How to Find the Right Attorney for Your Independent Restaurant

Your restaurant has just received a demand letter from an attorney claiming that your restaurant has violatedstate wage and hour or you've received notice that, due to an allegation of serving alcohol to underage patrons, your restaurant is about to lose its liquor license.

What do you do? That is, after you stop swearing under your breath?

Hopefully, the answer is that you pick up the phone and call your trusted advisor, the attorney with whom you've established a relationship and who knows you and your business. Alternatively, you scramble to find an attorney to help during the heat of the crisis and without the time to determine if that lawyer is the best choice for your restaurant and the issue at hand.

There is a perception in the hospitality industry that attorneys are fungible (i.e., one lawyer is just the same as the next) or that a law degree confers on an attorney a basic knowledge of every area of the law. Neither is true.

Unfortunately, there are also attorneys who believe they can effectively advise clients on matters ranging from trademark registration to employment matters and everything in between.

But just as restaurant owners conduct sufficient due diligence to determine their banker or accountant, they should also do due diligence on the law firm or lawyer they retain to advise them whether on a single matter or on ongoing matters.

This article provides a due diligence checklist for owners to consider when deciding who their lawyer should be.

Expertise is Critical

There are very few lawyers who are generalists who can competently handle work across multiple areas of the law. And there are fewer still who are experts across multiple industries and legal disciplines.

Think of it in these terms. It would be unlikely that you would call upon a plumber rather than a roofer when your roof leaks. The obvious reason for that is that, while both professions are experts in leaks, the type of leaks in which they are experts is significantly different.

The same is true of lawyers. When considering hiring a lawyer for a one-off matter or for an ongoing relationship, you should investigate the industries and the area of the law in which they are experts.

LEARNING OBJECTIVES:

By the time you've finished reading this article, you should be able to:
  • Explain why legal services are not fungible
  • Describe the benefits of working with lawyers who are familiar with the restaurant business
  • Identify attributes you should seek when hiring a lawyer or law firm.

The first diligence topic is expertise in the area of law. You want to hire someone who's been around the block once or twice. Therefore, some level of seniority can give you some piece of mind that when you seek a solution to a problem, and the lawyer is not encountering the problem for the first time. Experience counts.

To get a gauge for the level of general expertise, reviewing the lawyer's profile on the firm's website and on Linked-In can give you a sense of expertise. You might also look for articles or other content the lawyer has produced.

Second, if the lawyers you are considering have the level of experience you're looking for, then try to determine if they have expertise in the restaurant industry. For example, if you have an employment issue, you could call a generic employment lawyer. However, employment law has its nu- ances, and an employment issue at IBM can be very different from an employment issue at a restaurant.

As long as we're on the topic of the law, bear in mind Newton's Third Law: For every action, there is an equal and opposite reaction. In this context, that means that getting an answer to the question at hand from a lawyer may solve the problem in that isolated instance, but may raise issues elsewhere in your business.

Most of us are happy if the only reasons we require an attorney are for anything other than drafting a will, a real estate closing, or perhaps the occasional speeding ticket. As a startup restaurateur, you are likely to need at least one attorney at your beck and call for a variety of transactions and disputes. 

A lawyer who understands how a restaurant runs can quickly identify other areas that need to be addressed. So, hiring an employment lawyer who not only has experience in employment law, but also employment law within the restaurant industry, provides you with an advisor who can provide you with a broader solution than you may receive from a lawyer who brings to the table only his or her employment law expertise. You don't just want a lawyer who is able to address the problem at hand, but one who is also able to advise you how to prevent problems in the future.

For example, most employment lawyers are familiar with the Fair Labor Standards Act, the federal law that generally governs minimum wage and overtime laws. However, not every employment lawyer has extensive knowledge of the tipped credit rules, and having only a passing familiarity with those rules raises the risk that key issues will be missed. (The tip credit permits an employer to take a tip credit toward its minimum wage obligation for tipped em- ployees equal to the difference between the required cash wage and the minimum wage. You need to be sure you are applying your state's law.)

