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Why Restaurants Can’t Always Fire Chefs Accused of Sexual Misconduct

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Complex arrangements keep Mario Batali and John Besh tied to their businesses

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Following numerous allegations of sexual misconduct that have toppled high-profile culinary luminaries including Mario Batali and Ken Friedman, diners, chefs, owners, and restaurant staff are all asking the same question: Where do we go from here?

The allegations that Batali drunkenly groped women’s breasts and Friedman’s wildly popular restaurant the Spotted Pig was home to something colloquially known as “the rape room” has led some diners to boycott their establishments. Others are hesitant to do so, reasoning that declaring a moratorium on eating at restaurants owned by the accused will also hurt their innocent front- and back-of-house staff.

Restaurant groups, too, are debating their next moves: How does a restaurant divorce itself from a high-profile figurehead, particularly when — as in the case of Batali — their own identity is seemingly synonymous with that of their dining establishments?

In the wake of sexual misconduct accusations from more than a dozen women, Batali announced he would “step away” from his restaurants, a vague phrase that’s become a familiar refrain, often meaning the the stepper is no longer involved in “day to day” operations of the businesses (a definition that’s also vague). Batali’s also been fired from his co-hosting gig on ABC’s The Chew and had his products dropped by numerous retailers.

But, as the New York Times reports, business partner Joe Bastianich — who’s also faced accusations of “sleazy” behavior at work — says “the terms of [Batali’s] income stream from the company have not changed.” Similarly, Friedman has taken an indefinite leave of absence from his restaurants but remains an owner. New Orleans celebrity chef John Besh, who stepped down after being accused of fostering a restaurant culture where sexual harassment ran rampant and engaging in an “unwelcome” sexual relationship with an employee, “remains an owner of the business,” the Times reports.

In other words — even if those involved in the business might want to cut out a bad actor — sending a disgraced chef packing isn’t so simple when he’s also a partner. “Generally, partnership agreements, once entered, are hard to unwind,” says New York-based hospitality lawyer Jasmine Moy. “I always tell people that entering into business with someone is like marriage.” As anyone who’s gone through a divorce understands, severing marital ties is no easy feat, particularly when there’s property or other sizable financial assets involved.

Many restaurant businesses are structured in intricate, and frequently confusing, ways. As Eater NY explained in the wake of the Batali bombshell, “Each individual restaurant [under the Batali & Bastianich Hospitality umbrella] has a different ownership structure, with varying investors and chefs having stakes.” While Batali does not actually have an ownership stake in B&B, he does co-own each of the group’s nearly two dozen restaurants. (Bastianich declined to reveal any specifics about Batali’s ownership stakes.)

This arrangement isn’t uncommon. “The business structures often used [in the restaurant industry] are multi-tiered,” Moy says. “A famous chef will partner with a managing partner and maybe they form a management company, if they think they’re going to build a restaurant empire. That management company will be a part owner in several smaller LLCs: One might take in money for buildout and investing partners, and another might sign a lease for a standalone restaurant. Maybe that management company will also sign a management deal at a hotel, and then maybe it’ll sign a partnership to run another fast-casual venture.”

These complex business arrangements mean that, often, it’s not enough for a beleaguered chef or owner to simply agree to walk away. “Sometimes you need all the shareholders to vote when the management company or famous chef wants or needs out,” Moy says. “There’s a lot of other people that have to approve it in order to make the paperwork check out.”

In addition to answering to investors, in many cases, even the landlord will have to be consulted when it comes to a major move like transferring ownership. A big-time celebrity chef leaving his restaurants can throw up major roadblocks: In some cases, lease agreements may hinge on a celebrity chef’s continued involvement with the restaurant.

“In short, it’s easy to fire someone who is an employee, but it’s very hard to kick them out of a company when they’re a part owner,” Moy says. “Ownership comes with real liabilities, both legal and tax, with many other people having a stake in the outcome.”

