Wednesday, August 29, 2018

Are New York City Bars and Restaurants About to Close or Go Bankrupt? Is the NYC Hospitality Trade About to Get a Serving of Trouble?

Here at Shenwick & Associates, we were one of the first law firms to foresee the taxi medallion valuation crisis.  And now, we see the potential for disruption to another integral aspect of life in New York City–the hospitality industry, including restaurants and bars.


In our opinion, the combination of the minimum wage increase with New York City’s already stratospheric commercial rent and operating expenses will have a severe impact on New York City’s restaurants and bars, especially smaller, independent and family–owned establishments resulting in the closure or bankruptcy of these businesses!

We’ve already been contacted by several restaurateurs, who have expressed the following concerns:
1. Their restaurant or bar is breaking even or losing money, and with the coming increase in the minimum wage, should they close their business or file for bankruptcy?
 
2. Is the principal personally liable under either a guaranty (which makes the principal liable for rent and additional rent for the full term of the lease),  a “good guy” guaranty (which makes the principal liable until the business surrenders the premises to the landlord), for money owed to vendors, for sales tax or FICA/FUTA taxes as a “responsible person” or for unpaid wages to employees?
 
3. Should the entity that owns and operates the restaurant or bar close (“go dark”) or file for bankruptcy or negotiate with their landlord or vendors?
 
Strategic considerations include:
 
1. Does the business file for bankruptcy?  If so, does it file under chapter 7 (liquidation) or chapter 11 (reorganization)?
 
2. Should the business simply wind up operations and close (“go dark”) or negotiate with their landlord and vendors?
 
3. As mentioned above, if there is a good guy guaranty, has the guarantor minimized his or her exposure under the good guy guaranty?
 
4. If there are three or more years left on the lease, has the principal thought about selling the business or subleasing the space?
 
5. Should the principal engage in asset protection planning, negotiate with creditors or consider filing for bankruptcy?

At Shenwick & Associates we have a strong background in short sales, workouts, personal and business bankruptcy, asset protection planning and commercial leasing, as well as an LLM in Taxation from NYU Law School, providing a diverse set of possible strategies and solutions that we can help a restaurant or bar and their principal create or implement.
Our analysis begins with an examination of the businesses’ books and records, including the balance sheet, income statement, lease and tax returns.  We also review the principal’s assets, liabilities and after-tax monthly budget. If you or your business need help, please call or email Jim Shenwick at (212) 541-6224 or jshenwick@gmail.com.

No comments: