Food & Beverage Panel with FLB

If you couldn’t make the Food & Beverage Panel live… here's a bonus episode for you!

The full Food & Beverage Panel hosted by Fitzpatrick Lentz & Bubba is now live.

Jimi sat down with Tom Schlegel, Ken Charette, and Diana Hall-Yurasits to dive into what it really takes to thrive in Pennsylvania’s food & beverage industry. They cover everything from liquor laws and insurance coverages to everyday business strategy.

Recorded live at Diana’s Catering and Gourmet Market, this episode brings together local business owners and industry experts for a conversation you won’t want to miss. 

Catch the full conversation streaming everywhere now!

For more info on YMI insurance visit our website at ymiagency.com

Or give us a call at 610-868-8762 to see how we can better protect your business and family.

Transcript

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So one thing that was kind of unique during COVID was alcohol to go rules changed a little bit in that Pennsylvania relaxed the ability to sell spirits to go, cocktails, things like that. You could actually go get a takeout meal and have a martini come with you. That's been rolled back now and that bothers some restaurant tours and perhaps understandably so. But the state of Pennsylvania is the largest seller of hard alcohol in the world. So they want to keep that monopoly tied down to some degree, which is-- Really? Yeah, sure. I mean, the skate stores are owned by the Commonwealth of Pennsylvania. They sell every drop of hard liquor in the state unless you're in a story. So that matters to them. Welcome to Why Am I Talking, a podcast where the guests are so good, you'll wonder why the host is even talking. In each episode, you will hear one of the leaders of the Lehigh Valley's vibrant business hub. They will tell you the keys to their success, the mistakes they've made, and what they have in store for the future. Here is the host of Why Am I Talking, from Why Am I Insurance, Jimmy Honichuk. Thank you all for coming today. I will do a quick introduction of our bios, and I'll turn it over to Jimmy of our panel. So Diana Bolivarcis is a proud founder and owner of Where We Are Today, Diana's Catering and Gourmet Food Market. In 1988, Diana and her husband Jim opened Diana's Cafe. The restaurant specialized in high-quality, homemade foods served in a warm, family-oriented environment. For 25 years, Diana served 5 variables in the cafe across the Greater Lehigh Valley as a catering service. In April of 2024, the restaurant portion of Diana's Cafe closed due to labor shortages. Today, her vision of serving customers with fine food was on with Diana's Catering and Gourmet. Thank you, Diana. Ken Charette. is the chair of FLB's Mergers and Acquisition Group and Food and Beverage Group. Clients rely on Ken to guide them through complex business transactions, including, without limitation, buy-side and sell-side matters, investment transactions, strategic partnerships, and other similar matters. Clients value his practical, business-focused approach that emphasizes efficiency and dislocation of a transaction while working to protect his clients' interests. There's a particular focus working with food and beverage business. Tom Slagel. Tom is a shareholder in FLB's Real Estate Land Use and Development Group and corporate business and banking groups. His practice includes Pennsylvania liquor law interfacing with Pennsylvania Liquor Control Board when it comes to licensing restaurants, hotels, and other business premises. He helps business owners and entrepreneurs with obtaining and transferring a license within the restaurant and hospitality industry and adhering to PA liquor laws. And Jimmy-- most of you, I think, know Jimmy. He's the president of YMI Insurance. He loves working with clients to solve their problems with a mission to help make sure clients receive the most personalized service and agency you offer. Following a career in television that took him to Los Angeles and New York City, Jimmy worked in the finance industry before returning to the Lehigh Valley to learn and lead the family business. He also serves as the host of YMI's podcast, Why Am I Talking, connecting with multiple business leaders and influencers who are making a difference. Thank you for our panelists for being here. I will turn this over to Jerry. Awesome. Thank you, Jen and FLV for hosting this and for putting this together. I don't do anything and you guys do a lot of work to make it happen. So thank you guys. Thank you guys for coming out. I hope you get a lot out of it. There's a lot of variety of businesses and restaurants and breweries. wineries here. So you all have unique insights and questions. So feel free to ask it. It's a nice intimate setting. This is our third executive edge. This is the first one kind of catered to an industry. So it's intimate. I mean, ask questions. That's what everyone is here for. And last but not least, Diana, thank you for hosting. This is great. You know, living in Center Valley, I think you're something of a legend. And so it's nice. It's nice to be here. I don't know about that. I know about that. So without any further ado, I think we'll jump in to this. And Diana, we're going to start with you. Actually, you know what? I'll go off script for the first question. How did you-- like I said, you are something of a legend here. How did you build that reputation? What does it take to turn a restaurant from just a place to eat to something more than that? That's a good question. when we first bought the building, I had a lot of people say to me, but you're on a one-way St. in, on 309, you're a one-way St. in 309, you're difficult to get to. And I used to say to them, do you know where the Cascade Lodge is? And they're like, yeah, I know where the Cascade Lodge is. I said, do you know where Spring Valley Inn is? They're like, yeah, I know where that is. I said, if you can find Spring Valley Inn in the Cascade Lodge, I think you can turn around on 309 and find us. So that was definitely a little bit of a challenge. It was very slow when we first started opening. It took us about 18 months of construction. This was basically a house when we bought it. was being run as J.S. Michael's security business. So I have about 500 phone lines coming in downstairs. So we renovated everything. Everything you see here, my husband did. He's a remodeling contractor. So that took a little bit of time. We didn't have Facebook, Instagram, TikTok, or any of that to help you to open. So your advertising budget is definitely something that had to be pretty large to get up and running. I grew up in Southern Lehigh, so I had that hopefully to help me. But that was challenging when we first opened. That's great. So then how do you balance day-to-day operations with the long term growth? Especially as you've kind of had to pivot, like how are you able to find the time or make that transition work? I'm sure most of you know, you work a lot of hours and you never really quit. You just kind of, it's always in the back of your mind and you're always thinking about what you can do different, what you can do better, how you can change things. We pivoted from a full-service restaurant to the gourmet market and catering. We have always done catering, so we just decided we were going to grow that more. We had huge challenges to get just two more people