Category: Food & Hospitality

Food for Thought: Serving Up Unique Concerns for Restaurant Leases

Many aspects of commercial leasing are complex, but restaurant leases are a unique species of lease. Counsel to restaurants must be cognizant of operational and logistical issues posed by these hospitality businesses, and be prepared to address these key issues to protect the restaurant. Here are some of the most distinctive issues to be aware of when representing a restaurant tenant:

CONSTRUCTION ISSUES

Restaurant construction is different from other tenants’ fit-out work. It involves several moving parts, all of which come together to facilitate the restaurant’s successful operation. These include utilities, heating, ventilation, and air conditioning, managing odors, grease traps, hot water, and fire suppression systems. While counsel need not have the knowledge of a contractor or architect, one must understand the importance of the size of HVAC systems, design of fire suppression and sprinkler systems, the capacity and location of electrical conduit and electrical service, and sanitary and sewer lines and gas lines. For example, grease traps are imperative for restaurants, and it is important to determine (i) whether a grease trap is separate and external, or shared with other tenants, (ii) if shared, how maintenance responsibility and cost will be allocated among the shared users; and (iii) whether the grease trap’s location is convenient for operations.

Mitigation of cooking odors is another key issue, especially in a mixed-use development, shopping center, or an urban residential neighborhood. Some landlords and municipalities require expensive odor control systems, and negotiation is important in determining the size and scope of such measures, especially given the subjective perception of odors generally. It may also be helpful to include an objective standard of negative pressure for odor control. Noise mitigation is likewise an issue as to which landlords may be sensitive. Restaurants draw crowds of people who are out to enjoy themselves, which leads to loud voices, music, and other noise that emanates from the restaurant in a way that may affect other abutters and neighbors, especially residences or hotels.

OPERATIONAL ISSUES

  1. Hours of Operation: All businesses are sensitive to their hours or operation, but it is particularly important for restaurants to understand the impacts that may come with later hours, which often cause landlords concern (especially if the restaurant serves alcohol). If the restaurant has outdoor seating or a patio area, are those hours the same as for the interior space? Some liquor licenses or municipal regulations may also restrict operations, so it is important to understand and comply with the requirements and rules of governing bodies.
  2. Deliveries: Restaurants receive multiple deliveries daily, often greater than other types of businesses. The logistics of delivering food to the restaurant are critically important. Sometimes landlords desire to limit the hours during which deliveries may be made or the loading docks (if any) that may be used. Counsel should know how deliveries will be made and determine whether any restrictions on same will be troublesome to the restaurant’s operations.
  3. Trash: Restaurants generate a substantial amount of trash, both wet and dry, food and nonfood. The location and adequacy of trash storage as well as the frequency of removal are key issues to specify in the lease. Some landlords also require a cold storage area for food waste; and of course care should be taken to avoid vermin infestations. Where will the tenant need to take its trash? If the common trash room is far from the kitchen, that may pose problems for restaurant staff.
  4. Parking: Vehicle parking is an issue for all tenants, but it is often magnified for restaurants. Counsel should understand where the restaurant’s patrons are expected to park, and if desired seek to negotiate designated takeout parking spaces for the restaurant. If there is to be valet parking, or if a development designates certain areas as approved for ride share drop-off and pick-up and not others, counsel should understand whether those services and areas pose a business risk for the client.

EXCLUSIVE ISSUES

Many types of retail businesses seek exclusives in leases, but restaurants are particularly invested in ensuring that landlords do not lease other space to a competitor restaurant. If the development contains a hotel, the restaurant lease should contain an exclusive which prevents the hotel from operating a similar restaurant.

TIMING ISSUES

If the restaurant is located in a mixed-use project or shopping center, or otherwise not on its own parcel, the restaurant will want to negotiate the ability to determine when construction occurs and when it is obligated to open for business. Timing of construction can be a big risk, as delays and interruptions are expensive and set back the opening. Aside from construction timing, opening requirements may be important, especially in light of whether other tenants in the project are open and operating. Restaurant counsel may seek an opening co-tenancy requirement such that the restaurant will not be obligated to open until the major tenant or a substantial portion of the development is also open.

