assistants for hosts, upgraded POS systems, and other advancements. These technologies will streamline operations, allowing servers to spend more quality time with guests at the table.”
– Gary Wallace, Renwick Hospitality Group

“Generally feeling good but hard to say with complete confidence as any presidential/party change year tends to be a bit of a wildcard. Anticipate steady sales of food with slightly reduced alcohol consumption, which has been the trend for the last 12 to 24 months. Focus remains on delivering delicious food, excellent service and keeping it enticing with periodic menu changes/specials and interesting collaborations.”
– Stephen Maharam, Rolo’s, Radio Bakery

“I expect a continuation of the volatility we’ve been seeing for the past couple years as the industry wrestles with shifting and unpredictable revenues. We’re going to stay focused on guest experience and product while actively tracking and managing costs. Growing or maintaining margin through fiscal discipline and self audit will be key as guests are reaching the threshold of what they will tolerate in price increases.”
– Richard Knapp, Mother’s Ruin

“Patrons have been gravitating toward experiential dining rather than picking any random place in the neighborhood. They want to be transported out of their regular lives into a culinary dreamscape to unwind from the monotony of city life. This trend toward frequenting more refined establishment with well curated aesthetics will continue as customers are seeking new ways to perceive value as they’re forced to validate the increased cost to dine out.”
– Cosmo Montemurro, Murro Realty

“I think we will see a lot fewer Roadway Cafes in total but a much higher percentage of really well designed Roadway Cafes under the new system.”
– Gabriel Stulman, Happy Cooking Hospitality

“In 2025, we hope that we can broaden customer’s perception and encourage them to be receptive to exploring the multi-layered world of sake, while staying true to who we are.”
– Sake Bar Asoko

“We see continued segmentation occuring within the Fast Casual market where brands like ours, who focus on ingredient selection, homemade recipes and design aesthetic (we came up with the tagline Fine Fast Casual), fill a niche between the traditional fast casual brands (similar to fast food) and sit-down restaurants.

“That niche has a price point that is higher than fast food or the original fast casual brands but less than sit-down restaurants with tipping which allows families with kids to enjoy eating out without breaking the bank.”
– Seth Leifer, Press Burger

Build Your Rocket Ship – Set Up a Parent Company
by Andrew Fine, Partner & Chair of the Corporate Group

If you intend to scale your concept, it’s almost always cheaper in the long run to create a parent company at the outset. That way, your locations can be neatly folded underneath that parent company from the outset, avoiding a complicated and costly restructuring later.

Clients that assume they can restructure later are often frustrated by existing lease or loan terms that either prohibit or restrict their restructuring ability. This is because some contracts, if not carefully negotiated, can ‘freeze’ a company’s ownership for the life of the contract. ‘Frozen’ locations are often left behind in larger restructurings, creating financial and operational efficiency. If those locations were established beneath a parent company from the outset, however, money and operations would flow as intended.

It’s always best to plan for success at the outset rather than to try to ‘figure it out later.’ If you have a concept you hope to scale, please don’t hesitate to reach out to us, and we can help you put a growth plan together.

Please contact Andrew with any questions at:
[email protected]

Create a Force Field… From Expensive Lawsuits
by Hamutal Lieberman, Partner & Chair of the Litigation Group

You have to protect your hospitality rocket ship from legal debris. Here are some tips to mitigate your risk from the most common claims involving restaurants:

1. Conduct quarterly audits of onboarding and payroll records to ensure compliance with local, state and federal employment laws;
2. Comply with local, state and federal with respect to annual sexual harassment training;
3. Make your website ADA accessible, ideally by upgrading your code, or getting an accessible widget for your website;
4. Conduct due diligence on any space you are considering leasing to ensure ADA accessibility and other essential elements of the space work for you and will not cause you additional liability;
5. Conduct due diligence on any business partner or investor to avoid scams and fraud;
6. Reduce your partnership to written agreement via a partnership, share holder or operating agreement;
7. Reduce all working relationships to writing (e.g., landlord, vendors, employees) in order to ensure all parties are on the same page in the event of a dispute; and
8. Save all documents and become organized with your operating documents (employment documents, lease agreement, partnership documents) in order to help litigate (should you need to) in the future.

Please contact Hamutal with any questions at:
[email protected]

2025 Employment Outlook
by Brianne Murphy, Chair of the Employment Practices Group

What does 2025 and a new Administration mean for hospitality employers in New York?