To determine if a lawyer has industry experience you can, again, look at any writing they have done or the names on any cases they list on their profile. You can also investigate whether the firm's list of industries that it serves includes hospitality, although you should take self-promotion with a proverbial grain of salt.

It can also be helpful to ask others in your industry if they have encountered the lawyer(s) you are considering at industry events, or if they have a reputation within the industry. Lawyers who focus on specific business segments generally will have a presence in that segment and if no one within your industry has ever heard of them, that is a reason for pause.

Entrepreneurialism and Client Service Philosophy

As a startup restaurateur, you are an entrepreneur by definition and you understand the risks (and rewards) that accompany such an endeavor. You likely appreciate that your success will hinge, at least in part, on how you treat your customer. Despite the legal profession's efforts to portray the legal services business as distinct, esoteric, and rarified, the simple fact is that it is just like any other business. Lawyers provide products/services to customers in exchange for payment.

You should have an understanding how law firms make money, since you will be paying the bill. They must price their product/services in a manner that attracts customers and they must exercise client service that satisfies customers so that they are repeat customers. And just like restaurants who work hard to retain their "regular customers," it is more economical for law firms to retain an existing customer than to develop a new one.

For many law firms, the measure of success is "profits per equity partner," which equates to how much money the partners of the firm are able to make. One way these firms achieve this measure is to raise the rates they charge their clients, or senior lawyers push the work down to junior lawyers with billable hour requirements who will potentially spend more time solving your problem than would a senior lawyer.

In addition, hourly rates at these firms are typically locked so that some red-tape must be eclipsed before a lower rate can be offered. Finally, these firms are loathe to handle routine matters on a flat or capped fee basis because they simply do not want to take on any risk. Make no mistake: there are times when hiring a so-called "silk stocking" firm (i.e. an elite, well-established law firm) is appropriate; however, the resources of those firms tend to be best applied to large transactions or complex and/or catastrophic litigation. They hire the best and brightest law grads, from the top schools, and they pay them and train them well. They are not cheap.

The good news is that there's a plethora of lawyers who were trained at such firms who are now servicing clients at smaller, more nimble and entrepreneurial firms. The culture of Big Law- is not for every attorney, and there are some first-rate lawyers working for mid-sized and boutique practices, offering clients high-level legal service at much more reasonable rates.

What about Billing?

In recent years, the concept of charging clients by the hour has been criticized and, yet, the market seems hesitant to adopt, on a broad scale, other ways of charging for legal services. Hourly fees add up.

Part of the hesitancy to move from this billing practice is that neither the client nor the attorney wants to accept risk, or there is a perception that the alternative pricing is difficult to achieve. However, there are firms across the country that often use flat or capped fees because they realize that one thing that businesses (especially restaurant owners) need when using law firms (or other vendors) is certainty. Using alternative pricing provides a great level of certainty for discreet projects and also for more complex projects such as transactions and litigation.

Those firms that are not only willing to use alternative fee arrangements also typically have another favorable attribute - they understand the pressures that face owners, and their pricing shows a willingness to stand shoulder to shoulder with their client and, when appropriate, even share their risk.

This attribute also often (but not always) manifests itself in the lawyer/law firm's client service philosophy, which is another area into which you might inquire. Some lawyers act with a false sense of self-importance and that their schedules are more important than the issue facing the client who has called or emailed them.

They delay their response while ignoring the reality that the client is in a "live fire" environment, and that the help they are requesting from their lawyer may be time critical. When interviewing a prospective lawyer or law firm, ask what they expect of their attorneys in terms of responsiveness both internally and to their clients.

If they cannot explain their standards, and if they do not have them written down, then move on. If, however, they can prove- their standards, take the issue up a notch and ask if they will agree to a level of service that you require, such as responding to a call or email within two hours. If they cannot make that commitment, then they do not fully understand the meaning of being a business partner.

