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Yana Zhuravel offers a seminar at the New York Bar & Wine Show.

posted Apr 12, 2010, 6:52 PM by Yana Zhuravel   [ updated Apr 14, 2010, 10:29 AM ]

Yana Zhuravel, an attorney specializing in services for the nightclub, bar and restaurant industries was asked to offer a seminar at the New York Bar & Wine Show.  The seminar, which is entitled “Get a Head Start: How to Limit Your Legal Liability When Opening and Operating a Nightclub or Bar”, will give practical advice on how to tackle a multitude of legal issues that affect nightclubs and bars on a daily basis.  The seminar will take place on Sunday, June 20th, 2009 at 3:30PM.

Once you make the most important decision- to undertake the venture the opening up your bar, nightclub or restaurant- you are bombarded with contracts, leases and licenses that are difficult to understand and even tougher to execute.  Sometimes, all you need is some help and guidance to get through the process so that you, as an owner, may focus on what you do best.  Attorney Yana Zhuravel will guide you through the various legal hurdles that nightclub and bar owners face when opening and operating their establishments such as site selection and commercial lease structuring, health and fire code regulations, liquor and food service license procurement, business formation and dissolution as well as employment policies and guidelines.  The objective of the seminar is to provide owners with strategies on limiting their liability while ensuring smooth business operation.

To purchase passes to the New York Bar & Wine Show please visit www.nybarshow.com.

Yana Zhuravel featured in VIP Moderne Magazine - Get a Head Start: The Basics of Commercial Space Leasing for Nightclub, Bar and Restaurant Owners: A Conversation with Yana Zhuravel, Esq.

posted Oct 14, 2009, 11:16 PM by Yana Zhuravel   [ updated Mar 14, 2010, 5:19 PM ]

One of the first things you do when opening up a bar, nightclub or restaurant is to lease a space that suits your needs.  Finding a space and negotiating a lease is a time consuming and complex process that is crucial to your success and bottom line.  In fact, rent is the single largest expense for any establishment. I am fortunate to have Yana Zhuravel, an attorney in New York State who specializes in the nightclub and bar industry.  Yana has helped dozens of nightclub and bar owners negotiate and structure their leases in order to limit the owners’ financial and legal liability.

MLF: What is the first step that a nightclub/bar/restaurant owner should take when leasing a space? 

ZHURAVEL: The first thing an owner should do is to become familiar with some of the basics and terminology of real estate leases and then enlist the help of a professional tenant representative to help find you the right space at the right price.  Also, the nightclub/bar/restaurant businesses are unique because they involve food and alcohol services.  Therefore, enlisting the help of an experienced attorney to properly negotiate and structure the lease in accordance with the establishment’s operational needs will not only maximize the overall economics, but will also limit the owner’s liability exposure and will allow for smooth ongoing business operation.  An attorney can also help with satisfying building code, fire code and licensing requirements.  Any landlord will have a listing agent and an attorney on their team when working on a lease transaction and you should to the same to protect your rights and interests.

MLF: Can the owner just let his attorney and tenant rep run with the leasing process?

ZHURAVEL: Absolutely not!!! No one understands your business needs better than you.  Think of the tenant rep and the attorney as advisors who will work on your behalf and provide you with information and counsel to achieve an optimal outcome. 

MLF: What are some key elements of commercial real estate leases that a nightclub owner needs to understand?

ZHURAVEL: This is an excellent question.  The most critical element of a lease is the manner in which rent and operating expenses are denoted.  There are four basic types of leases, absolute net, triple net, gross and modified gross.  Ultimately you end up paying rent for the space plus a reimbursement for a certain part of the property operating expenses, but knowing the difference between these lease structures can help you compare rents at different properties and make sure that you’re getting the best deal. 

Absolute Net. A net rent simply means that the rental rate per square foot (as noted in the lease) is net of reimbursement for operating expenses.  Under an absolute net lease the tenant reimburses the landlord for all operating expenses associated with the property.  This is a common lease structure for a single-tenant building or a pad site.

Triple Net Lease (NNN).  This is similar to an absolute net lease, but here the tenant reimburses the landlord the pro-rata share of property operating expenses.

Gross Lease. All operating expenses are included in the rent and the tenant is not required to pay additional reimbursements to the landlord.  If you come across a gross lease make sure you get a breakdown of expenses per square foot from the landlord so that you understand the amount of operating expenses at the property.  Being able quantify these two components of the rent may help you to negotiate a better deal and can help you compare a gross lease rate to a NNN lease rate.

Modified Gross Lease.  This is the most complicated lease structure as it requires the tenant to reimburse the landlord the pro-rata share of property operating expenses above a certain base year.  Sounds complicated right! Here is an example. Let’s say that you leased 10,000 square feet in a 100,000 square foot property in 2009 for $10 per square foot.  Now, 2009 will serve as your base year.  In 2009 operating expenses were $100,000, but in 2010 these expenses increased to $200,000.  You are now responsible to reimburse the landlord 10% of the $100,000 increase in expenses of $10,000.

