With the Restaurant Revitalization Fund grant application portal finally open, Total Food Service has sought out the advice of some of the marketplace’s leading experts.
With New York City and the nation’s hotels severely challenged, we knew that Christy Reuter, the chair of Meister Seelig & Fein’s Hotels & Restaurants practice, could give our readers her read on what lies ahead. Ms. Reuter specializes in domestic and global hospitality transactions and represents hospitality companies seeking to expand within the United States and in countries around the world. She has negotiated deals in cities throughout the United States and in various countries and cities, including Abu Dhabi, Dubai, Japan, Turkey, Monaco, Saudi Arabia, Switzerland, and Hong Kong.
Ms. Reuter provides strategic legal and business counsel to clients at every stage of a transaction. She regularly guides clients through the material business and legal issues in complex corporate transactions including joint venture negotiations, operating or shareholder agreements, license and management agreements and commercial leasing. Ms. Reuter also regularly assists clients with review of employment agreements, non-disclosure agreements and vendor and contractor agreements.
Ms. Reuter is the former General Counsel for the internationally acclaimed hospitality group Cipriani, which she still represents.
What attracted you to practicing law?
What a great question and I will give you the short answer. Everybody in my family used to say: this kid needs to be a lawyer because she never takes no for an answer. I grew up on Long Island in Lake Grove and I can tell you honestly since I was 11 years old I knew I would be an attorney.
How about your interest in hospitality?
One of those crazy stories, where I was on the other side of the desk and in what could only be described as a beautiful accident, hospitality found me. I was in private practice and involved with a case that went to the New York Court of Appeals. The case dealt with how defining whether a service charge at the banquet contract is a gratuity for the workers who were independent contractors. It dawned on me very early, just how complex labor law is for restaurants, and how challenging it is for owners to keep up with the regulations.
From your start in New York, you have built a very far-reaching knowledge base of the intricacies of the law across the globe.
In working as general counsel, you have several things that you need to deal with. I had to start learning about loan documents and corporate structure. That’s really where I built the foundation of expertise for licensing and management agreements. One day I was working on a deal in Abu Dhabi and the next day Mexico. In the US, a deal has a different look in every state with respect to local laws. The key is to find local counsel who becomes your partner, that understands the lay of the land. It’s interesting and often overlooked that a restaurant like Zuma that I represent might have the same tables and chairs and the same menu from country to country but the legal work behind the scenes to make that happen couldn’t be more different.
What attracted you to the Meister Seelig & Fein opportunity?
I was actually happily practicing on my own, but I kept running into Stephen Meister while negotiating a hotel acquisition. He suggested lunch with the MSF team, and as I sat there, it dawned on me that we all spoke the same language. We looked at the practice of law through the same lens.
What impact did the Pandemic have on your practice?
Last March, I had 10 plus deals sitting in front of me in various locations. When everything closed, we literally went into 24/7 coaching mode. I worked around the clock on everything from renegotiating leases for my restaurant clients to interpreting the daily changes in legislation that impacted how they could operate. I spent nearly 70% of my time on the lease work. I must say that most landlords “got it”. They understood the severity of the situation.
What are your thoughts on the role of takeout & delivery in the survival of the industry?
Most of my clients didn’t focus on delivery before COVID. So, it wasn’t something they could easily adapt to moving forward. I think the smaller restaurants are the ones that found success with it. Many of my clients looked at the winter weather, the limits on indoor dining capacity and it simply didn’t make economic sense to turn the lights on. On top of that, when you start looking at the cost of third-party delivery and how little is brought to the bottom line, it wasn’t good business.
We’ve seen tremendous change in the role that fine dining plays in hotels.
It was a very hot market prior to COVID. With the challenges that hotels have had, it has changed dramatically. I see all types of deals and opportunities for my clients to go into hotels. At the top of my list of concerns is whether the hotel’s food and beverage are unionized. That makes bottom line profit a challenge. Hotel landlords are offering all kinds of below market deals to entice high end operators with substantial budgets to build out the space. I will tell you that this really varies from market to market. While New York City might be struggling right now to attract restaurants, there is absolutely nothing available in the Brickell neighborhood of Miami. It seems as if every major restaurant brand in Manhattan has opened a restaurant in South Florida.
What are your thoughts on how a restaurant/hospitality owner should prepare for the Restaurant Revitalization Fund (RRF) grant program?
I just attended a webinar with the SBA; with the website and phone lines about to go live, it’s time to make sure you have done the prep work. My advice is to get your financial information ready. It starts with a clear outline of your income and expenses and your PPP loan documentation. You need to be ready, because it is first-come-first-served with no guarantee that there is enough funding for all the restaurants that qualify. Our MSF team can help you with the process.
What’s your read on qualifying for the RRF?
All applications will be taken but the first 21 days are going to be dedicated to socially disadvantaged groups such as Women and other minority-owned businesses and certain amount of funds are dedicated to businesses with gross receipts of $500,000 or less. There are three formulas used to calculate the amount of the grant depending on when the qualified business started operations. PPP funding will have to be deducted from gross receipts for purposes of the calculations. So for example, if XYX restaurant generated $8 mill in 2019 then $4 mill in 2020 and took $200,000 in PPP is entitled to apply for $3.8 million in grant funding that does not need to be paid back.
What can RRF funding be spent on?
To start the process, I think the place to begin is to get your personal finance house in order. If you have been lending money to your business in the ordinary course to stay afloat, you need to have a promissory note or other form of loan document prepared by an accountant or attorney. That will enable you to pay yourself back from the RRF fund that you receive. You can use the grant funds for any expenses incurred in the ordinary course, but nothing should be used to “pre-pay” these obligations. My other suggestion is to use part of the funds to build out, complete or alter the outdoor structure that you may have built onto the sidewalk/street space that you have been given to use. Most importantly, the battle is on to keep top employees. I suggest looking at the investment in whatever has to be done to ensure the highest quality customer experience that you’ve worked so hard to create. Think about current expenses, you can pay this month’s lease with the funds but nothing going forward.