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Nate Riordan Named 2020 Seattle Super Lawyer

May 13, 2020

Nate Riordan | 2020 Seattle Bankruptcy Super Lawyer

Franchise and business law attorney Nate Riordan was named a 2020 Seattle Super Lawyer, an honor bestowed on only 5% of the lawyers in Washington each year. This is the 2nd year in a row Nate has been named a Seattle Super Lawyer for his outstanding work in bankruptcy law.

Super Lawyers® selects attorneys using a rigorous, multiphase rating process. Peer nominations and evaluations are combined with third-party research. Each candidate is evaluated on 12 indicators of peer recognition and professional achievement. Selections are made on an annual, state-by-state basis. Super Lawyers® is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement.

About Nate Riordan

Nate Riordan received a B.A. with honors from the University of Wisconsin – Madison in 1992 and graduated cum laude from the University of Minnesota Law School in 1998. Nate practiced law in Minneapolis until 2004, where he practiced in the areas of corporate bankruptcy, workouts, restructures, finance, franchise and corporate and transactional law. In 2004, Nate moved to Seattle and has practiced there ever since.

Nate practices in the areas of:

  • Multi-Unit Franchise
  • Leasing
  • Transactional/Mergers & Acquisitions
  • Corporate/Partnership
  • Commercial Leasing / Sale-Leaseback
  • Franchise Representation
  • Master Franchisor / Area Developer Representation
  • Debt Restructure / Workout
  • Finance
  • Commercial Bankruptcy

Stress Management Tips for Small Business Owners During a Pandemic

April 24, 2020

Stress Management Tips for Small Business Owners During a Pandemic | Bankruptcy Attorney Nate Riordan

We are one month deep into the COVID-19 pandemic and many businesses are feeling the strain of mandatory closures, reduced foot traffic and the prospect of a recession if we’re unable to stem the financial bleed. All these factors can create an underlying and unrelenting amount of stress. But as some business owners know, stress has many negative impacts–psychological, physical, and even financial.

Stress Management Tips for Small Business Owners

Stress can make it harder to think clearly and to strategize a way forward but it can also weaken your immune system making you more vulnerable to illness. This is why we want to offer you a few stress management tips for small business owners to maintain calm and order while wading through this pandemic’s river of chaos.

1. Create A New Routine To Match Your New Life

If you were thinking about “getting back to normal” that is simply not possible right now. Nothing is exactly normal as this novel coronavirus sickens thousands and workers are forced to do business from home as they maintain physical distance between themselves and other people. During this time, having a routine is more important than ever for reducing stress but you will need to create a routine that takes into account how your situation has changed. If you’re working from home this is especially important. You will need to coordinate your routine with your spouse, children, and other housemates. Ask the following questions:

• Where will I and my spouse/partner work during the day? You both need to agree on how you will share the space. Having a clear understanding will reduce the number of arguments you have about how the home is being used.

• When will I work? Decide what “office hours” you will keep and stick to that schedule daily. Sporadic or excessive hours can exasperate your anxiety about being productive.

• How will I interact with my kids? It can be a shock to the system to have your kids suddenly at home all of the time. You need to decide when you will spend time with your kids and when they will need to entertain themselves. Don’t feel obligated to fill all of your free time with your children. It’s healthy for everyone to have some “me time.”

• When and where will I get physical activity? The gyms are all closed so you need a new exercise routine. Determine now which days/times you will work out and make sure you have a dedicated space where you can do that.

2. Maintain Strong Boundaries

If you’re working from home, you need to maintain strong boundaries with your family and your job.  Here are a few tips:

• Create a dedicated workspace. Your designated workspace should be off-limits to others. When people “borrow” and lose the tools you need to work, it can be infuriating. Don’t get your blood pressure boiling, get everyone in your household on the same page now. Everyone must be informed about what they can and cannot access in your workspace. Ideally, you should have a room or desk that is a “no-go” zone for others. If that’s not possible because you have limited space, you should have a list of items that people cannot touch such as your computer, phone, and work files.

• Don’t tolerate interruptions. As mentioned earlier, you must maintain a work schedule but you should also have no tolerance for interruptions during work hours. Think about it, would your kids call or show up to your job to ask what you’re cooking for dinner? No? Then don’t tolerate these types of interruptions when you’re working from home.