in the kitchen that could help us function. So in addition to the restaurant here, we were a 50-seat restaurant. We put that much food out the back door for catering. So it was really kind of, I was concerned that we were going to slip up and something was going to hurt us. So we had to make that decision, which is why we pivoted to where we pivoted. I hope that answers your question. It does, yes, Ken, I want to give you a chance here. I know, you know, some of the people here, they have one location, or they have multiple locations, or they've JV'd with people, partnership. What sort of trends are you seeing, whether it's M&A, whether it's JVs, within the restaurant industry? Sure. Within the restaurant industry itself, you see in the M&A space, you tend to see a lot of risk. with respect to opening up new businesses. So it can be challenging, especially early on, to raise capital from outside investors, particularly if the outside investors are new to the industry or if the operator that's raising capital is new to the industry. On the capital raising side, you tend to need to be able to show a proven track record of having done this in the past, understanding your industry, understanding the market, the geographic region you're in, if you're looking to raise capital. On the M&A space for restaurants, unlike a lot of other industries, we don't see a ton of private equity involvement. You don't see a lot of big players coming in and doing roll-ups and buying companies, unless you have a lot of franchise locations under your belt. If you have 5, 10, 20 franchises, then that's something that becomes attractive to a larger institutional buyer. But otherwise, we tend to see more churn locally. So you tend to see operators either buying out their own partners, operators selling to other operators, franchisors selling to other franchisors, or we see a lot of folks when they're looking to retire looking to sell to their longtime staff or managers. I want to talk on something you said there, which is franchising. I know a couple of the models here kind of lend themselves to franchising. very established brands, very recognizable, more than one location. Can you walk through sort of the risks or what someone who's considering franchising should consider? Yeah, I mean, there's a lot of steps involved to go from sort of a single operator or single location model to a franchise model, right? A franchise model is where you're basically packaging the business that you've created. And for a fee, and potentially for leasing fees, other things if you're going to own the real estate at the other locations, selling that model to somebody else and they're going to pay you an initial franchise startup fee as well as sort of ongoing royalties for the sale. For that model to work, there's a lot of startup costs involved on your end, right? You have to really understand what the business and what it takes to go from just selecting a location to an established operating business very quickly, right? Franchisees, when they come in, they want to be able to sign the franchise agreement, pay the fees, and have an exact playbook of how they get from signing the lease to opening the restaurant within a relatively quick period of time. So it needs to be something that's readily repeatable, generally something that will work in a lot of different geographic markets. So the appeal needs to be relatively broad. And then, if you're the party that's looking to become the franchise, one of the most important documents that you need to have is a really good franchise agreement that lays out the rights and responsibilities of the franchisor and the franchisee who's responsible for what costs, who needs to do what actions, and who's responsible when there's dispute among the parties for certain things. Awesome. Tom, you do liquor, so you're probably everyone's favorite person. But I know that is a real pain point for restaurants, for breweries, for wineries. Talk to me, you know, you have a great idea for a brewery, a great idea for a restaurant, you're ready to go into action. What should they be considering in terms of liquor law, liquor licensing, and getting started from that? Well, I guess step one, if you're looking to start a restaurant with a liquor license, is finding a liquor license. Finding a liquor license is not the easiest thing in the world because of Pennsylvania. restaurant liquor licenses are under a quota system. So there's only a certain number of licenses available in any county. And then you have this question of where am I going to open this restaurant at? If I'm going to buy an existing restaurant with a license, easy as possible setup, it's a person-to-person transfer, a new operator comes in, it's like buying a business. If you want to start a new concept, though, you have to find an existing license, go through a process of moving it from one place to another. So if you're in the same municipality, simple enough. You just have to get the LSB to approve a person to person, place to place, transfer, demonstrate where you're going to be licensing in a new space. It becomes more challenging if you're going to move from one municipality to another. So you have to then go to a township meeting and get an intermunicipal transfer approved, which is its own little challenge. So it's different depending on what you're trying to do. Breweries, wineries, perhaps a little bit less different in terms of like the restrictions on quota because you can apply for that type of license and obtain it if you have the facility to operate in. The bigger challenge there is getting the approvals you need through at the federal level. You need to get licensed by the ATF as well as through the LCB. So it's a lot to think about. Yeah, my brain is churning right now. When a restaurant is getting started and they're trying to get that liquor license, are they bidding or competing with, monolithic companies as well? Like how does the auction process work? Well, I mean, the auction process is sort of a new creation in Pennsylvania where licenses that became dormant are available for purchase at auction. There's usually one of those available in Lehigh and Northampton County every year or so. The challenge with those for a mom-and-pop restaurant is that the bidding on those is going very high with grocery stores and national convenience stores, which have driven the prices of those up at auction. I guess what I see though is there's still licenses available. Restaurants go out of business, they want to sell their asset, which is their license, and that often works through brokers and even often the attorneys who know the licensees and have worked with them. The thing about restaurants is just, making food, but there's so much more that goes into it. Luckily to have you guys, because I don't understand any of that. I'm going to ask myself a question now, which is sort of, you know, hearing that, what insurance coverages are important for restaurants, for breweries? And I'll start with the easy ones. Like you need to have general liability. That covers your basic slip and fall on your property, someone suing you for whatever reason. You're going to need property insurance so you have assets. You've got brew tanks. You've got ovens. You've got whatever you've got. If you've taken a space like this and you don't own it and you've added all of these additions