Restaurant Receivership Services in Dallas, Texas, and Nationwide
Many experienced receivers avoid or outright decline appointments as a receiver for restaurant and bar operations. I welcome and enjoy such appointments. As outlined in my curriculum vitae (CLICK HERE to download), I have served as a receiver for many restaurant operations. These appointments have included, among others, high-volume burger concepts, family-owned Mexican restaurants, and start-up Asian food concepts.
I have a ready pool of talent available to me to bring into a restaurant receivership appointment who have decades of food service experience. My goals as receiver are to:
- preserve and protect the business pending the outcome of the underlying litigation;
- recover, grow, and operate the business profitably; and
- facilitate settlement of the underlying litigation by finding long-term solutions to the sources of the conflict that often cause litigation.
Nature of restaurant receiverships:
These appointments can be quite challenging as they require heavy emphasis on cash management and personnel problems. These businesses often find themselves in receiverships because of a dispute among ownership over the direction and “vision” of the business. Almost always there are accusations of mismanagement, if not outright theft by one stakeholder or owner against another. The underlying litigation often pits one family member against another. Restaurants are people-intensive, relationship driven businesses; they are the very opposite of an appointment as a receiver over a static, empty office building. After gaining control and establishing safeguards for the business, in my opinion and experience, a restaurant receiver should begin looking for ways to facilitate the resolution of the underlying conflicts that gave rise to the need for the receivership in the first place.
Establishment of immediate cash controls:
Restaurants and bars, particularly at the time of the appointment of a receiver, are very fragile businesses that can quickly accelerate toward failure if immediate steps are not taken to preserve the business. Immediate steps must be made to secure cash and revenues, particularly tracing of credit card deposits into accounts tied to the restaurant’s POS (point of sale) system. To facilitate a successful transition into a receivership, a cash control system must be implemented within hours of the appointment. Accounts must be taken over or new accounts created. A minimum operating balance is established with limitations on what can be spent by select key employees with the remainder of the funds beyond that operating balance deposited and segregated into a separate account to which only the receiver has access.
Retaining key employees:
A restaurant is a “service” business. Restaurants cannot survive, much less thrive, without talented, motivated, and experienced employees. An immediate evaluation, again within hours of appointment, including face-to-face interviews, must be made of key employees to determine whether they should be retained with the business. Many times the owners, the parties to the conflict, are in dispute over key management employees. Sometimes, key management employees are clearly aligned with one party over another party. Sometimes, this situation can be managed, but this situation but may be untenable and require change. In a receivership setting, employees are always insecure about their future and always fear the appearance of taking sides in the underlying dispute between the owners. They must be reassured, and employment contracts may need to be created with retainage bonuses to adequately incentivize a key employee to remain with the business.
At the time of the appointment of a receiver, there are relationships with key supply vendors that are strained and damaged, usually due to non-payment or slow payment, that must be addressed and repaired. Many times the business has been placed by key vendors on a cash payment basis only, meaning all deliveries of food or alcohol must be paid for with cash. Vendors must be reassured and workouts on outstanding balances negotiated.
Liquor License Issues:
Many restaurants placed in a receivership have a liquor license, and the sale of alcoholic beverages is essential to the profitability of the business. If the operation has a liquor license, there are a number of special issues that must be addressed when a receiver is appointed. In Texas, for example, the County Judge must immediately approve a temporary transfer of the license to the receiver. A receiver cannot legally renew a liquor license. It is imperative to determine at the outset of a receivership, or even better – during contemplation of a receivership – when the liquor license is due to be renewed. If the need for renewal is likely during the pendency of the receivership, the issue of license renewal can be, and should be, addressed in the form of the receivership order.
There are also times when a restaurant cannot be operated profitably despite the best efforts of a receiver. A receiver may be forced to file a motion for liquidation and/or sale of the business. In some instances, a Court may at the outset order a receiver to liquidate a restaurant business. The liquidation and/or sale of a restaurant can be challenging. Restaurants and bar operations typically have as their primary asset associated goodwill. This goodwill has to be properly marketed. Many times, particularly with a long-term lease that is current or can be made current, restaurant location leases can be assets rather than liabilities, particularly with proper marketing. It is imperative that appropriate qualified professionals be retained by a receiver to properly market the assets or ongoing operations of a restaurant.
Keys to success:
The key to success for a restaurant receiver is to have at his or her disposal at the ready a team of food industry specialists who can step in immediately to rescue, resurrect, and restore the business. Over the years, I have developed just such a pool of talent. Ready, cost-efficient talent at competitive industry rates who can step in on an emergent basis is the ultimate key to success for a restaurant placed into receivership. I would appreciate your consideration in the future in the event you have before you a case that may require the appointment of a receiver.
We provide a free initial consultation to every client. To arrange a meeting, contact us online or call our office at (214) 378-9500. We understand your busy schedule and will meet with you after traditional business hours, if necessary.