• Clock-in and clock-out promptly. Keeping good boundaries around your work hours is critical to reducing your stress levels. If you sit around and procrastinate all day watching cat videos or following the latest COVID-19 news, you will never get anything done and you will be stressed about it. Don’t do that to yourself, keep to your schedule, make a list of critical tasks to complete and do your job just like you would if you were at the office. On the flipside of that, don’t do a lot of 14-hour work benders that will just stress you out, burn you out, and send you to the hospital because you’ve become sick. Stick to your schedule and do your job in an efficient manner.

3. Care For Your Physical and Mental Health

Maintaining a healthy exercise routine, a nutritious diet, and a relaxation schedule is critical to reducing stress. Healthy habits help to keep your immune system strong. It will also give you the physical and mental stamina to deal with the chaos and small ‘dumpster fires’ that are inevitable when in the middle of a pandemic. It’s up to you to keep yourself in the best physical and mental condition.

4. Don’t Allow Short-Term Chaos To Create Long-Term Failure

Don’t allow short-term chaos to create long-term failure by failing to stick to your long-term business plan. If you did your proper planning, your business should have some protocols for dealing with emergencies, this is the time to implement those protocols. This is not the time to panic and start making decisions out of fear. Stay the course and make adjustments as necessary but don’t abandon your long-term vision.

Best Practices For Creating A Successful Home Office

As governors require non-essential businesses to close their doors, many workers are being forced to work from home. At home, many workers are finding all kinds of challenges—rambunctious kids, bad internet connections, and a simple lack of space that threatens their productivity. In this short and simple guide, we will explore some of the best practices for creating a successful home office.

Strong Boundaries

If you are not living alone, having strong boundaries with your family or housemates is critical to working out of a home office.

• Create a dedicated workspace. Your designated workspace should be off-limits to others. If you can put your home office in a room that no one else has access to, that would be ideal. If you have a lock on the door, use it. This is not about not trusting your family or housemates but it is about protecting your business from people who may do unintended harm by borrowing your tools or damaging equipment. If you don’t have a separate room, cordon off a space that will be designated as “the office.” If this space is in the open, consider locking your computer and sensitive business files in a cabinet when not in use. Everyone in your household must be informed about what they can and cannot access in your workspace.

• Don’t tolerate interruptions. You should have no tolerance for interruptions during work hours especially when on Zoom or telephone calls. Nothing is more embarrassing than having your toddler wandering into your office talking about inappropriate things while you are in a Zoom business meeting. If you have small children, there should be someone supervising them while you work—we will discuss more about that later.

• Coordinate with your spouse. If you and your spouse are both working at home, you need to talk with them to come to an agreement about how this will work. The last thing you want is a bunch of arguments about space, internet bandwidth, noise, and access to equipment. You need to iron all of these details out right now. For example, who will get access to the one private room in your home? When possible try to share prime space so that neither of you is feeling left out or disrespected. When coordinating how you will set up your home office workspace, compromise is the most important thing to do.

• Manage your children. This is a big issue for many people working from home, especially if you have small children. If your children are under the age of 10, you might consider hiring a digital babysitter. Some child care providers are taking their services online. Many of them have age-appropriate activities that can keep the child occupied for about an hour. Do not expect your children to remain engaged with a babysitter via zoom for 2 or 3 hours, it’s not going to happen in most cases if they are young. Consider hiring digital babysitters for when you need quiet time for business meetings or some concentration heavy task. When looking for a digital babysitter, you should first check in with your current child care service and ask if they have digital babysitters. If not, reach out to your personal or professional network for recommendations only as it will be difficult to verify the quality of the babysitter if they have not been recommended by someone you trust.

Here are some other tips for keeping your kids occupied:

• Create a homework schedule. Schools are closed but most students are still expected to study and complete assignments. Make sure that your kids are working on schoolwork during your work hours and consider hiring digital tutors for subjects where they struggle. Once again, if you’re going to hire a digital tutor, get recommendations from your personal and professional network or from the school.

• Let them play videogames. Yes, it’s preferable for them to go to the park or play outside but if you can’t supervise them, consider allowing them some game time during the day. Age-appropriate videogames will keep them preoccupied for hours, just make sure that they complete their homework first.