to it, well, you need to insure those. You put money into that. You want to make sure you get coverage for that if something happens. And then work comp, if you have employees, it's required by the state. You have to have work comp. So those are three obvious ones that you need to have. But kind of leaning off of you, if you serve alcohol, liquor liability is a no-brainer. You need to have liquor liability. There was a recent example where it was a bar restaurant, and it was a slow night, and so they were serving more to try to make up revenue. And the person who they served a bunch to went the wrong way down 22 and caused an accident and came back. And they had liquor liability, so there was coverage for that. But that can ruin your business, right? That is a multi-million dollar claim. And if you don't have the protection for that, if you didn't have liquor liability, you're going to be up the creek for sure. Another one that I suggest is employment practices liability. I think that's important for any restaurant. any brewery, any business where it's high stress, where it's close quarters, this covers you as a business for any hiring, firing accusations, for discrimination accusations, for sexual assault accusations, anything like that, you would get coverage from this. And again, in close quarters with alcohol, those things tend to happen more frequently. And so we've seen that be a really important one. fire legal liability if you rent your space, that basically gives you coverage if you damage your landlord's building. So you start a fire, right, which is very possible if you have a grease trap or anything like that. You start a fire and you damage your landlord's building, your GL isn't going to cover that. You need this fire legal liability coverage. And so that, you know, if you're in a large shopping center, you can see that claim get out of control. And if you only have $100,000, you're going to burn through that real quick, and now your landlord is going to be suing you for the rest of their damages. So that's an important one to consider. And then last one that I think gets overlooked a lot, I think you'll care about this one, is Cyber. Cyber is super important. And restaurants usually laugh at me and say, we don't have personal identifiable information. But you do a lot of credit card transactions, thousands of credit card transactions. And if your business was shut down for whatever reason because your POS system didn't work, this could help you out. Or if that credit card information gets accessed because of you and cyber terrorists attack small businesses because they're easier to attack. Now you are on the hook for credit monitoring for all of those people, and that can add up real quickly. And so cyber coverage is not super expensive, but it will give you protection to that. So that's, I'm going to show up on fun insurance stuff. And Diane, we're going to go back to a restaurant, which I think is more fun. Let's talk about the staffing challenges that you've had. You and I were talking about this a little bit beforehand. I think everyone is kind of facing a staffing issue, but I think the restaurant industry in particular got hit hard coming out of COVID. So how have you kind of managed that, you know, recently? So one of the reasons why we pivoted from a full service restaurant down to just catering was that I could control that better with the staff that we had. I was telling you earlier, we've had staff here 19 years. You know, they've been with me a long time. They're the heart and soul of business. We just could not get two more people to help us do what we wanted to do that I felt were at the same caliber as everybody else. It's challenging because I just feel at this point in time, the new generations coming up really don't want to work that hard, and restaurant business is not easy. They only want to work very part-time. And as when you have a bunch of part-time people, it's very hard to control and it's very, the payroll goes up, everything else changes. So those are just different things that we kept looking at. So yeah, we just pivoted what we did to help compensate for that. What advice would you give, so you've been doing this a good period of time, what advice would you give to someone maybe starting on how to build that culture? Like you said, you've had people 15, 17 years. How do you build that culture to get people that want to stay? I just think that we have a very family friendly business and we just, we treat everyone with respect. We expect you to come in and treat us with respect also. We're very fair to our employees, they're compensated well. We do whatever we can for them. And I think that it's a different-- it's a certain caliber of person that will thrive well in that situation or in that environment. And some people will not thrive with that. Some people just like to have chaos around them. I'm not one of them. My life is chaos. It doesn't mean I like that around me. Going back to what I said is, restaurant is more than just making good food. There are lots of contracts in a restaurant, Ken, from the refrigeration contract to everything else. Can you talk about, maybe some of the most important ones that you see out there? Sure. So for a restaurant, the first contract would be your lease if you don't own the facility. You know, that's obviously going to be one of the most important documents that you have, because that's going to allocate things like risk and responsibility for what happens if there's a casualty event at the property, or who's responsible for a repair to the roof, or if you need building systems repaired, things like that. And a lot of leases nowadays will be generally triple net leases, which tends to place as many costs as possible on the tenant. But if you're going to be the tenant, some things you want to think about are if this is a, let's say it's a five-year lease with maybe auto five-year renewals or something like that for some period. If the lease generally says all expenses are triple net, is that really always going to be fair to you if there's a roof replacement or an HVAC replacement? Because the useful life of that replacement may be much longer than the remaining term of your lease. So Even if a default rule is triple net, and that tends to be market, you can often talk to landlords about things like that when you're negotiating your lease to share that cost in a little bit more equitable manner. Because those can be huge big ticket items. When they come up, that can just throw your budget. And that's something I think that's important and not everyone considers is the ability to negotiate that lease, right? Like you don't have to just take what they give you. And some of it could be very detrimental to the business. And I guess that's probably where you step in and kind of normalize what is written in the lease. Yeah, I mean, every contract is negotiable to an extent, right? It all depends, you know, what bargain winning power and leverage the parties have, right? So in a leasing context, the more desirable the property, the more marketable it is, the more offers a landlord has on the property to lease it, probably the lower leverage you have to negotiate it. But if it's been on the market for a while and you're the only party talking to the landlord, you're going to have a better shot at negotiating. things in the lease. And