Restaurant & Hospitality

On May 30, 2017, Mayor de Blasio signed into law Int. No. 1456, requiring mobile food vendors (food trucks, hotdog carts, etc.) to display letter grades received after sanitary inspections akin to those displayed in windows of city restaurants. The new law will be a win-win for both consumers and vendors as seeing satisfactory grades will assure customers of a sanitary product, further legitimizing the ever-expanding food truck industry in NYC.  A similar bill is active in the NY State Senate. The state law would require the inspection grades to be displayed and require tracking of the mobile food vendors in order to efficiently find their protean locations for inspection purposes. Currently, the NY State bill has passed the State Senate and has been delivered to the State Assembly.  At the very least, expect to see health inspection grades displayed on mobile food vendors in the near future.

The International Council of Shopping Centers (ICSC) recently released an interesting report prepared in collaboration with Jones Lange LaSalle (JLL) entitled The Successful Integration of Food & Beverage Within Retail Real Estate.  The study explores how foodservice growth is increasingly impacting retail real estate models, and includes case studies and practical analyses highlighting the successful integration of food with traditional retailers at malls and shopping centers around the United States and the world.

The study identifies three macro demographic trends that are driving structural changes in the global retail and leisure landscape, where consumer spending is shifting from “transactional to experiential food offers.”

Urbanization and Population Growth

Ever-increasing numbers of people and customers are moving into key market areas.  This is particularly true for the expanding middle-class who comprise a larger percentage of the global population, and who are “also becoming richer, better educated and more technologically connected.”

The Rise and Role of Technology in the Digital Age

JLL notes that today’s millennials and Gen-Z-ers are increasingly shopping online and are generally characterized as having shorter attention spans with a lack of brand loyalty compared with their predecessors.  More than ever before, they are demanding a seamless transactional experience where they can order online with smartphones and on social media sites, and then have their items ready for immediate pick-up at the store, or vice-versa.

Experience Economy

As time becomes an ever-more precious commodity than “stuff,” consumers are becoming more interested in enjoying memorable experiences that they can share (often contemporaneously through social media outlets) rather than tangible, material items.  The hot trend of food halls – particularly in the United States – is an example of this, where those destinations are increasingly becoming the anchor and key draw at shopping centers given the “experience” they provide for shoppers.

What Does This Mean for Landlords and Tenants?

JLL notes that the amount of space dedicated to foodservice at existing retail properties has grown from approximately 5% to 8%-15% over the last 10 years, and is forecasted to reach 20%-25% in some markets by the year 2025.

Accordingly, there will be a significant transformation in the way landlords approach leasing strategies at their retail centers.  Their efforts will need to focus on seamlessly integrating food and traditional retail operators to create a unique and experiential tenant mix.

In addition, landlords will face new challenges in understanding how their support for foodservice and restaurant operators both differs from, and is also interrelated with, their responsibilities to traditional retailers.  Among other considerations, these include:

  • Greater risks from food-based fit-outs and capital expenditures;
  • The increased likelihood of dealing with smaller-scale food operators instead of larger “corporate” entities;
  • Optimizing the ratio of base and percentage rent deals that are more common among foodservice operators;
  • Understanding the differences in desired lease terms (foodservice locations will typically demand longer lease terms in order to amortize and realize the benefits of larger capital/fit-out expenditures); and
  • Strategically placing food and retail locations within the larger mall space, including considerations for interior/exterior access points and parking needs.

The report provides many examples of how foodservice can be successfully integrated within shopping centers of different shapes, sizes and formats; however, there is no “one-size fits all” solution.  What is clear is that savvy retail landlords and their tenants are those who will embrace the idea of incorporating experiential foodservice options into their business plans.

 

If you have plans to open a restaurant in New Jersey and would like to serve alcohol, you should be aware of the longstanding rules related to liquor licenses.  Most New Jersey municipalities are not able to issue new liquor licenses meaning that a business owner seeking a license will likely have to purchase an existing license.

What’s the first step in acquiring a liquor license? 

First, you should understand that there are several different types of liquor licenses but for your use as a restauranteur, you will want to acquire what is known as a Plenary Retail Consumption Liquor License.  You can determine if there is such a license available for acquisition by calling the municipal clerk or secretary of the Alcoholic Beverage Control Board of the municipality in which you plan to locate your restaurant.

I’ve located an available license in a different municipality.  Can it be transferred to the municipality in which I plan to operate?

No.  Liquor licenses are not transferable from one municipality to another.  The municipal clerk can provide you with a list of the names and addresses of the holders of all liquor licenses and can advise you which licenses are currently not in use (i.e., “pocketed”).  You can then contact the license holder to determine if he or she wants to sell the license.

Once I identify an available license, what are the next steps?

If you reach an agreement with a license holder, you will then need to:

  • Enter into a written purchase and sale agreement,
  • Obtain written consent from the seller to transfer the license,
  • File a 12-page application, accompanied by required fees, with the municipality for a “person-to-person” (from the seller to buyer) and “place-to-place” (from seller’s establishment to your new establishment) transfer of the liquor license,
  • Publish legal notices of the proposed transfer, and
  • File for the issuance of a tax clearance with the New Jersey Division of Taxation. The municipality cannot approve the license transfer until a tax clearance certificate is issued.

The municipality through the police department will then conduct a background investigation of you, the buyer and your principals, including fingerprinting, to ensure that you are not legally disqualified to hold a license, are reputable, and will operate the licensed premises in a reputable manner.  The background investigation also ensures that the proposed transfer and restaurant liquor license operation will not violate any state or local laws, regulations, and ordinances (including distance requirements between licensed establishments, as well as distance between schools and religious facilities), and that you have disclosed the source of all funds to purchase the license and you do not have any undisclosed, or hidden or non-qualified investors.  If you are determined to be qualified, and no objections to the license transfer are received by the municipality, then the municipality must authorize the transfer of the license to you and the new premises by resolution at a public meeting.  You are not entitled to utilize the license until such official action is taken.

How long can I expect the process to take?

The entire license transfer process should take between 90-120 days so the purchase and sale agreement should adequately provide time to complete this process.

What options do I have if my application for a liquor license is denied?

In the event that you cannot acquire a license, then, unless prohibited by the municipality, your customers may bring their own alcoholic beverages (beer and wine only) into your establishment.  You can supply glasses, ice, etc. but you cannot charge a corkage fee.