• Fun hobbies. If there are things that your kid likes to do such as draw or read, consider giving them projects to do while you work and then reward them for completing those tasks without interrupting you.

Good Location

When you create your home office workspace, you need to pick the right location and make sure that it is set up for maximum comfort and efficiency. Here are a few things you should consider:

• Space
Whatever location you choose for your home office, it needs to have enough room for all your tools, at least the things you will use daily. You can always store less frequently used items in another room.

• Noise level
While it’s probably impossible to get a location that has no noise, it’s important that your workspace have relatively low noise levels especially when doing work-related phone/Zoom calls.

• Light
You need enough light to read your papers and find the things you need. But you also don’t want to get so much sunlight that you are squinting for half the day. If you work near a window, make sure that you can lower light levels when it gets really bright outside. You should also have lamps that you can easily reposition and turn on/off. If possible, install dimmers so that you can have as much control over your light as possible.

• Access
Who has access to this location? Is it a high traffic part of your home? If possible, choose a location where you can keep others out or an area that has very low foot traffic.

Solid Internet

Have you been having more internet connection issues lately? It’s not your imagination. Some households are experiencing a lot of latency issues, dropped Zoom calls and even internet outages. Here’s the thing, if your kids are playing Fortnite, your spouse is streaming a Zumba exercise, and you are doing a Zoom call it may be too much for your internet service to handle. You may experience very slow internet connections, dropped calls, and even an outage. You need a backup plan. Here are some tips:

• Purchase the best home internet you can afford. You won’t regret this investment as it will reduce the amount of latency issues you experience when everyone is using the internet.

• Consider purchasing a Wi-Fi hotspot. This will allow you to have a dedicated Wi-Fi connection just for your home office.

• Consider using your cell phone as a WiFi hotspot if you have a temporary home internet outage. But only do this if you have unlimited data, otherwise, you may end up with an unpleasant bill next month.

Professional Clothes

It can be easy to fall into the rut of spending your workday in your pajamas or workout clothes. Don’t do it. Each day you should get dressed as if you are going to the job. No, you do not need to wear a formal business suit every day at home but you should consider it for Zoom calls if that’s what you would normally wear in the office. As for your everyday home office wear—go business casual. Wear something clean and comfortable, something you wouldn’t mind your coworkers seeing you wear.

As you confidently set up your home office, don’t allow fear or panic to guide you. Make sure that your home office serves your business needs and create a household agreement with our family that respects the important function your work provides.

There are some things you simply cannot control. But one key way to manage stress is to take action to organize and calm a stressful environment. Our stress management tips for small business owners, best practices on creating a home office and tips for keeping the kids occupied while social distancing can help you maintain calm and order.

Contact the franchise and business law attorneys at West Coast Franchise Law today at (206) 724-0846 to discuss your situation.    

Nate Riordan on The Pillars of Franchising Podcast

April 17, 2020

Nate Riordan, franchise attorney and founder of West Coast Franchise Law, was a guest on The Pillars of Franchising podcast.

WATCH: Emergency Advice for Your Franchise During the Coronavirus Pandemic:
What to Say and Do With Your Landlords, Lenders, Franchisor, Taxes and Employees

How Franchises Can Weather the Coronavirus Storm

Your lease is probably the single most important consideration for franchise businesses to weather the coronavirus storm.
You need the lease when you return.

–> Free Download: Emergency Forms for Your Lease or Leases For the Postponement or Abatement of Rent

Contact the franchise and business law attorneys at West Coast Franchise Law today at (206) 724-0846 to discuss your situation.   

10 Do’s and Don’t When Talking to Your Landlord About Rent Relief

April 10, 2020

10 Do's and Don't When Talking to Your Landlord About Rent Relief | Bankruptcy Attorney Nate Riordan

PLUS: How Franchises Can Weather the Coronavirus Storm

Your lease is probably the single most important consideration for franchise businesses to weather the coronavirus storm.
You need the lease when you return.

–> Free Download: Emergency Forms for Your Lease or Leases For the Postponement or Abatement of Rent

10 Do’s and Don’t When Talking to Your Landlord About Rent Relief

1. Do reach out to them. Let them know what is going on and whether you can pay the rent. Do this even if you cannot pay anything.

2. Do make a request. Ask the landlord for what you want them from them in terms of rent relief. How much are you asking to rent or abate? How much are you asking to be deferred or postponed?

3. Do agree to repayment of some kind if you are talking about deferring rent. If you don’t agree upon the exact terms, at least push out the date at which repayment will start for at least 90 days.

4. Do be aware that these terms may need to be revisited and share with the landlord that you “hope we don’t have to revisit the conversation!”

5. Don’t act unilaterally if you can help it. If the landlord won’t or can’t respond and you just have not got the money, then you don’t have a choice. But even if your intention is to send nothing, advance notice and conversation can go a long way.

6. Do have a plan and communicate that plan. A plan for getting re-opened, a plan for operations with reduced expenses, a plan for asking other stakeholders for help reducing expenses, even a plan for making a plan (if you have no plan).

7. Do communicate the details of your situation. There’s no need to overdo it, but landlords will want to know – what are you seeing? Slower paying customers? Fewer orders? Total stoppage? There’s both anxiety and curiosity at play here while the details get sorted out and everyone tries to identify significant information.

8. Do address the emergency assistance from the SBA as part of your plan. Are you applying? Will the funds get here quickly enough? Landlords need to know that while you intend to apply for one program or have applied for another you don’t have funds yet.

9. Do get it in writing. Make sure the details of anything you agree upon are written down and signed.

10. Don’t forget your landlords are human and stressed out too. They’ve got mortgages and business themselves.

BONUS – DON’T FORGET TO THANK YOUR LANDLORD. A handwritten note is never a bad idea.

Contact the franchise and business law attorneys at West Coast Franchise Law today at (206) 724-0846 to discuss your situation.   

Free Webinar: Coronavirus Crisis Strategy for Franchise and Small Business Owners

April 2, 2020

Free Webinar: Coronavirus Crisis Strategy for Franchise and Small Business Owners

Emergency Advice for Your Business During the Pandemic

What to Say and Do With Your Landlords, Lenders, Franchisor, Taxes and Employees by Nate Riordan, Franchise and Business Law Attorney: West Coast Franchise Law

In this free webinar, Nate Riordan, an insolvency and franchise attorney with over 22 years in restructuring and bankruptcy, will bring his experience to bear and offer advice on common financial problems facing businesses during the pandemic and answer questions about what to do and what not to do during this trying time. While the circumstances are new, conversations with lenders and landlords about financial distress are not new or different.

SPACE IS LIMITED – SIGN UP EARLY
REGISTRATION IS REQUIRED 

Free Webinar Registration 

• Monday, April 6
• 11am – 12noon PDT
• Register Here

🔥Please forward to someone who may find this helpful! 

Tune in and listen to Nate:

• walk you through how to think about and approach hard conversations
• answer common questions about asset protection and bankruptcy
• tell you it just isn’t time to file bankruptcy yet

While there are no silver bullets, you will feel informed and reassured about the things Nate will discuss with you.

The webinar closes with Q&A with Nate.

Contact the franchise and business law attorneys at West Coast Franchise Law today at (206) 724-0846 to discuss your situation.  

Insights On the SBA Disaster Loan Application Process

March 25, 2020

One of the professionals in our network reached out to a great SBA loan originator and got some on the ground insight into the SBA disaster loans. It’s not surprising that things aren’t going smoothly as they ramp up a new program with huge demand and lots of questions. Here are some takeaways:

Disaster relief loans are a mess.
The online application process is overwhelmed. Savvy would-be borrowers are going on at 3 am and are prepared to be there for several hours. There isn’t a way to save your application and get back on later. Once you start, you need to finish or your work will be lost.

Be prepared.
It’s a loan application. Have your financial statements, tax returns and proof of expenses like payroll and rent ready. Our advice from the firm – 3 years tax returns, 3 years profit and loss and balance sheets, copies of a recent payroll run, a rent invoice or even your entire lease are what we recommend.

Get ready to be patient.
No one currently has a handle on the timeline for approval.

No one has a sense of how important your current ability to repay might be. In other words, apply for the loan, even if it isn’t clear if you can qualify.

If you have existing loans, immediately ask for payment deferrals.

It’s not clear how repayment terms will be set.

Ask for what you need or a little more, but don’t overreach. What you request should be tailored to your demonstrable need.