that concept generally carries over for any other contracts, right? So whether it's your contracts with, if you have vendors and suppliers who are selling goods into you that you're then selling at your establishment, you want to make sure you have good terms and conditions in there. So for example, what happens if something they sell you is subject to a defect or a recall, who's on the hook financially for that? Make sense. I'm going to skip you real quick because I'm going to piggyback on that, which is product recall is another coverage that you can have on your policy. So if you are responsible for foodborne illnesses or something like that, there can be medical bills, there can be recall bills. That is a coverage that you can add to your policy to kind of reimburse that. And that's just something that people should be aware of. Let's talk about liquor again. Alcohol to go laws became, I don't know, more prominent during the pandemic. How have evolving regulations kind of impacted long-term business planning? And what have you seen in that realm? Well, there's a couple ways to talk about that. So one thing that was kind of unique during COVID was alcohol to go rules changed a little bit in that Pennsylvania relaxed the ability to sell spirits to go, cocktails, things like that. You could actually go get a takeout meal and have a martini come with you. That's been rolled back now and that bothers some restaurant tours and perhaps understandably so. But the state of Pennsylvania is the largest seller of hard alcohol in the world. So they want to keep that monopoly tied down to some degree, which is really. Yeah, sure. I mean, the state stores are owned by the Commonwealth of Pennsylvania. They sell every drop of hard liquor in the state unless you're a story. So that matters to them. You know, how that affects long-term business planning, I'm not entirely sure. You know, obviously we've all seen the growth of grocery stores and convenience stores as sellers of alcohol, they sell that under restaurant licenses the same way that a restaurant licensee sells alcohol, you know, with a meal, which is kind of unique. Perhaps the one thing that would make me think, as someone who advises people as they get into that business, there's tiers of licensing in Pennsylvania. So there's producers that make alcohol. A producer can be Yingling. It could also be a small local brewery. And there's distributors that are in the middle of that market that are taking alcohol from a producer and then moving it to the third tier, which is a retailer. I think the tier that gets beat up the most of this is actually the distributor, because there's ways that producers can now sell at retail, which you all probably know, those of you who have breweries. And The distribution chain has changed a little bit in that you now have grocery stores and convenience stores that are selling kind of as a distributor, like a beer distributor, just in smaller quantities to go. So maybe who's the loser in this might be the distributor. I just heard, and I need you to clarify, you might not know the answer. Are there open container rules in Emmaus? Can I walk down the street here? I used to live in Emmaus. At least at the time, there was not a restriction. I don't know if there still is. I may have looked at this more than most people could imagine because of a certain client, not specific to Emmaus, but local open container laws are enforced by the local police. So I would assume that the borough of Emmaus has regulations around open containers. and the local police enforce that. where this comes up, and people certainly know about it, is during music fest in the city of Bethlehem, in certain areas, and like the festival limits, they suspend those open container rules, and you can walk around with alcohol. But that's being enforced at the local level. Okay. All right. So I got that information. And I'm not trying to get arrested. I'm going to talk real quick about some claims that I've seen in some coverage that I didn't talk about that I think is important. And that is business income interruption. And so the example that I use right now is Mr. Lee's Noodles, if you guys know that, in Bethlehem. They are at the bottom of, I don't know if it's 510 flats, but large apartment complex there. And there's a fire at the top. And the fire department comes, they spray a whole bunch of water to put out the fire. It all comes down to the bottom where Mr. Lee's Noodles is. Mr. Lee's Noodles, this was, I don't know, May. They're still not up and running. That is income that they have lost out on. And I don't write them, I don't know what their coverage is, but that is income that they've missed out on. during probably one of their busier seasons. They don't expect to be up and running until January. Business income interruption coverage would make you whole during that period. It would replace the income that you were losing. And so it's super important coverage. If you think about fires, I know Paranormal Pizza in Bethlehem, they had a fire, and they could not go back into that building, obviously. But if they have business income interruption coverage, during that period, it took them 1 1/2, 2 1/2 years to get back up and running. They're being made whole for their business. So they're not, you know, they're able to pay their staff and keep their staff and that culture going. So it's super important coverage. You know, fires are prevalent. You don't expect the water from a fire to shut down your business, but it certainly can. And this is coverage that makes you whole during that period and keeps your staff involved. So super important. I just wanted to bring that up. Let's talk about mistakes, though. And I want to kind of hit everyone on this. The common mistakes that you've seen. And Diana, I'd start with you. You've been doing this a while. What are some lessons maybe that you learned the hard way? I think sometimes you're more trusting than you should be. I think that, both clients and employees can, you just trust them too much. That's not gonna, hasn't happened often. Yeah. It's definitely again. something that has happened. And you're just like, OK, learn from this and move on. It's hard as a business owner, right? Because there is, of course, the management hat that you wear. But then there's the human being hat that you wear as well. And that's susceptible to developing friendships and relationships. But you need to always have that management hat. Well, especially because we're such a small business and we're so close-knit. I mean, you're obviously involved with your employees' lives, whether you like it or not. you still have to be able to put a line there. Yeah, that's good. Ken, how about you? I mean, when you're looking at contracts, when you're looking at M&A, what are some of the bigger mistakes that you- Yeah, I would say for this industry, the most common mistake I see is just not having good contracts in place. And I'll give you a specific example. I can't tell you how many business divorces I've been involved in, the restaurant industry between founders, where it starts out, everything's great. you may be having an operating agreement or a shareholders agreement, you got on LegalZoom, if you have that, or maybe you just have a handshake deal where you're 50-50. And at some point, you know, issues start to come up, things fester. You