• The Cost: Increased costs associated with labor and goods due to incoming administration’s tariffs, immigration, border and food policy initiatives.
• The Silver Lining: Regulations: Biden-era agency activism will likely be rolled back. This will result in favorable conditions for businesses especially in the hospitality industry federally. For example, we anticipate that the NLRB will resume its focus on labor/management rather than expanding its interpretation of the NLRA to apply to nonunion activities; the FTC will likely abandon its appeal on the ban on noncompete agreements; the Supreme Court will continue to strike down agency overreach.
• Oversight: Likely an increase in DOL Raids and Audits, similar to the 2016 Trump Administration. NYC would likely be a strong high-profile target for the Administration, due to its immigrant and restaurant population – as well as its repudiation of President Trump. The first Trump Administration conducted nearly double the DOL audit efforts of prior administrations. In light of the campaign rhetoric, we can anticipate at least a similar if not greater level of effort than we have previously seen.

What can employers do to mitigate risk?

• Call HL today to advise you on performing an I-9 Audit before January 20, 2025, implementation of e-verify, and other risk mitigation measures employers can take before Inauguration Day.
• The shifting winds of a new Administration, regulations and enforcement efforts can create a minefield for even the most diligent operators.
• Having a plan in place to tackle 2025, including the right legal team on call with minimal investment will help you avoid common pitfalls and start your 2025 off right.

Please contact Brianne with any questions at:
[email protected]

Time for Your Annual License and Permit Review
by Joseph “Joey Regs” Levey

It seems as though the current operators in the hospitality cityscape, who have withstood the tests of a pandemic, have now fortified their foundations, doubled down on their planning, and are ready to explode. The sheer volume of groups that we are seeing plan for expansion and growth right now is like nothing I can remember. I’m not just talking about action in the space, because that does spike from time-to-time. I’m talking about thoughtful, methodically planning for significant and sustainable growth. And honestly, we love to see it!

A major key to successful expansion is ensuring that your foundation is strong by making sure all of your licensing and permitting is in order. Historically, people have always neglected this part. Every time you add [or subtract] investors, change your DBA, your layout, your concept or any element of your operations, there may be some filings that need to be made with the City and/or State. Failure to do so could actually render your business out of compliance and could even affect your ability to grow and expand in the way that you’d like to. The headline licenses to be concerned with here are your State liquor license and your City DOT outdoor dining permit(s). There are moving targets with respect to timing and requirements on both fronts.

Whether you are looking to sell a location, add new investors to your group or exit from the space entirely, this is a major due diligence point and there is value in ensuring that all City and State licensing compliance is buttoned up in advance of any of these conversations materializing.

Please let us know if you’d like our help in terms of assisting to bring your business into compliance. Please contact Joseph with any questions at:
[email protected]

Think About Buying Your Building or Condo Unit
by Jason Dunietz, Chair, Real Estate Group

Most restaurateurs choose to lease their space due to flexibility in location and easier exit options if plans change. Buying a property is typically more expensive and beyond budget, but for those who are well-capitalized, it’s worth considering as there are many advantages to owning your own place. Here are the basics:

Tax Benefits – Owning allows you to structure leases to maximize tax advantages, like depreciation. A cost segregation study, which will provide a detailed report on what individual components of the building can be depreciated, provides welcome front-loaded tax benefits.

Real Estate Appreciation – Ownership provides potential gains from property value increases.

Lease Control – Owning eliminates landlord issues and lets you tailor lease terms for tax and operational advantages.

Structuring the Deal – even though you may have the same investors and owners in both, set up separate legal entities for the restaurant and the property to ensure independent operations and liability protection.

Buying a Building – Purchasing a building requires significant upfront capital but offers potential rental income to offset debt. Conduct thorough financial and legal due diligence, especially regarding rent-stabilized units, to understand liabilities and ensure accurate projections. We can help you navigate this process and make sure that you’re protected if you choose to go down this road!

Buying a Condo Unit – If the building isn’t an option, consider a commercial condo unit, which is usually less expensive. Review condo documents carefully to understand your rights, responsibilities, and monthly charges.

Financing Options – Even with strong investor support, debt financing can be beneficial. Traditional commercial loans cover 55%-65% of costs, while SBA 7(a) loans can finance up to 90%.

If you have any questions about the process of buying a building or condo unit, please email Jason at [email protected]

R.I.P. James Kent, David Bouley, Chita Rivera, Quincy Jones, Paul Auster, James Earl Jones, Shelly Duvall, Maggie Smith, Dr. Ruth, Roy Haynes, Dickie Betts, Lou Donaldson, Donald Sutherland, Norman Jewison, Willie Mays, Rickey Henderson, Pete Rose, Bob Newhart, Kris Kristofferson, Bill Walton, Richard Serra, Faith Ringgold, Wally Amos and Terri Garr who graced us with their music, food, movies, art, books, comedy and an unforgettable over the shoulder running catch.

As Jerry and the Boys say: It’s just a box of rain/ Or a ribbon for your hair/Such a long, long time to be gone/And a short time to be there – Fare you well, Phil.

Happy New Year!
David

P.S. – We love to hear from you always so feel free to respond directly to this email with ideas, suggestions, complaints and whatever else is on your mind.