We’ll update as often as possible.

Contact the franchise and business law attorneys at West Coast Franchise Law today at (206) 724-0846 to discuss your situation.  

 

COVID-19: What Are The Current and Potential Economic Costs?

March 24, 2020

coronavirus economic costs COVID-19 | What Are The Current and Potential Economic Costs? | Nate Riordan Seattle Franchise Attorney | West Coast Franchise Law

Each day that the coronavirus pandemic continues we receive more news of its devastating economic impacts not just in the U.S. but around the globe. Stock markets plunge, businesses close, and ordinary people are losing their jobs temporarily or permanently. The ramifications of the coronavirus will be felt long after the virus has been stopped—months and even years later. Here are some of the most probable economic costs of the current pandemic.

Revenue Loss
As governments around the U.S. and the globe mandate shops of all kinds to close and restrict the number of customers in their physical locations, cashflow is becoming a trickle or stopping completely. State mandates and consumer fear will drive some businesses to financial ruin even as others thrive. In the next six months to a year, we could find many previously strong businesses unable to pay their debts or even pay the daily operating costs required to maintain their business.

Worker Absenteeism
As more workers get sick or self-quarantine, some businesses won’t have enough people to operate normally even if they have enough orders to stay afloat. This is a real risk in the grocery retail industry as the public strips shelves bare due to panic food stockpiling. Grocers can’t restock the shelves fast enough because they don’t have enough workers available. Some grocery stores have reduced their open hours to give workers more time to restock shelves.

Supply Line Disruption
Even for those businesses that have a healthy flow of customer purchases, panic buying and worker absenteeism due to illness and quarantine could threaten the efficiency of supply lines. Instead of getting supplies in a few days it may take weeks to get an order filled by suppliers. If this happens, some customers may seek out other businesses to fulfill their needs.

Business Closure
The consequence of this pandemic is that some businesses will need to close their doors. But for those who can hold on just long enough to survive, they may benefit from restructuring their debts in bankruptcy and giving their business another chance at thriving.

Government Stimulus
The U.S. government has finally begun taking action to protect businesses. The Small Business Administration (SBA) is offering loans to businesses impacted by COVID-19. “These loans may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid because of the impact of COVID-19. The interest rate is 3.75% for small businesses without credit available elsewhere and 2.75% for nonprofits. Businesses with credit available elsewhere are not eligible for this program,” the news release states. And some states are providing small grants to retail establishments who have been directly impacted by the pandemic. New forms of consumer and business relief are being proposed on a nearly daily basis during this evolving crisis.

What Can You Expect?
If you have a business that is closed and cannot operate remotely, we have no doubt that this is extraordinarily stressful and that it is very much uncertain whether you can emerge from this with an intact business.

We are happy to get on the phone with you and discuss options. Having your questions answered—or if they cannot be answered, having the opportunity to kick things around—may be helpful to you. What we are generally telling businesses worried about survival is that the best course is likely to no action at this time–just wait, while trying your best to not go into a deeper hole. Conserve cash. Reduce expenses, including laying off employees or even temporarily closing up as necessary. It is really unlikely that we are going to recommend “Bankruptcy Now.”

Everybody is on this sinking ship—debtors and creditors alike. For creditors who want their money, there are no good options. Suing is pretty much pointless right now. Landlords and banks have few options. Kicking a tenant out means an empty building. The Washington State Supreme Court yesterday directed that all non-emergency civil matters in state courts be postponed to at least April 24.

It may be that when we emerge on the other side of this, creditors are in a mood to negotiate and not litigate. Debts may get compromised and/or paid out over time without any need to resort to the bankruptcy courts. Or not. We do not know and because this is uncharted territory, we can’t predict.

For now, let us know if you want to set up a call to talk about how to handle angry creditors, how to decide what to pay or not pay, etc.

Contact the franchise attorneys at West Coast Franchise Law today at (206) 724-0846 to discuss your situation. 

Is Your Franchise Business Closed Due to the Coronavirus?

March 21, 2020

Coronavirus Closings: Is Your Franchises Business Closed Due to the Coronavirus? | Franchise Attorney Nate Riordan

If you have a franchise business that is closed and cannot operate remotely due to the coronavirus closings (COVID-19), we have no doubt that this is extraordinarily stressful and that it is very much uncertain whether you can emerge from this with an intact business.

We are happy to get on the phone with you and discuss options. Having your questions answered—or if they cannot be answered, having the opportunity to kick things around—may be helpful to you. But what we are generally telling businesses worried about survival is that the best course is likely to just wait, while trying as best you can not to go into a deeper hole. Conserve cash. Reduce expenses, including laying off employees or even temporarily closing up as necessary. It is really unlikely that we are going to recommend “Bankruptcy Now.”

Everybody is on this sinking ship—debtors and creditors alike. For creditors who want their money, there are no good options. Suing is pretty much pointless right now. Landlords and banks have few options. Kicking a tenant out means an empty building. The Washington State Supreme Court yesterday directed that all non-emergency civil matters in state courts be postponed to at least April 24.

It may be that when we emerge on the other side of this, creditors are in a mood to negotiate and not litigate. Debts may get compromised and/or paid out over time without any need to resort to the bankruptcy courts. Or not. We do not know and, because this is uncharted territory, we can’t predict.

For now, let us know if you want to set up a call to talk about how to handle angry creditors, how to decide what to pay or not pay, etc.

Contact the franchise attorneys at West Coast Franchise Law today at (206) 724-0846 to discuss your situation. 

Yum! Brands Acquires Habit Burger

March 12, 2020

Yum! Brands Acquires Habit Burger | Nate Riordan | Franchise Attorney

Yum! Brands, the parent company of KFC, Taco Bell, and Pizza Hut is acquiring the niche restaurant, Habit Burger for $375 million. The acquisition is poised to take Habit Burger to new heights, far beyond their 300 locations in the United States (company-owned) and China (franchises). Already the largest restaurant company on the planet, Yum! is poised to give Habit Burger access to resources they would be hard-pressed to secure operating alone. Here are some of the ways that Habit Burger with benefit from being acquired by Yum! Brands.

Money
With the right combination of capital and strategy from Yum!, Habit Burger can potentially improve their customer offerings, expand locations, invest in quality personnel and grow their business from a niche operator to an international powerhouse.

Infrastructure
Yum! Brands knows the restaurant business. They are the parent company of international brands such as KFC and Taco Bell so they already have the infrastructure to quickly scale Habit Burger from a few hundred locations to thousands. They have the experience, tools and connections necessary to successfully expand Habit Burger globally. Small niche restaurants may have a deep understanding of local markets but once they go beyond that they may be limited. They either don’t have access to accurate information about national and international markets or they can’t afford to hire the people who are experienced enough to pull off expansions. If Habit Burger wants to expand rapidly, they have access to Yum! resources and know-how to make that possible.

Branding
Yum! Brands has a track-record of taking brands to difficult markets.  Habit Burger will have access to Yum! branding resources that will help them position their marketing messages in the best way for specific locations. Because Yum! has such a deeply resourced marketing system, they can quickly create, test, and deploy marketing campaigns across global markets and get quick and accurate feedback about their effectiveness. This type of strong feedback loop is rare for niche restaurants who are trying to go it alone in the international market.

Franchising
Right now, most of Habit Burger’s locations are company-owned. Yum! has 49,000 stores in 145 countries which comes with a franchise network with which to partner for expansion. Expansion is already on the table as Habit Burger has announced they plan to expand to 2,000 locations globally. This simply wouldn’t be possible without the Yum! franchise network and their access to credit and financing.

Growth
While Habit Burger is small relative to Yum!, the acquisition does offer some long-term growth opportunity for the large restaurant company. This is Yum’s first foray into the burger business and it could offer more opportunities for growth nationally and internationally.

Deepening The Brand
As Yum! continues its global expansion, building its burger franchise brand will deepen its connection to consumers as “burgers” are closely connected to the idea of what is “American.” And the American brand is still very popular globally. Many global consumers want to have a taste of American foods, eating burgers is one popular way to do that.

Good For Investors
Habit Burger is a strong brand. Buying into that strong brand is good businesses for investors who will benefit as Habit Burger expands and increases its customer base.