know, when money is involved, that also heightens emotions and can create additional friction points. And then what happens is everything boils and comes to a head. And if you don't have a good shareholders agreement or a good operating agreement, depending on what your entity choice is in place, you don't have anything that's going to provide a roadmap for how you resolve that dispute. And then inevitably what happens is you end up in a protracted litigation type situation with the other party that usually results at some point either with the business just dying because no one can agree on what to do, or one party ends up buying the other party out, but no one's really happy at the end of the day with that result. So, although, when you get into business with people, it's usually all happy and rosy at the beginning. Things happen, right? COVID happens or whatever it might be. Labor shortages happen. Maybe you have one partner that's more involved in the day-to-day operations of the business, and the other partner maybe doesn't show up as much. And over time, that creates resentment. You feel the other person isn't pulling their weight. And eventually, that leads to a financial dispute among the partners, because they don't want it to be 50-50, profit split anymore, or something like that. And so although it's not comfortable to have these kind of conversations at the beginning, it's usually to everyone's benefit to do that. so that if there is a dispute in your 50-50 or 25-25-25, whatever the equity split is, you don't end up with paralysis for the business. So that's a common one. If you're looking at a situation where you want to sell your business to a third party, obviously you want to make sure you have your organizational documents as a whole in good working order. You want to make sure that your material contracts, leases, vendor contracts, and things are organized and up to date. And then the other issue I see a lot are just not clean financials. People running personal expenses through the business. From A buyer's perspective, it becomes very hard for the buyer to figure out what a business is actually worth if they can't see a sort of clean financial statement that just shows what the revenue and expenses are and what the actual EBITDA or net profit of the business is. So a lot of times, sellers then end up having to explain to the buyer what a normalized financial statement would look like, and that just gives a buyer an opportunity to knock the price down, because the more issues they find or the more uncertainty they have with the documents or the financials you're getting. giving them, the less likely you are to get full value for the business. That's great. How important, like you're saying, those conversations early on, I feel like it's the honeymoon period. It's almost like asking someone to marry you and giving them the prenup at the same time. How do you navigate that conversation? I think it's just a conversation that has to happen. And what we try to explain to clients, whether we represent the entity or one partner in the business, is it's just a normal part of establishing a business, right? You need to think at the outset of what an exit might look like, right? And there's some common conversations that always need to happen, right? What happens if somebody dies? You know, are you now, is the other partner now in business with, you know, the deceased person's kids or surviving spouse? What happens if they get divorced? Are you in business with your partner plus their divorced spouse that could be uncomfortable, those kinds of things. What happens if you get disabled? Those are sometimes the easier conversations to have. The more difficult conversations tend to be around management and decision making and what happens if you're deadlocked. That's great. Can you share an example, maybe a real world example of like a licensing issue or mistake that maybe threatened the business? Sure. So I guess when you're exiting from a liquor license to business, sometimes you're closing up and you need to then put your liquor license into what's called safekeeping, which is sort of how the LCB holds onto an inactive license. And there's rules have changed a little bit about how long you can do that for. So you can have your license in safekeeping for two years for a fairly low fee. But once you go beyond two years now, and this is a fairly recent change, the fees to keep it there start doubling annually. So like, you can get to a point where it's almost financially irresponsible to keep it there. The fee to keep it there is going to be more than the license is worth itself. So, you know, that sometimes just encourages a licensee to move on if the business hasn't worked out. But they can also jeopardize your license, because if you don't, if you don't renew it, you don't pay those fees, the state can just essentially take the license back. That's how licenses get into auction situations now, which is a really bad outcome if that occurs. I guess the other thing I'll say too is, it's kind of dovetail off what Ken said, liquor license sales are one of the few areas where the state really does look at the seller's tax payment history. So you really need to be clear and paid up on Department of Revenue, labor and industry. And they actually look at that before allowing you to transfer your license. So make sure your accountant is working with you on that effectively. Great. And then just the biggest mistake I see a lot from clients is not keeping their insurance company up to date. We want to know. We're not trying to trap you guys. But you are going to get audited at some point. And that's going to lead to real friction. A lot of our clients are quickly growing restaurants. They're quickly growing breweries. And their sales are going up. Their payroll is going up. The insurance companies are going to audit at some point. And we've brought clients on because they got an audit, and now they owe two, three years of payroll increases and sales increases. And that's painful for a small business to eat those costs. So I always check in with my clients quarterly and just say, how's it going? Where are we tracking? Because I'd rather you get the bill now than get it in a year, two years, three years, and then you come really mad at me. So insurance agents are your friends. No one believes it, but I promise you, we are your friends. Keep in touch with them. All right. So I think we're probably approaching time. So I want to give everyone one more question and then open it up to any questions that you guys might have. Diana, looking back, what would you tell your younger self as you were starting the business? What advice would you give yourself? Well, I didn't think about that question. I think I would advise someone who's starting out in this business that they prioritize family time and their health. And just make sure that you make time for that, because your business can be consuming and all consuming. My kids were one and two when we opened this place. So it was-- yeah. It was fun. It was fun. I had a great support system. But I think that was the main thing. I gave it thought, but I didn't give it as much thought as I wanted in a year in. we started to make some adjustments to make sure that we had that balance as a family. That's great. Ken, let's talk about intellectual property real quick, whether it's mergers