Don't Get Burned in Your Kitchen


An outline of considerations for a restaurant owner when hiring a chef

The success of any restaurant ultimately lies in the food. Is it creative? How does it taste? How is it presented? But the food is a function of the creativity and talent of your chef—the master of your kitchen. If you are considering opening a restaurant, or if you are considering granting your chef an equity interest in your restaurant, you must consider several things. All restaurant owners need to ask themselves a series of questions:

  • How much discretion and control do I want to provide to my chef?

  • Should my chef have accountability to me, or should the kitchen be his or her “domain?”

  • Who owns his or her recipes?

  • Should my chef have an interest in the restaurant or the restaurant’s brand?

  • What are my expectations for my chef?

  • Should he/she be required to work in the restaurant full-time, or is the pursuit of outside interests (social media, television, book writing, appearances, etc.) permitted?

Once you have made the leap into the restaurant world and begun the process of identifying investors, locating and possibly securing a location (a topic for a separate article in and of itself due to the myriad issues associated with leasing, rent, licensing, and permitting), and creating the design and development of the restaurant and the restaurant concept, it is time to begin the search for an executive chef. That search can lead you in many directions, provided that you are in control—that you know your restaurant’s mission and you know the type of cuisine you desire to serve.

For example, are you the kind of owner who wants a “separation of power” between the kitchen and the restaurant management, or do you want to have input into kitchen operations? Many chefs, unsurprisingly, want control over the kitchen. This is their “office,” their “creative laboratory.” They want the ability to hire and fire their critical kitchen staff such as the sous-chef, line chefs, pastry chefs, and other key kitchen employees. Many want control or input over the sourcing of ingredients—everything from local markets to fish and meat purveyors. All want control (in varying degrees) over the menu—not only over what is offered, but also its look and feel. Navigating this relationship with your chef—allowing your chef the degree of independence that he/she desires while maintaining some control over your restaurant and its kitchen—is a careful balancing act that takes time to get accustomed to, and then to master.

Once you have established the framework for your business relationship with your chef, you must take into account the legal issues that pertain to your chef's employment, including its terms. Opening a restaurant is a long-term commitment—one that historically does not pay immediate dividends. As an owner, you will want and need a commitment from your chef that he/she is committed to employment exclusively for you for a period of time. Like any employment arrangement, however, your chef’s employment should be terminable in the instance of certain bad acts (misappropriation, felony, embezzlement, fraud, willful misconduct, and gross negligence are examples of grounds for termination found in many employment agreements).

A second consideration is whether your chef should have an equity interest in your restaurant. Oftentimes heavily negotiated, this interest can range from a full partnership at the outset of employment to a growing interest that vests over time. The amount of the equity interest awarded to your chef, the vesting of that interest, and the economic terms of that interest (as well as the purchase price, if any) are all considerations taken into account at the time of negotiation of your chef’s employment agreement.

Thereafter, with those key business terms negotiated, you must hold a discussion of expectations. Are you the type of owner that expects his/her chef to work exclusively in the kitchen, or do you want your chef to also focus on marketing his/her name and the restaurant brand? As your restaurant brand grows, do you want your chef to increase recognition of the brand and himself/herself by means of social media, speaking engagements, literature, television appearances, and the like? How much time do you want your chef spending on marketing? Do the proceeds of his/her efforts flow through to the restaurant, or are they retained by your chef? Today, more than ever, this is an important discussion to be held with your chef.

Further, you must set your expectations for your chef regarding the time during and after his/her employment with your restaurant(s). Will your chef work exclusively for you, or will you permit your chef to “freelance” for others when not in your kitchen? (For example, your chef may want to participate in private dinners and affairs.) Do you expect your chef to be precluded from competing with your restaurant in the case of his/her termination? If yes, for how long, and in what territory or proximity to your restaurant? Will this prohibition encompass all styles of cuisine, or just the cuisine served by your restaurant?

Finally, the issue of ownership of recipes must be discussed before hiring a chef. Restaurant owners typically take the position that all recipes are owned by the restaurant, while chefs, at times, may take the position that recipes they developed prior to employment are theirs, and do not belong to the restaurant. Clearly defining ownership of recipes is critical to avoid future conflict.

Embarking on a restaurant investment is an exciting and potentially very rewarding endeavor; however, it requires a great degree of advance consideration and forethought. It's critical to clearly define your business partnership with your chef and your respective expectations for the relationship before it begins. Finding the right balance between each of your expectations and goals can lead to a very long and profitable business relationship and friendship, which can be as rewarding and satisfying as a savory dish of your favorite meal!

The opinions of contributors are their own. Publication of their writing does not imply endorsement by FSR magazine or Journalistic Inc.

Jordan Fisch

Jordan A. Fisch is co-chairman of Cole Schotz's Corporate Department and a member of the Real Estate Department and Real Estate Special Opportunities Practice Group. Jordan’s corporate practice consists of counseling buyers and sellers in merger and acquisition transactions, issuers and investors in debt and equity offerings, and lenders and borrowers on both secured and asset-based credit facilities. Jordan’s practice also includes counseling many closely held and family-owned businesses, providing those businesses with general corporate advice.

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