Meta-title: Restaurant Partnership Agreement
Introduction
Various new restaurants elect to enter into restaurant partnership agreements with others. The selected partners often have the required finances and skills to steer a restaurant business towards success. Though such partnerships could be easily sealed with handshakes, it is advisable to have a binding restaurant partnership agreement. The agreement ensures that the business operations are efficient. It also ensures that the persons involved have their responsibilities and rights clearly outlined.
Authorities and duties
A restaurant partnership agreement ought to include what every partner will bring to the table. One of the partners may be responsible for the start-up capital that is required to secure the equipment and facilities. Another partner could also be tasked with the daily operations of the restaurant once it is opened. The restaurant partnership agreement should also clearly spell out the partner in charge of every section of the business. This aids in avoiding conflicts, for example, different partners feeling they have the right to fire the cooking staff.
Division of stakes in the business
In the absence of a restaurant partnership agreement, ever partner could be personally liable for the business’s debts if things went south. A restaurant partnership agreement should thus include the stake of every partner. This relates to both the division of profits and evaluation of losses. For instance, in a limited partnership, a partner may contribute capital to the restaurant and share in the profits. However, such partners may be prevented from taking management roles and incurring liability for any debts that are beyond their initial investment.
Admission and dissolution
An effective restaurant partnership agreement should also detail how the new members are admitted. It should also outlie the procedure to be followed when one of the partners wants to leave. Further, restaurants may need extra financial banking hence the need for creditors. The restaurant partnership agreement should thus outline whether the new members could be admitted by a majority vote or supermajority of if any of the additions need unanimous consent.
Also, a restaurant partnership agreement should include what exactly happens once a partner resigns. The existing partners could be prioritized to purchase the shares. Moreover, the value of the partnership should be determined since the initial investments could increase or decrease in terms of value over time.
Protecting interests
Settling terms is a significant part of the process but is meaningless if they can not be carried out. In order to protect interests in a restaurant, the restaurant partnership agreement should clarify on how the remaining partners should find a buyout. Basically, there ought to be established credit or capital available to do so. If one of the partners dies or is incapacitated, the situation becomes more complex.
Often, the best solution is for every principle to be covered through “key person” insurance that pays disability or death. Depending on the needs and insurance selected, the proceeds could be utilized to buy out the former principal’s heirs or hire other individuals to take over the initial managerial responsibilities of the principle.
Dispute resolution
Even well-thought-out partnerships find themselves at loggerheads when the partners disagree. In order to avoid such, a partnership agreement ought to detail how the disputes are solved. For instance, establishing a third-party arbitration could keep the arguments from escalating into court dramas. Another approach to disputes could be a partnership agreement that could be set as a pre-requisite of litigation.
Steps to a successful restaurant partnership
It is not uncommon for friends and family members to venture into the restaurant business jointly. Purchasing and operating restaurants could, in most instances, be more successful if one is involved in partnership ventures. However, working together has its challenges. Hence it is crucial for both partners to agree on various issues that accompany the ownership and operation of a restaurant before drafting a restaurant partnership agreement.
What do successful partnerships rely on?
There are several things that have to be done correctly before beginning a partnership to ensure that the partnership runs successfully. Accordingly, it is important to:
- Ensure you select the right partner. Selection of partners is the most significant aspect before joining forced with other people. Even if one is partnering with intimate friends or relatives, one has to ensure that the potential partners have the required resources and skills to be good business partners. It is thus crucial for one to see past personal relations and gage potential partners by their expertise, dependability, and skillset.
- Enter into the restaurant partnership agreement with defined goals. One should decide with their partners on the type of restaurant that they are interested in purchasing. Further, the partners should clearly establish the short and long-term goals for the business. Some of the aspects that should be included are whether one is looking to resell in few years or retain it for the long-term. Otherwise, partners run into issues if the goals are not clearly defined or if the franchising strategy is not communicated to all partners.
- The role of each partner should be outlines. For smooth running of the business, one should ensure that every partner defines roles and there is no overlap or confusion. It is thus best to work off the skills of every partner. One of the partners may be better at managing kitchen roles while others may be cut out for managing the staff.
- Agreeing on ownership stakes. Voting stakes, ownership stakes, and financial commitments should also be agreed on upfront. Partnering with other people is a common aspect if the partners have the desire and skills to begin a business. However, the lack of financial resources could be a hinderance to the purchase process. It is thus important that the partners decide on such issues especially if they are not contributing equally to the finances. This applies in cases of silent partners that only provide capital to the business.
- Drafting of a written Enter into the restaurant partnership agreement. One’s broker or attorney should help one id drafting a written partnership agreement that provides details on the ownership stakes, exit plans, financial contributions, and other foreseeable issues. It is thus important to have everything written to prevent issues in the future. With the Enter into the restaurant partnership agreement in writing, the terms are clear and hardly disputable.
- Having regular meeting with partners. Partners that have a Enter into the restaurant partnership agreement in force should communicate regularly. Such communications should include ways on achieving the set goals and division of responsibilities. It is also crucial to discuss any issues in their initial stages to avoid squabbles and conflicts.
Key contents of a partnership agreement
- Executive Summary
The executive summary is always situated in the initial section of the partnership agreement. It prepares the reader for the subsequent sections of the restaurant partnership agreement. The executive summary mostly contains basic information regarding the restaurant, theme used, types of dishes or foods, mission and vision statement. It should also include the profile of the management team and describe the target market.
- Benefit from the partnership
Indication of the intentions of the partnership is among the most crucial aspect of the partnership agreement. Whether one is representing the restaurant or third party requesting a partnership, this section of a restaurant partnership agreement should be prioritized. Therefore, all parties should equally benefit from the partnership. The benefits can be financial where both parties earn. They can also be marketing benefits where all parties can increase their customer base.
- Keeping it simple
A restaurant partnership agreement should not bee too extensive like business plans. The latter require detailed explanations and wide research. Rather, a restaurant partnership agreement should be kept simple and short. To avoid confusing the other party, one must be direct with their intention.
- Creation of the restaurant partnership agreement
All the necessary details should be included in the restaurant partnership agreement. Also, all the terms and conditions including responsibilities and roles should be included. Others include distribution of profits and loss, ownership interests, distribution of loss and profits, authority, management duties, among others.
- Clauses, Terms, and Conditions
The law that will be govern the restaurant partnership agreement should be mentioned. Further, all licenses and policies should be outlined. The process of termination and the rules of it should also be included. The preceding eases the process in case the agreement is being terminated. All the permits that the partners have should also be valid.
- Review and Signatures
Once all the relevant details are included and the necessary changes are made, the last step is reviewing and signing of the restaurant partnership agreement. Upon signing, it is legally binding. All the partners involved should ensure they have a copy of the signed agreement. If there are nay changes that need to be made, they can be done with the consent of all partners involved in the restaurant partnership agreement.
References
https://smallbusiness.chron.com
https://ww.flastergreenberg.com
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