and acquisitions, just recipes, branding, trade secrets. I know a lot of these businesses, those are important issues to them. So how should they be approaching it? How should they factor that into a merger? Any insight? so think of it from the buyer's perspective, right? They're not just, buying a facility and a kitchen or, a manufacturing facility and some inventory. Generally speaking, one of the most valuable assets they're buying are your family recipes, your product formulations, your know-how, right? You know how to make the particular alcoholic beverage or the items on your menu. So it's important to you, to the extent you want to monetize that asset, that you protect it in the right way to the extent that there's confidentiality component. just an easy example is, Coca-Cola has managed for over 100 years to protect the trade secret for its products formulation by limiting, who knows what that formulation is to a very small number of people and, the extent appropriate having NDAs and things like that in place. Not saying you need to do that with restaurants per se, but, when you're selling, consumer packaged goods, bottled beverages, to the extent the formulation is something you view as proprietary, certainly limit who knows how to make it so that they can't go out and compete with you and make the same or substantially similar product. And to the extent you're working with third-party vendors, if you're in a situation where you have a co-manufacturer or a co-packer or something like that, you want to make sure that you have contracts in place that clearly delineate who owns what in terms of IP. That's great. Tom, last thing for you, we do have brewers, we do have wineries here. Just what are some challenges they might face in terms of liquor law that might be unique to them? Well, I think the most unique one, it's a challenge, but it's also an opportunity. So Under recent changes in the liquor code, brewers and wineries have the ability to sell at retail their own products and other Pennsylvania brewed products in facilities that they own or lease. So they can kind of become a quasi-restaurant license and be able to sell at retail and make profit that way. The risk of that, of course, is that there's rules about what else you can sell other than your own products, and you can run afoul of of selling non-PA products and find yourself sorted to a citation or something of that nature. But the liquor code allows you to do that at your own facility and other storage facilities where you might be storing your products. So it can allow you to create a little bit of a restaurant network off of your brand with your own product, which is pretty cool, but it's complicated. Probably need a lawyer for that. Probably. And then the last thing for me I wanted to talk about was just Risk management, like again, insurance agents, we are your friends. We can help you mitigate risks, which can help reduce your premiums. So conversations with your risk management team are important, whether it's, you know, making sure that you have contracts in place for cleaning, for maintenance. Those are super important and they can get you with better carriers, they can get you better coverages. So managing that, you know, making sure that your staff has proper training, whether it's ramp certification, things like that. The insurance companies can help you mitigate and manage risk so that you can see better coverage and have better access to carriers. So just work with them. They can help you out. And I think that's it. I do want to talk about business autos, but maybe someone will ask a question about that. Yeah. We have talked about that. All right, so I want to thank you guys again for that. I think there was a lot of information. I hope you guys found it useful. But Please ask questions. If you guys have any questions relative to your business or your restaurant, please, now, you've got some great people here. OK. So we're very interested in the . I'm . We have . And ,, because we cannot . but that's why we try not to start licensing. However, we would like to know... What are you licensing exactly? The brand name? The brand name, yeah. Yeah, I mean, it all is going to come down in your particular case to what you have in this particular licensing agreement, right? You want to be very clear as to, what you're licensing, what the purpose of the license is, what things they can, display, what things they're required to come back to you for, consent. You want to be clear what happens, you know, with the termination of a license. Usually it's automatic. cessation of the right to use any of the brands. You're going to want to have indemnities, you know, protecting you to the extent that someone does something that injures your brand, right? You know, maybe there's a, you license your name and your logo to another company, and then there's a story in the news or something where they got cited for, you know, health violations or... bought a product and got injured in some way, right? You're going to want to have protections in the documents that, one, allow you to terminate the license, but two, allow you to... you know, recoup any financial loss as a result. There's another question. This is about thinking line to franchising. So let's say, you know, you are, you can't really automate the person you, like the father, the senator, the man, because they're saying you do you being a franchisor. So how do we-- well, what are the ? Well, I think you kind of hit on the head there, right? A franchisor has a much greater level of control than a licensor does. And you do want to be careful that what you're doing is not interpreted to be sort of a disguised franchise model, because you're right, there's a whole, there's a much more complex web of rules around what a franchise arrangement is supposed to look like, right? You're supposed to have a very detailed franchise agreement, for example, and then the franchise agreement, as you know, would have all kinds of things, right? Like, you know, standards and everything else. You're not usually going to get that per se in a licensing agreement, but what you could think about doing is having, you know, relatively short terms on the license. So you maybe don't want to make it a 5 or 10 year term. Maybe it's a one year terms and with lots of termination rights. So if you're seeing something that you're not happy with, you have a way out of that arrangement. Now, of course, conversely, the licensee isn't going to want that because they're going to be spending presumably time and effort building this other location. So, it's the short answer is you probably need to talk to a lawyer if you haven't already, just to get a sense of what you can and can't do there. Thank you. Yep, that's great. The first thing I have is regarding the and I apologize I can use my My background is not in anything like that. I'm not. Not trademark, no, but they can be what's called a trade secret, which is usually reserved for things like, you know, know-how formulations, things like that. To be a trade secret, it needs to be something that's materially important to your business and something that the knowledge of is limited to a specific group of people and that the general public doesn't have access to. So it's possible that it could be a trade secret, but if it's something that's sort of generally available, to the