Those liabilities continue even if a partner elects to voluntarily divest, as in the case of San Francisco’s Four Barrel Coffee. Following accusations of sexual misconduct from multiple employees, Four Barrel co-founder Jeremy Tooker agreed to divest from the business and transfer his shares and ownership (which comprise 50 percent of the company) to Four Barrel’s employees. Four Barrel co-owner Tal Mor declined to discuss in further detail how the divestment process will actually work, though he confirms that he and partner Jodi Geren plan to transition Four Barrel into a 100-percent worker-owned cooperative model.

The announced divestment plan comes with its own set of potential complications. According to Moy, transferring shares of a business to employees can also make those employees liable to pay taxes on said shares, a potentially hefty financial commitment they may not be prepared for. And as Eater’s Meghan McCarron points out, that co-op model doesn’t guarantee that other bad actors who may have contributed to “a culture of harassment” at the company won’t gain more power, in form of a larger ownership.

While the process of extricating someone like Batali or Besh from their own restaurants seems dauntingly complex, it doesn’t have to be that way. The best defense against these situations, according to Moy, is for restaurateurs and their partners to be clear about what specific behaviors will not be tolerated, and what exactly the consequences of such behavior will be, by having all parties sign an operating agreement from the get-go that clearly lays out all this information.

“It’s really worth investing in getting the documents done right, because it’s really hard to redo them once you’re already operating,” Moy warns. “The consequences of not doing them the right way [from the start] means that you could spend years and hundreds of thousands of dollars fighting with each other in court later. Having a really specific, inclusive, and thoroughly fleshed out set of operating documents will present a lot of strife, litigation, and confusion.”

Milton Springut, founding partner of intellectual property litigation and counseling firm Springut Law, says he sees cases like this all the time, and notes a savvy chef will separate a license for use of their name from a business contract.

“Most of the time, you have this young chef who’s very talented but has limited funds,” Springut says. “Then ‘The Money,’ a business backer, comes along, and they’ve done this before. They have the funds to support the business but also understand how important these contracts are, and are able to specify — or have their lawyers specify — exactly how the business relationship will work, and what happens if things fall apart.”

“Batali’s situation is different of course,” Springut says, “because he’s the chef and ‘The Money.’”

“It’s a matter of leverage and negotiation,” says Tal S. Benschar, a partner at Springut Law. “Batali has experience in this so his contract is probably solid.” But, the acts Batali is accused of — and has largely admitted to — may have represented a violation of said contract. “Depending on how that contract is written, a chef who wishes to exit might have to continue to allow the group to use his name if it’s still of value to the brand,” Benschar explains.

A chef like Batali that’s been in the business for a long time will likely know better than to sign over his name directly. “Generally they’ll set up an entity,” Benschar says. “The chef owns a trademark, and licenses it for certain things. As the trademark owner they have a responsibility under the law to protect the way their name is used. It’s about reputation. Operationally, maybe they agree it can be used as part of the name of a restaurant, or a certain number of restaurants. This way if there’s a break, there’s a clear line on what is allowed and what is not.”

But Batali appears to be persona non grata in the industry right now, so it seems possible or even likely at this point that Batali & Bastianich Hospitality would prefer to scrub his name from their business entirely: Bastianich told the Times last week that he’s currently in talks with branding agencies and plans to change the group’s name in an effort to “completely [change] the DNA of the company.” For now, though, whether or not Batali will actually divest from ownership of the group’s restaurant empire remains up in the air.

The tribulations of Batali, Friedman, and a growing list of other bad actors including Besh and Charlie Hallowell will certainly serve as a cautionary tale for restaurateurs and investors going forward, as the deluge of sexual misconduct allegations underscores the importance of having iron-clad operating agreements in place before such things come to light.

The existence of such agreements that make it easier to oust a chef who’s accused of sexual misconduct may also serve as a strong deterrent against bad behavior: If a chef knows that making lewd comments to a server or groping a line cook could result in him being terminated and having to transfer all his shares of the business back to the company, he might think twice about his actions. And in an industry where 90 percent of women report facing sexual harassment at work, literally any deterrent seems like a step in the right direction.

Whitney Filloon is a senior associate editor at Eater.
Editors: Daniela Galarza and Erin DeJesus

Mario Batali Takes Leave Following Sexual Misconduct Allegations [Eater NY]
After the Apologies, Restaurants Struggle to Change [E]

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