In summary, restaurant leases are more complicated than other retail leasing; and restaurant counsel should be aware of these unique business issues and strive to fully understand the details of its client’s business in order to set the restaurant on a successful path.

© 2024 SHERIN AND LODGEN LLP
For more information on Restaurant Leasing Issues, visit the NLR Real Estate section.

Governor Signs Bill to Exempt Certain Businesses from Fast Food Minimum Wage

On March 26, 2024, Governor Newsom signed Assembly Bill (AB) 610, which amends the definition of “fast food restaurant” to exempt restaurants in airports, hotels, event centers, theme parks, museums, and certain other locations from the requirements set forth under the Fast Food Council requirements.

Last year, Newsom signed AB 1228, which repeals the FAST Recovery Act but establishes a modified version of the Fast Food Council (Council) until January 1, 2029. The bill also sets forth the minimum wage increases for fast food workers, with an increase to $20.00 effective April 1, 2024.

The bill includes an urgency clause which means it takes effect immediately. As such the exempted businesses will not need to comply with the minimum wage requirements past in 2023.

Jackson Lewis P.C. © 2024
For more news on Fast Food Minimum Wage Laws, visit the NLR Labor & Employment section.

FDA Lists Regulations Under Development and Updates Priority Guidance Topics for Foods Program

  • The U.S. Food and Drug Administration’s (FDA’s) Foods Program has posted a new website listing regulations it plans to publish by October 2024 and long-term regulations it is prioritizing for publication at a later date. Additionally, FDA has updated the list of guidance topics it is considering and expects to publish by the end of 2024.
  • Regulations are officially announced in the Unified Agenda of Regulatory and Deregulatory Actions published each spring and fall. Some of the regulations FDA has listed on its website include use of the “healthy” nutrient content claim, the use of ultrafiltered milk in cheese and cheese related products, and front-of-package nutrition labeling, among others.
  • The following five topics have been added to the list of guidance documents the FDA expects to publish by the end of December 2024:
    • Notifying FDA of a Permanent Discontinuance in the Manufacture or an Interruption of the Manufacture of an Infant Formula; Draft Guidance for Industry;
    • Action Levels for Lead in Food Intended for Babies and Young Children: Guidance for Industry;
    • The Food Traceability Rule: Questions and Answers; Draft Guidance for Industry;
    • Hazard Analysis and Risk-Based Preventive Controls for Human Food; Chapter 12: Preventive Controls for Chemical Hazards: Draft Guidance for Industry; and
    • Voluntary Sodium Reduction Goals: Target Mean and Upper Bound Concentrations for Sodium in Commercially Processed, Packaged, and Prepared Foods (Edition 2): Draft Guidance for Industry
  • Public comments on the list of guidance topics can be submitted to www.regulations.gov using Docket ID FDA-2022-D-2088.
© 2024 Keller and Heckman LLP
For more on the FDA, visit the NLR Biotech, Food, Drug section.

FDA Announces Draft Supplemental Guidance on Menu Labeling

  • Today FDA announced an update to its Menu Labeling Supplemental Guidance which addresses implementation of menu nutrition labeling requirements. The menu labeling rules only apply to standard menu items offered by “covered establishments,” which are defined as restaurants and similar retail food establishments with 20 or more locations doing business under the same name and offering for sale substantially the same menu items, as well as restaurants and similar retail establishments that register to voluntarily subject themselves to the menu labeling requirements. (21 CFR 101.11).
  • The menu labeling regulations require disclosure of calories on menu and menu boards, and require that other nutrition information (e.g., fat, sugar, protein) be available in written form on the premises and provided to the customer upon request. Notably, the menu labeling regulations do not require disclosure of “added sugars” as is now required on packaged foods.
  • The draft update includes two new Q&As which (1) clarify that nutrition information can be provided on third party platforms (TPPs) through which food is ordered and delivered and (2) that added sugars may voluntarily be declared.
  • Although FDA accepts comments on any guidance at any time, comments on the draft new Q&As are due by February 12, 2024, to ensure they are considered before FDA begins work on final versions.
© 2023 Keller and Heckman LLP
For more news on FDA Menu Labeling Regulations, visit the NLR Biotech, Food, Drug section.

Giving Thanks for Thanksgiving

Until President Abraham Lincoln proclaimed a national day of thanksgiving during the Civil War, thanksgiving holidays were a matter of state and local concern.   California mentions Thanksgiving Day in 18 separate statutes, including those in the Code of Civil Procedure, Civil Code, and even the Fish & Game Code.  The last statute, however, has nothing to do with turkeys.  Rather, Fish & Game Code Section 5523 concerns the timing of the opening of the Dungeness crab season.

California may have more than one day of thanksgiving.  Government Code Section 19853 provides that all state employees are entitled to various specified holidays, including  every day appointed by the Governor of this state for a public fast, thanksgiving, or holiday.

© 2010-2023 Allen Matkins Leck Gamble Mallory & Natsis LLP

By  Keith Paul Bishop of Allen Matkins Leck Gamble Mallory & Natsis LLP

For more news on California Holidays for Employees, visit the NLR Labor & Employment section.

NYC Council Passed Bill to Require Added Sugar Icons for Chain Restaurant Menu Items

  • On November 2, the New York City Council passed a bill that will require chain restaurants with 15 or more locations to post added sugar icons and factual warning statements on menus or menu boards next to menu items and on or near food items on display that exceed a specified level of added sugars. The icon must be displayed on food items that exceed 100% or more of the daily value for added sugars as determined by the FDA (i.e., 50g) or another amount as specified by the Department of Health and Mental Hygiene (DOHMH).
  • This new legislation, Int 0687-2022, builds on the “Sweet Truth Act,” which was passed in 2021 and requires the same added sugar notifications on certain prepackaged food items at covered NYC establishments.
  • The bill has been sent to the Mayor for a hearing and signature, to be held on November 17. If signed, covered establishments will be required to display the added sugar icons no later than one year after the DOHMH issues its rules for the bill. Any covered restaurant that violates the provisions of the bill is liable for a civil penalty of $200.
© 2023 Keller and Heckman LLP
For more news on Added Sugar Notifications, visit the NLR Biotech, Food, Drug section.

Patenting a Nice Cool Glass of Nicotinamide Riboside? Claims Covering Milk Invalid under § 101

The US Court of Appeals for the Federal Circuit found that claims covering a naturally occurring composition were not patent eligible under 35 U.S.C. § 101 merely because one component of the composition had been “isolated.” ChromaDex, Inc. v. Elysium Health, Inc., Case No. 2022-1116 (Fed. Cir. Feb. 13, 2023) (Chen, Prost, Stoll, JJ.)

ChromaDex sued Elysium (a former ChromaDex customer) for infringement of its patent directed to dietary supplements containing nicotinamide riboside (NR). Elysium moved for summary judgment, arguing that the asserted claims were invalid under the § 101 prohibition against patenting natural phenomena. After the district court granted summary judgment, ChromaDex appealed.

The asserted claims were directed to a composition comprising:

  • Isolated NR
  • One or more of tryptophan, nicotinic acid or nicotinamide
  • One of 22 carriers
  • Increased NAD+ biosynthesis after eating.

Both parties conceded that milk satisfies every element of the asserted claims with the exception that its NR is not “isolated.” Both parties also conceded that milk is a naturally occurring material and thus not patent eligible under § 101.

On these facts, the issue presented was whether the claim limitation that the NR must be “isolated” (which does not occur in nature) was sufficient to make the claims patent eligible. The Federal Circuit responded “no.”

The Federal Circuit analyzed the asserted claims under two tests: the “markedly different characteristics” test set out in Chakrabarty, and the Alice two-step test (unsure whether Chakrabarty remains controlling precedent).