public, then it might not be. So with trade secrets, you want to usually limit who has access to them, like if they're stored electronically, limit who can access those on your servers to a small universe of people. Maybe think about having those non-owner folks that are parties to that sign an NDA or something like that. OK. Would you consider yourself a small business? So if we need the most financial resources for small businesses, you know, just regarding business plans, whatever you need me to know, like someone doing a Well, I am a member of the Chamber of Commerce, and they're a wealth of information and definitely can use you. I was an extremely active member of the Restaurant Association for many years, past president and all that. They're very useful with that information also. As for a business plan, I was pretty much on my own when I wrote that. I know that Lehigh has a program that can help. I did not use that. But I just went on. What I knew one should look like-- there's a lot of resources online also that will help you with the business plan. But to me, a business-- you need-- When we did this, when we pivoted this, and we have another idea we're working on also, you have to put numbers to the paper because if you don't have that, the idea is not going to, might not pan out as well as you want it to pan out. So it's important that you have that business plan. It doesn't have to be as formal as maybe one you take to the bank, but should definitely have an idea of what your costs are and how you're going to execute it. And then for Tom, BYOB. So for businesses that offer BYOB coming in, what do you see being the most detrimental thing that a business could come at them being a BYOE. Some liability risk associated with that. I mean, it's not a it's not a liquor licensing issue. Like any business, you know, be it a restaurant or a caterer, it can say, hey, you know, you can do this on your own. You can come to my establishment and drink. As an operating business, so there is some risk around, are you allowing that patron to overserve themselves, essentially? What are you letting them do on your premises? There's a bit of risk there. So you have to be careful. And then to tie in. I was going to tie in to that. Yes. We have BYO restaurants that we cover, and we make sure to put liquor liability on there. Liquor liability is rated, you know, there's a rating to put it on the policy, but then it's rated by liquor sales. And you essentially have zero liquor sales there. So there'd be a nominal fee for putting it on the policy. But then you are covered for liability related to that over-serving or that serving of alcohol. So we definitely recommend putting liquor liability on your policy. Thank you. Yeah. I have a question. OK. This is going to be for Ken. So I have been in business for three years. Trying to make it as simple as possible, because I know And every person that I know that has a restaurant is going through the staffing. It's where we live right now, and we have to accept it. What I've done-- trying to simplify every system I have. I'm writing recipes to obviously keep consistent and everything. My food is fast-based. It's fast food, but it's not like-- it's scratch-made. So I'm trying to develop every system I have. kind of put it in as a franchise. Now, I have been in contact with a bunch of, I'm sure you guys know, a bunch of like franchise, people that have, I guess a team that were franchising, you know, small restaurants. But like I feel that they, even though they have a team, I don't know if that's something that I can create on my own, finding lawyers in my area. kind of like helping me out since I am doing my job, but still like my employee handbook, my, you know, running a system that someone can potentially buy it and always I can create that. Or is it easier to just go with those big companies that tell you we have everything here laid out and then we just tell you what we have to offer and we'll find you people to buy it. Like I'm like, trying to figure out what a good way to go. Yeah, I'm not sure I have an easy answer for you there. And full disclosure, I'm not a franchise attorney. I'm primarily an M&A attorney that works with a lot of food and beverage companies. But I think you're going to have to make that decision on a case-by-case basis. And I think it will come down to a lot of what the fees are for the consultants in the industry that you're looking at and what their track record of success is. And then you're going to have to weigh the fees and that track record against what the costs are for you to do it yourself and what the costs are both in terms of your monetary costs and the time costs that it's going to take you to do that. You know, it certainly is common to see brokers in this space, right, that will go and market your franchise once you've papered the franchise and established it to other potential franchisees. And there can certainly be value there. Obviously, there's a cost associated with that. But at the end of the day, you need to think about what do you ultimately want to focus your time on? Do you want to focus your time on running the business that you have? Or do you want to focus your time on shifting to the franchise model and marketing and selling that franchise? I don't know if I have that answer, but that's what you're going to have to decide at the end of the day. And then also for liquor license here, I know oversee the-- for me, being a fast pace and having an extra amount of sitting capacity in the restaurant, If you want people, I can sit down for you. But I want it in the future, near future add, obviously, liquor me here in VA. So what's the process of obtaining the license but not having for me to do a wine? Like, you know, do the wine or the beer? I guess that's something that I can possibly add on my, you know, like on my restaurant. Will it be a matter of? sort of joint venturing with someone who has a license. So it wouldn't be your license. You're not really renting from them. You're figuring out a way to sort of joint venture the sale of product at your location. So that's coming back to what I was saying before about like a brewery or a winery can operate at retail at certain other locations by doing certain things there. So you have to create a contract to make that work. So my best advice there is to find somebody that you're really comfortable with that's in that space that you can figure out a way to partner with. Great. Justin. So it goes on with that, that she just asked, that restaurant network per se, my understanding is that there's basically two operators over the space. I feel like if you're a restaurant, that just purchased a $200,000 license. Are you very jealous? The restaurant that opened up next door did it for a lot less money with a winery or brewery. Do you see the LCD squashing that down in the near future? Because it is kind of a dirty little-- I don't-- so I don't think the LCD is going to-- squash that down. I mean, the liquor code allows for it. The issue with business competition, and I do kind of get where you're coming from, like a restaurant licensee who's bought an expensive liquor license and sees someone who kind of looks and feels the same doing something across the street, may have an issue with it, just as bothered by that. What I do see potentially happening is like that licensee, that restaurant