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Texas Restaurant Law

To Partner Or Not To Partner: Top Things To Consider Before Bringing On A Restaurant Partner

Posted in Acquisitions, Corporate Entity, Franchising, Litigation, Recent Law Trends

Many of my clients think that partners and shared ownership are great. They are right, to a point, but there are often times that partners are more a pain than a benefit. With that in mind, I thought I’d share some of the benefits and drawbacks of partnering your restaurant business.

Benefits of A Restaurant Partner

Sometimes, bringing on a partner is required. For instance, if you have little or no restaurant experience and need an operator, you need a partner to help show you the ropes. Likewise, there are often other types of key employees that you need to incentivize with the goal of partnership to ensure that they stay around long enough to help you. Similarly, if you need a little motivation, it’s great to have someone to share the joys and struggles of common ownership.

These are all great reasons to have a partner, but in the grand scheme, the hardships of having a partner outweigh the benefits, as I’ve shown below.

The Dark Side of A Restaurant Partner

Having a true partner in a restaurant means that nearly every decision must be jointly decided. Of course, you can draft a nice partnership agreement (which we highly recommend). Partnership agreements help in many ways, but there are still limits on what those agreements can do. As such, you ultimately have to trust your partner and resolve any conflicts that arise along the way.

Over and above conflicts between partners, what happens when your partner (or you) want or need to be removed from the partnership. This can happen for many reasons, but the most common include death, disability and the need for a “business divorce.” Further, if you haven’t drafted a solid partnership agreement that deals with the actual, matrimonial divorce of the partners and their spouses, you could wind up having to deal with both your partner and their ex-spouse.

Take-Aways

As shown, it’s complicated to deal with partners. You can do it, but it’s often easier to have just one person running the show. Therefore, at least consider the following when deciding whether to bring on a partner:

  • How will conflicts be resolved?
  • Who is responsible for what issues (in detail)?
  • How is your restaurant financing affected by your or your partner’s relative credit rating?
  • What happens if a partner dies, becomes disabled, or wants out?
  • What happens when to the restaurant ownership when the partners divorce their spouse?

Have you had difficulties with your restaurant partner? What else should owners know? Please share your thoughts!

About the author: Matthew Sanderson is a restaurant lawyer in Texas. “Good service with a smile” is his motto. Click here to find out more about Matthew Sanderson’s legal practice and how he can help you today. Follow him on Twitter @dealattorney.