Under the Chakrabarty test, a claimed composition is not a natural phenomenon if it has “markedly different characteristics” from what occurs in nature. The Federal Circuit found that ChromaDex’s claimed composition had no markedly different characteristics from natural milk. While ChromaDex argued that isolation potentially allowed for unnaturally high concentrations of NR, the claims did not require such concentrations. The claims included compositions structurally and functionally identical to milk and therefore failed the “markedly different characteristics” Chakrabarty test.

Proceeding to the two-part Alice test, under step 1 the Federal Circuit found that the claims were directed to a product of nature because there were no structural differences between the claimed composition and natural milk. Under step two, the Court found that there was no “inventive step” because the claims were merely directed to increasing NAD+ biosynthesis, which was a natural principle that resulted from drinking milk.

Practice Note: During claim drafting, care should be taken to avoid claims that encompass all structural and functional components of a naturally occurring material.

Article By Alexander Piala, PhD of McDermott Will & Emery

For more intellectual property legal news, click here to visit the National Law Review.

© 2023 McDermott Will & Emery

USDA Finalizes the Strengthening Organic Enforcement Rule

  • USDA’s Agricultural Marketing Service (AMS) administers the National Organic Program (NOP) as authorized by the Organic Foods Production Act of 1990 (OFPA).  The USDA organic regulations, which were published on December 21, 2000, and became effective on October 21, 2002, govern the production, handling, labeling, and sale of organically produced agricultural products.  On August 5, 2020, in response to mandates in the Agriculture Improvement Act of 2018, as well as pressure from the industry and recommendations from the National Organic Standards Board (NOSB), USDA published a proposed rule called Strengthening Organic Enforcement (SOE) that is aimed at preventing loss of organic integrity—through unintentional mishandling of organic products and intentional fraud meant to deceive—and strengthening trust in the USDA organic label.
  • On January 19, 2023, USDA published the SOE final rule.  The final rule includes clarifications and additional examples in response to comments received on the SOE proposed rule.  Key updates include:
    • Requiring certification of more businesses, like brokers and traders, at critical links in organic supply chains;
    • Requiring NOP Import Certificates for all organic imports;
    • Requiring organic identification on nonretail containers;
    • Increasing authority for more rigorous on-site inspections of certified operations;
    • Requiring uniform qualification and training standards for organic inspectors and certifying agent personnel;
    • Requiring standardized certificates of organic operation;
    • Requiring additional and more frequent reporting of data on certified operations;
    • Creating authority for more robust recordkeeping, traceability practices, and fraud prevention procedures; and
    • Specifying certification requirements for producer groups.
  • The compliance date for the SOE final rule is March 19, 2024, or 12 months after the effective date of March 19, 2023.

Article By Food and Drug Law Practice Group at Keller and Heckman

For more biotech, food, and drug legal news, click here to visit the National Law Review.

© 2023 Keller and Heckman LLP

FDA Finalizes FSVP Guidance for Importers of Human and Animal Food

On January 10, the FDA issued a final guidance for the Foreign Supplier Verification Programs (FSVP) for Importers of Food for Humans and Animals. As our readers know, under the Food Safety Modernization Act (FSMA), FSVP requires that importers verify that the food which they import provides the same level of public health protection as the preventive controls or produce safety regulations (as appropriate) in the U.S. and to ensure that supplier’s food is not adulterated and is not misbranded with respect to allergen labeling.

The guidance is intended to assist importers in developing and implementing FSVP records, and following FSVP requirements for each food they import. The guidance includes recommendations on the requirements to analyze the hazards in food; how to evaluate a potential foreign supplier’s performance and the risk posed by the food; ways to determine and conduct appropriate foreign supplier verification activities; and how importers of dietary supplements or very small importers can meet modified FSVP requirements.

The guidance finalizes a 2018 draft guidance, and addresses comments received regarding what food the FSVP regulation applies to, what information must be included in the FSVP, and who must develop and perform the FSVP activities.

For more Biotech, Food, and Drug Legal News, click here to visit the National Law Review.