licensee that's annoyed by this, if they think there's liquor violations occurring there, they may contact the BLCE, which is the Bureau of Hood and Control Enforcement, which is the enforcement arm of the state. The LCB doesn't do their own enforcement. It's all done through the BLCE. You know, they may then show up at your place and start to look around and see what kind of violations are happening here. And they could be a pain to deal with. So, you know, you don't want to you don't want them in your in your business, you can avoid it. That's always that's always possible. Yeah. Yeah. Yeah. And that was kind of a compromise that came out of, you know, the bars. saying, they're stealing our business. So that was the month. Pennsylvania and New Jersey are often very different on everything from a legal perspective. Yeah, that's true. I mean, there's other interesting things happening in New Jersey right now. Like they're rolling out over 1,000 retail licenses so new restaurants and bars can open. It's kind of driving down the value of licenses in that state. But scarcity is an issue. So it's like if you're a, if you want to open a restaurant and serve alcohol, it's expensive to do it. And so people are going to try to find new and creative ways to work around that. And that's just human nature, right? Yeah, and I was just going to add on that too. Just remember the financial situations are different in both of the ways you described, right? In the one instance, the restaurant owns a valuable asset, which is a liquor license, and you're keeping presumably 100% profit of the sales of that license. right? Where in the other situation, there's a joint venture of some kind that's going to have some type of, shared cost and expense type relationship. So, although the restaurant in the second situation didn't have the upfront cost of acquiring the license, they still certainly have some kind of a cost vis-a-vis the joint venture, I would think. So it's not necessarily like one situation is so much better than the other from a pure profit scenario. You know, brewing equipment is plenty expensive. So I do not purchase a liquor license, but I purchase a lot of brewing equipment. And I have two brewers full time that have a good salary and stuff. So it's not as easy as, you know, just using my manufacturing license to produce the product and, you know, feeding around a liquor license. You know, we continue to pay that cost all over time. Yep. And in that scenario where there's some sort of a partnership, are you obligated to work just with that brewery or winery? If you work with them, are you able to sell other PA made alcohol? Are we getting alcohol? Is that what I'm hearing? Well, in this scenario, the seller of the alcohol is always going to be the manufacturer. So it's a way where the the restaurant side of the equation and hopefully drive more business by having more people coming to the establishment and the liquor side has more sales of their retail in conjunction with the food. So it's not the food seller who's necessarily making the profit off of alcohol. Tom, do you handle -- and I'm going to say the wrong terminology, whatever -- or is someone at Pitts Hackman wants to do a handling pep infused? I don't work in that space at all. does a little bit on, but it's more, he's doing that more in an A, as opposed to like regulatory. But yeah, that's a whole new frontier too, I guess, right? Even though you're not supposed to go shop for alcohol in New Jersey, some of us might. And that's not being sold in New Jersey, which is kind of remarkable. You can get it in PA too. Just, I happen to know that. That's a good question, though. And that is, a growing space for sure. The hemp and peas. Right. We have a different version of, yes, THC. Interesting. All right. Any other questions? I have a quick question. I just wanted to touch on because Diana said earlier that she didn't have TikTok or any sort of advertising, social media advertising. Can you just touch on some of the things that small businesses might have to do with influencers or people say, hey, I have a following. I can make you money. Can you give me something for free? Sure. I mean, we work with a lot of businesses now who primarily use social media influencing. as their marketing spend. You know, it's not just, when you think of social media influencing, I'm not just talking about major celebrities who are going to cost hundreds of thousands of dollars per post. A lot of my clients work with what I call micro-influencers who might have like a thousand people or a few thousand people, but it's, you know, they're micro-influencers in a particular space, right, whether it's travel or restaurants or fitness or organic food products, whatever it is, they find those influencers. And for a relatively nominal amount of money, you can get those individuals to make certain content for you that can help drive people to your website and hopefully to your establishment. And what we tend to do with them is relatively simple letter agreements. with the social media influencer that outlines what the content is going to be, what the deliverables are, what the time frame is, how long the post has to stay active. Sometimes there's requirements around compensation for a number of click-throughs and things like that. But then we're also thinking about whether we need to terminate the arrangement because the influencer is arrested or something like that, or they make a very political post that you don't want associated with your business. So we're always thinking about, just to go back to my comment earlier on how to get out of a contract. Good question. Anything else? I have a question for Diana. More of a personal question for you. When you started your business, were you very involved in the cooking aspect? Do you have culinary experience or were you always wanting the business? Just, I know how hard it is to get started with that much food, so I was wondering your involvement with that. Well, I First of all, I went to college for industrial psychology, which I recommend. It's a cross between a business degree and psychology, one you use daily. I trained under two different chefs at two different locations. I do not have any formal training. We did open with a chef when we first opened. We have an executive chef here now who's been with me for a long time. Yes, I was definitely involved in the cooking. It's a lot of our family recipes, things that I've had my entire life growing up. And we used a lot of that here with our chef who's been with us for the last, I don't know, a lot of years. I mean, she's obviously implemented a lot of her flavors into it, but the core recipes were definitely ours from our family. So yes, it's very beneficial to know every aspect of your business, from hostessing, to washing dishes, to mopping the floors, to cleaning the bathrooms. You never know what you're going to do that day. Okay, I have a question, and that's can we take a picture at the end of this? But before that, thank you everyone for coming out. This was really great, and I appreciate everyone being here. Thank you. So a round of applause for you guys. Thanks for listening to another episode of the Why Am I Talking? podcast. If you enjoyed this and want to hear more content from amazing personalities in the valley, please subscribe, leave a rating, and drop us a quick review.