Finally, no lawyer can fully service a client without understanding that client's business as deeply as possible. Such knowledge can sharpen the attorney's ability to solve the client's issues in a more effficient and effective manner.

As you discuss engaging the attorney/law firm, ask what he/they will do to invest in gaining the knowledge off your business. Lawyers/law firms who truly seek a business partnership are likely to be willing to invest their own time in understanding your operating philosophy and culture, as well as how the various parts of your business fit together.

Other law firm attributes you might consider include:

Reputation in the market place. The success of your restaurant is likely dependent on word-of-mouth recommendations from your patrons. The same is true of law firms. Thus, it is important that the lawyer/firm you are considering provide you with at least three references. If those references are not from your industry, that is an indicator that the lawyer is perhaps not as experienced in your industry as hey have indicated.

You should call the client references, particularly established independent restaurants. They will undoubtedly say nice things. But, you should dig deeper. Ask what you think the lawyer/law firm does well and, more importantly, what they don't do well. Ask them what they would change about their relationship with the lawyer/law firm, or the manner in which they do business. No service provider is perfect all of the time and discerning where the lawyer/law firm may not do well all of the time can be helpful in setting key performance indicators.

Accountability. For your business, accountability lies in attracting customers and keeping them. If you do not do that well, the dwindling number of customers will be an immediate indicator of that fact. Lawyers and law firms should, but often don't, operate with key performance indicators. When establishing a relationship with a legal service provider, make clear your expectations in writing. Those expectations may include that the law firm will:

    • Respond to any email or phone call within 2 hours, except in unusual circumstances
    • Not exceed a specific number of billable hours on any project without written notification and approval
    • Provide limited proactive training to your staff each year at no cost

Your guests hold your restaurant accountable for certain standards regarding hospitality, cleanliness and food quality. Holding your lawyer/law firm accountable to meeting your expectations will greatly advance your cause of getting quality, efficient and satisfactory legal support.

Breadth of service. Once you have identified a lawyer with the right expertise in your industry, the next step is to evaluate their resources and support. The best solution is a full service firm, and preferably one with attorneys that specialize in the hospitality industry across legal specialties. If a full service firm satisfies your needs, it is important to appoint one attorney as your relationship partner, and direct all inquiries or requests to that attorney. Your relationship partner should be the quarterback, your outside general counsel, who can marshal the right resources to solve your issue.

There are numerous advantages to working with a full-service firm (see "Words of Wisdom" below). Access to a number of legal specialties is among them.

Location. Many clients appreciate the ability to meet with their lawyers face-to-face but with the ease of communication resulting from existing technology, such meetings are becoming less necessary. This means the location of the lawyer/law firm you are considering is less important than in days gone by. By considering engaging with a lawyer/ law firm who may be outside your city or state, you increase your range of choices. Further, hourly rates differ based on geography, so broadening your search can result in cost savings as well.

There are some attorneys who are so skilled at their area of practice, such as restaurant franchising, that they attract restaurants from all of the country. Often, you will find those attorneys via recommendations from other operators. Working with a local attorney can be valuable, since he or she are more likely to know other competent lawyers in the area to handle specialized matters, and are familiar with the local court system and its rules if you need to be represented in local litigation.

Do your research. Ask for recommendations. Vet your prospective choices.

You will develop relationships early on with your vendors, your accountant, your banker, and your electrician. You should find a lawyer or law firm to be part of your team as part of the startup process.


POINT OF VIEW
Know Your Limits… and Know Your Lawyer's Limits

By Barry Shuster

A few years into the launch of this magazine, I received a call from Jake, a friendly guy with a New Jersey accent. He was interested in moving to North Carolina with his family, and owning a restaurant. He came from a restaurant management background, had ventured into a corporate career, and was ready to be his own boss in a warmer climate.