© 2023 Keller and Heckman LLP

Companies Gear Up For Mass Production of Cultured Meat

Could cultured meat be available in your U.S. grocery store in the new year? A previous article focused on the topic of “cultured meat” – meat made from the cells of animals and grown in a nutrient medium. While no cultured meat has yet been approved for sale in the U.S., companies are positioning themselves for mass production once needed approvals, licensing, inspections, etc., are obtained.

Earlier this month, Believer Meats broke ground on a $123 million plus facility in Wilson, North Carolina. The facility will be able to produce 10 metric tons of meat a year and will be the largest cultured meat facility in the world. The new facility will be Believer Meats’ second production facility. Last year it opened its first facility in Rehovot, Israel, with the capacity to make 500 kilograms of cultured meat a day. Believer Meats has developed processes to create cultured chicken, beef, pork, and lamb.

Investment in the cultured meat industry has been massive. For example, Believer Meats has $600 million in funding, and its investors include ADM Ventures, part of Archer-Daniels-Midland Co., and Tyson Foods.

Investment in the cultured meat industry has been massive.

So, with all of the investment and building of facilities, is the sale of cultured meat in the U.S. imminent? Cultured meat was first introduced in 2013. The eventual sale of cultured meat in the U.S. seems inevitable, but the timing is not yet clear. Before any cultured meat can be sold in the U.S., the FDA and USDA must approve the processes, license the facilities, inspect the facilities, inspect the meat, and approve labeling for the meat. Recognizing the rapid development of cultured meat products, the FDA established a premarket consultation process for companies to work with the FDA to start the process of regulatory approval for their cultured meat products. This premarket consultation process permits the companies to, voluntarily, work with the FDA, and to share information about their processes. The FDA premarket consultation does not, itself, “approve” the products, but evaluates the information shared by the companies – in order to determine if the meat is safe for human consumption. Specifically, as part of the premarket consultation, the FDA considers the cells used to make the cultured meat, the processes and materials used to create the cultured meat, and the manufacturing controls under which the cultured meat is created.

Recently, UPSIDE Food Inc. became the first cultured meat company to complete the FDA’s premarket consultation process. In November of this year, the FDA issued a No Questions letter to UPSIDE Food Inc. for its cultured chicken. The letter stated that information provided by UPSIDE Food Inc. to the FDA demonstrated that UPSIDE Food Inc.’s cultured chicken is safe and its production process prevents the introduction of contaminants that would adulterate the product. Last year, UPSIDE Food Inc opened a facility in Emeryville, California capable of producing 50,000 pounds of meat per year.

UPSIDE Food Inc.’s No Questions letter from the FDA is just the first step in the regulatory process. Pursuant to a 2019 agreement between the FDA and USDA, the FDA and the USDA will share oversight of the production of cultured meat. In addition to the premarket consultation, FDA will oversee the creation of the cultured meat up until the time of harvest, including licensing facilities, and inspecting the creation of the cultured meat. Inspections will ensure approved processes are being used and that the cultured cells are grown in a fashion that complies with Good Manufacturing Processes and food safety regulations.

When the cultured meat is harvested and processed into its final form, regulatory oversight will shift to the Food Safety Inspection Service (FSIS) of the USDA. As with traditional meat producers, cultured meat producers will have to apply for Grants of Inspection and be subject to similar inspections and food safety requirements. Labels for the cultured meat will also have to be preapproved by FSIS.

Before Believer Meats can sell any of its products manufactured in the North Carolina facility, Believer Meats will have to navigate the regulatory hurdles necessary to obtain approval of its products for sale to consumers. Believer Meats has indicated that it has been working with the FDA, but the FDA has not yet issued any statement on Believer Meats’ processes or products. However, with the start of construction on the world’s largest cultured meat facility, Believer Meats will be well-positioned to begin commercial production when regulatory approvals are obtained. We will be following this emerging new market and the regulatory rubric designed to oversee these cutting-edge food products.

Article By L. Christine Lawson of Womble Bond Dickinson (US) LLP

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