MLF: What are some other lease elements that a bar owner needs to know?

ZHURAVEL: This is a very comprehensive question, so allow me to provide a quick checklist of some key things that come to mind:

1) Lease Term:  The duration of a lease can range from month-to-month (MTM) to 25 years.  A short term lease carries a risk of rental increases, while a long term lease exposes the owner to a significant long term liability.

2) Extension Options: A great feature because it provides short term security and eliminates long term liability.  If you’re opening up a new lounge concept and are uncertain of its success, you can sign a 3 or 5-year lease with several extension options to be exercised at the option of the tenant. 

3) Tenant Improvement Allowance (TI): Landlords frequently offer reimbursement of improvement expenses that you make to your space.  You should look at TIs as a loan to build-out your space.  A lot of times a landlord will offer you an extra TI allowance in return for a higher rent.  When you compare the upfront allowance to the rent increase you’ll find that you’re being charged an interest rate between 10% and 20%, so be careful when accepting such an offer.  You can always request a TI allowance from the landlord as part of your negotiating strategy, just be careful if he increases the rent as a result.     

4)  Exclusive Use Clause: This allows you to make sure that the landlord can’t lease space to a similar establishment at the property without your permission to avoid competition. 

5) Liability: Make sure that your liability is limited only to activities within your leased space and not the common areas.  For example, someone is walking in front of your restaurant and falls on the sidewalk, which is considered a common area. You don’t want to be named party to a law suit as a result.  A liability waiver is especially critical if the landlord is responsible for cleaning the snow or any other debris in front of your establishment.  You should not be responsible for the accident if it’s the landlord’s responsibility to take preventative measures.

8) Hours of Operation:  Make sure that your lease expressly states your permissible hours of operation.  I’ve seen many clients who ran into significant problems because they overlooked this critical clause in the lease.  Also be mindful here because sometimes landlords will require your establishment to stay open during certain off-peak hours (or holidays), which may not be beneficial for you and your business.

9) Grace Period: This is a rent-free period (2-6 months) given to the bar owner to perform build-out.  It’s really important to negotiate a grace period because you don’t want to pay rent during the time that your business is not operational.  Grace periods are standard, so don’t let anyone tell you otherwise, but it’s up to you and your attorney negotiate the best deal possible.

There are countless other nuances to consider when analyzing and structuring lease agreements such as insurance requirements, exclusive parking space allowances, zoning and fire code compliance and ingress/egress easements,  just to name a few.

MLF: Do you have any parting words for our readers?

ZHURAVEL: Leasing sounds like a fairly straight forward process: find a space, lease a space, open for business.  However, this process has certain complexities that need to be recognized and addressed, so if you decide not to seek the assistance of a legal or real estate professional, you should do some research on real estate leases so that you may understand your financial and legal liability exposure.

Yana Zhuravel is a practicing attorney in New York State.  She specializes in Real Estate, Construction, Business and Licensing issues and serves the Nightclub, Bar and Restaurant industries in the New York City Area.

The information contained in this article is provided for information purposes only, and should not be construed as legal advice on any subject matter.  No recipients of content from this article should act or refrain from acting on the basis of any content contained in this article without seeking proper legal consultation based on their specific facts from an attorney licensed in the reader’s state.  The content in this article is general information and may not reflect current legal developments.  Yana Zhuravel, Esq., expressly disclaims all liability in respect to actions taken or not taken based on any content of this article. 

Five Strategies to Help Your Bar or Nightclub Conquer the Current Recession. By: Yana Zhuravel

posted Oct 14, 2009, 11:11 PM by Yana Zhuravel   [ updated Mar 18, 2010, 1:49 PM by Yana Zhuravel ]

Unless you’ve been living under a rock for the last two years, you are aware that we’re in the midst of the most severe financial crisis since the great depression.  Although there is light at the end of the proverbial tunnel as we begin to emerge from “The Great Recession”, we are certainly not out of the woods yet.  While the service sector exhibited growth for the past two months, consumer still hold a tight grip around their free cash evidenced by significantly depressed spending levels as compared to the 2007 highs and a national saving rate that is hovering around 6%.  The bad news is that consumer dollars are becoming more elusive and completion to capture a portion of the consumer wallet is increasing.  The good news is that with a little bit of knowhow and ingenuity your bar, nightclub or lounge can stand apart from the competition and attract patrons who are looking for that perfect place to escape the harsh reality of today’s economic life.   Here are basic strategies that are easy to implement and will help you increase patronage and most importantly profits.