Jake had found a restaurant in my town that was for sale, and he wanted to buy it. A business acquaintance recommended me as an attorney who was familiar with the restaurant industry. Jake had very few contacts in North Carolina, and asked me to represent him in the purchase of the business. As you would imagine, I was enthusiastic to work with another restaurateur, and I felt competent to assist him with the deal.

After several weeks of negotiation, drafting and reviewing legal documents, and the final closing of the sale, I was his North Carolina lawyer. In fact, this is not an unusual way for business clients and lawyers to establish a relationship. The restaurateur wants to be able to call someone he or she knows and trusts. The lawyer hopes the business will grow, and provide opportunities to represent the client in other matters.

Jake become not only my client, but my friend, as well. Over time, I counseled him on other business and personal legal issues. These included lease negotiations, and basis business counsel. Some of these matters were well within my experience. Other matters required me to consult attorney colleagues who had more experience in certain areas.

One of the advantages of working with an established local attorney is access to a network of other lawyers. If Jake needed legal counsel that was outside my range of experience and expertise, I would provide him with the names of lawyer who could provide competent assistance. In this case, the relationship worked. That said, I think the important message to take from this story is not what I could do for Jake, but what I could not do for him and his business.

There is nothing wrong with working with a solo or small-practice attorney (e.g. a few lawyers working together) that has/have suffcient skill to provide general counsel and representation. Very often their fees will be lower than larger firms, particularly the elite firms that represent large organizations in complex matters.

That said, a solo lawyer or small firm that primarily handles divorces, traffic matters, or wills, but wants to expand into small business representation, could present a problem. You have to ask yourself if you want to pay an attorney to learn a practice area on your proverbial dime. I know a very fine lawyer who has tremendous skill in representing clients in federal tax matters; however, he got his first case from a client who was informed of his lack of experience in the matter. The client trusted him and wanted him to handle the case, even though he would be learning on the job. Ideally, though, you want to work with attorneys who are familiar with your legal matter.

With Jake, I had sufficient confidence and experience to navigate a restaurant business purchase transaction, and I agreed to represent him. If the first call from Jake, however, was a request to represent him in a employment discrimination lawsuit, the best I would have been able to offer was the names of law ?rms who specialized in that area.

Even if I would have liked to expand my practice into employment litigation, I believed then, and I believe now, it would have been a disservice to him to accept the matter. Moreover, my state bar's rules of professional conduct includes: A lawyer shall not handle a legal matter that the lawyer knows or should know he or she is not competent to handle without associating with a lawyer who is competent to handle the matter. And I certainly didn't ever want to have to file a claim with my attorney malpractice insurance carrier.

Indeed, as expressed in the main article, there are distinct advantages to developing relationships with mid- to large-sized firms who have a number of attorneys and staff members. You have ready access to a pool of legal talent. And even if your matters are assigned to junior attorneys, they will have backstops in-house to guide them. Another advantage of developing a relationship with a larger law firm is continuity. As in any other profession, lawyers move, change firms, and retire. An established firm with a number of lawyers can pass along cases and matters seamlessly to other partners and associates. The advantage of working with a smaller firm or practice (aside from lower hourly fees), is that it is possible that your business will receive more personalized attention. Also, a small firm can grow with your business and develop strength in legal matters that tend to arise in your restaurant.

A small firm with sharp attorneys with interest and experience in business transactions and general counsel can be a reliable first telephone call. Often, they can assess the matter, determine if they can handle it, or refer it to another firm.

Regardless of the lawyer or law firm you choose, another important point to take from the main article is you don't want to have to scramble to find a lawyer at the last minute. Particularly if you have been served with a law suit, or have a pressing transaction, it can be difficult to find an attorney to take the case, if he or she would have to drop everything to come to your assistance. In your favor, I suppose, is your chosen enterprise. I always enjoyed be introduced by Jake as that's my lawyer when I stopped in for a drink. Lawyers, like everyone else, enjoy knowing the owner of a local restaurant. For some lawyers, it might be as close to celebrity as they will ever get.