Potentially Challenging For Franchisees
Yum! franchisees wanting to diversify into hamburger concepts are now probably confined to Habit. Because Habit has so few locations, the opportunity to own multiple locations will only exist if the franchise is willing to invest significant resources and capital to development. This comes at a time when Yum!, like many large brands, is requiring a lot of development from its franchisees.

 

What You Need To Know About Opening A Ghost Kitchen

March 5, 2020

Burgers Sign: What You Need To Know About Opening A Ghost Kitchen | Nate Riordan | Franchise Attorney

Ghost kitchens are fast becoming the new frontier for restaurants wanting to expand their market share. Low costs for real estate and staffing are attractive features of a ghost kitchen but so too is the “delivery only” business model. As food delivery apps become more popular with diners, brick-and-mortar restaurants can find it difficult to keep up with demand especially during busy times during the day. But since ghost kitchens don’t have any dine-in capacity, they’re the perfect model for doing a delivery-only restaurant. However, there are some legal and practical considerations you need to make when you’re opening a ghost kitchen franchise and/or dealing with a third-party delivery service.

Serve Sturdy Meals

If you’re running a ghost kitchen with a delivery-only menu, make sure the items you sell can survive the delivery trip. You don’t want to sell delicate dishes that will arrive smashed or crushed. And you don’t want to sell items that can easily spoil.  If your menu isn’t filled with items that are a good fit for this delivery-only model you could find your business quickly overwhelmed with customer complaints or even lawsuits if spoiled food makes customers sick.

Get Customer Data

If you’re looking to open a ghost kitchen franchise, you should only work with experienced franchisors who have customer data that will tell you what works and what doesn’t. Ghost kitchen franchisors should have a solid track record of profits and be connected to food delivery apps that will continue to collect pertinent customer data as the business grows. This data will help you forecast what customers really want and how they are responding to your product. Remember, the ghost kitchen industry, just like the traditional restaurant industry is subject to the changing tastes of customers—you need to have the right data to forecast and respond to those changing tastes.

Choose A Good Location

If you’re opening a ghost kitchen franchise, you’re at an advantage when it comes to leasing a space. Leases are typically shorter for ghost kitchens (10-15 years) and more affordable. Just make sure that you’re in a location that is close enough to your target market that food can be delivered quickly.  Try to get a location that is close to lucrative areas such as office parks, college campuses, and wealthy neighborhoods.  Also, be sure that you understand historical traffic patterns and sports or cultural events that could impact sales and access. You don’t want to open a ghost kitchen on the outskirts of town only to discover that it takes you an hour to deliver food every week because of the traffic from sports events.

Gain Online Visibility

When you have a brick-and-mortar restaurant, you can rely on foot traffic as a way to advertise your business. But ghost kitchens will need to rely on online visibility. This type of visibility won’t come cheap and there will be a lot of competition. Before you sign a franchise agreement for a ghost kitchen, make sure that there is a solid and sufficient marketing plan. You don’t want your business to be buried by the competition just because they’re more marketing savvy than you. You must have an online presence on the most popular third-party delivery apps available and you must have a plan to protect your reputation.

Negotiate Third-Party Delivery Agreements

When you open a ghost kitchen, third-party delivery agreements are just part of the process. But you will need to consider a few legal and logistical questions:

  • Who will be ultimately liable for food that arrives extremely late (and cold)?
  • Who is liable if food safety hasn’t been maintained during delivery and a customer gets sick?
  • Do you have tamper-proof packaging to ensure that your food is delivered the way you intended?
  • Does the third-party delivery service charge the customer a service fee? If so, how will this impact the royalties you pay the franchisor?
  • Does the third-party delivery service charge more for your food on their platform? If so, how does this impact your franchise agreement?
  • What is the service area of the third-party delivery service? Does that service area conflict in any way with territorial boundaries in your franchise agreement?

As you explore their-party delivery options, make sure that you negotiate menu prices, delivery methods, routes, prices and the use of your trademarks and logos. You should also consider negotiating an exclusivity agreement where the third-party delivery service provider does not deliver food for restaurants that are in direct competition with your business.

If your business is a franchised restaurant, legal and contractual constraints exist around whether you can open a ghost kitchen.  Those constraints vary depending on the terms of your franchise agreement, the franchise systems policies with respect to whether you can open a ghost kitchen and the franchise system’s policies. Please consult with us right away if this is your situation and this is something you are considering!