1)      The Human Experience:  Any one of your patrons can go to the bodega on the corner and get a six-pack and a bag of chips.   Remember, you’re not selling alcohol or food; you’re selling the human experience, which is the interaction that your customers have with you, your staff and your customers. Offering great customer service does not cost you anything; all you have to do is train your staff to be outgoing, vivacious and courteous.  Everyone who works at your club is a family and everybody depends on everybody else for their income.  Here is an example;  if the staff at the front door is rude to a customer, that person’s night is already off to a bad start, so he’ll order fewer drinks, tip less, and ultimately everyone suffers. Hospitality begins at the front door so eliminate the obnoxious people that stand behind the velvet rope and sneer at clients who are waiting on line to spend money at your club.  Make sure that the bouncer checking IDs is courteous to your guests.  The wait staff and bartenders should definitely keep the smiles on their faces, their tips depend on it.  Believe it or not, bars and nightclubs are part of the hospitality industry, and as such, great customer service is the key to a successful club. 

2)      Promotion, Promotion, Promotion:  Many nightclubs and bars make the common mistake to slash or eliminate their advertising and marketing campaign during recessionary times.  Don’t you fall into that trap! In a study of US recessions, McGraw-Hill Research found that businesses that maintained or increased their advertising expenditures during recessions, averaged significantly higher sales growth, both during the recession and for the subsequent 3 years as compared to businesses that eliminated or decreased advertising.  Sounds counterintuitive, but its true; if every nightclub and bar around you is dropping advertising due to the recession, but you continue to advertise, which establishment are potential patrons going to read about in magazines or newspapers?  Now you see my point.  You want your community you know that you’re in business and going strong.  The good news is that during tough times you can stretch your advertising dollars since internet, print, television and radio media have significantly slashed their advertising rates.  Further, media companies want to lock-in future cash flow so if you negotiate a long term contract in a time of distress you will benefit from favorable discounted advertising for a long time.

3)      Cover Charge! What Cover Charge? I know that a cover charge is easy money in the bank, but these days people are looking for a deal.  Paying a cover charge represents a risky proposition to a cash strapped patron.  If he pays a cover charge and your bar is having an off night, the patron will not enjoy the time that he spends at your establishment and will tell all his friends that he had a bad time AND he had to pay a cover charge for that privilege.  So what you’ve done is generated $20 in short term cash but forewent hundreds of dollars in future revenues from this person and a dozen of his friends due to negative word-of-mouth advertising.  Now imagine you have no cover charge. The same person comes to your bar on an off night, has a few drinks and leaves.  What does he tell his friends the next day: “I went to a bar, it was an off night, had a few drinks”. No harm, No foul. 

4)      Reduce Liquor Costs:  In a difficult economic climate it is very important to cut costs, but the trick is to cut costs without sacrificing quality or service.  Strategically adjusting your liquor purchasing is a clever way of reducing costs and increasing profits.  You’re in one of the best buyer markets in years, which puts you, the bar owner, in a position to dictate terms to liquor brands, distillers and distributers.  In addition, you should take advantage of new liquor brands trying to penetrate the alcohol market.  These companies are looking to aggressively market their new brands so you can arrange promotional parties and events.  In addition, you can obtain promotional pricing from these new brands and offer your patrons discounts on drinks made with the promotional alcohol brand.  In this case everyone wins: the liquor company gets to promote its product and the customer gets inexpensive drinks and you save significant amount of money on alcohol procurement while still generating alcohol revenue.

5)      Let Your Furniture Work For You: Décor is your business card.  It tells customers who you are and dictates how much you can charge for your products such as alcohol and food.  Furniture is a critical element of your décor because if directly effects guests’ comfort level.  The more comfortable your guests are, the longer they stay, the more drinks the order, the more money you make.  As you can see, it’s a pretty simple cause and effect relationship.  There are many different options to choose from when purchasing furniture for your establishment, but I believe that modular furniture is the best option because of its versatility and price.  Modern modular furniture specifically designed for use in nightclubs bars and lounges and is typically comprised of 2 to 4 components and allows you to construct a variety of furniture pieces.  For example, you can use armless chairs and corners to construct love seats, sofas, sectionals, perimeter seating or VIP booths.  The most amazing thing is that modular furniture allows you to create a different look for your nightclub each night, which gives your patrons a different experience every night.  In addition, modular furniture allows you to make your VIPs to truly feel like very important people.   Here is an example. Let’s say that you have a party of 50 guests at your club, you can create one VIP area and accommodate this large party.  The next day you have 5 parties of 10 people; in this case you can disassemble the perimeter seating area and create 5 separate nooks that will give each group of people their own VIP area.  Offering a high level of service will separate you from the competition and will attract crowds of patrons to your establishment.

There is a multitude of ways to ensure that your nightclub or bar prospers in today’s market.  In addition to the abovementioned strategies you can also run cross promotions with other businesses in the area, set up an informative web site and send out e-mail blasts to existing clients.


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