NDAs & Non Competes In The Restaurant Industry

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QUESTION FROM: Mark in NE

”My cook of almost 7 years is leaving and no one else knows the recipes. Do you have a form I can use for her to sign not to use my recipes at other places?

We’ll of course be hiring another chef to replace her in the next couple of weeks since noone else can execute all of the dishes.

One of the chefs applying, mentioned that she wants to open a restaurant too. She is currently cooking things from her home as a side catering business so technically she’s our local competition (and not even a mile away).

We are considering a non compete clause in her contract too.

Have you ever done this? What advice & experience can you please share?

Not only am I afraid the chef leaving will steal our recipes but even if they don’t, I have a bunch of 100 year old family recipes one of which is for incredible fried chicken that everyone raves about. I realize it’s a 50/50 chance here that any chef will take my recipes and run....scary!”


HH ANSWER:

This is what happens when you don’t cross-train or take standard preventative measures prior to opening...but seeing as how the horse has already left the barn, I’d offer your outgoing Chef an exit interview, with a $500-1000 daily consulting fee for teaching the crew (including you) how to cook every dish...and be sure you take detailed notes and photos - not to mention taste every dish that comes off the line to ensure that it is actually being cooked as it has been all along.

It’ll be worth the $$$.

Moving forward,there are a few ways to protect recipes. The easiest is to pre-combine several ingredients and call it “chicken marinade” or “flour blend” or whatever...pre-mix, measure, package and then alter the recipe so that each specific ingredient included in the “blend” or “mix” is removed from the recipe and “flour blend” is put in it’s place.

As far as an NDA goes- I wouldn’t go anywhere near one with a Chef...or even broach the subject but 33 years is a long time...there must be some love and respect there.

I’d honor that by offering to pad her war chest with a full month’s pay as a “Thank You for your years of service” and shut the restaurant down for a night to throw her a farewell party / dinner with all staff and regulars.

Please don't take this as an insult or a personal attack, I'm just trying to help: You should know more about your small business than anyone.

This includes cooking, recipes and procedures. It’s impossible to profit from an idea and/or recipe alone. You have to be able to execute - and execute well. After all… execution is everything.

Spend the next 7 weeks learning how to cook, writing down and systemizing recipes and developing a criss-training program so that - in the event of a emergency, illness or termination… someone is able to step in and fill the next chef’s shoes.

Or...you could simply rely on the incoming Chef and put the future of your financial success solely in their hands - have them prep, prepare and plate every time...and hope they don’t ever get sick or get hit by a bus.

IMHO- an NDA is impossible to litigate and only makes you less desirable to work for.

At the end of the day, even if your recipes are well documented, they could add a pinch of sugar and it would technically/legally probably be a completely different recipe.

You can only protect your recipes from chefs without a memory. You can, however, ensure they don’t open up (or work for) another shop within Xmiles of any location you own or operate...but I wouldn’t think of giving a chef an ultimatum like that unless you’re making them a partner / giving them some equity...and even then, you’d be starting off on a contentious foot which, IMHO, is not worth it.

I’m not a lawyer or licensed to practice law so I would recommend you consult with one briefly to discuss the possibility of simply making up a non-compete yourself if you are that concerned about it.

If you do decide to move forward with a non-compete, it may not have to be very formal. You may simply want to say who you are, name of the business, location, her/his name and position and that they held along with the fact that they agree not to use any menu item in any another on or off-premise capacity for no longer than seven years within a certain mile radius from your location.

You may want that (and possibly other) specific limitation(s) in a non-compete for it to be enforceable because I believe the law only allows you to bind someone for so long and have been told that non-competes need to be reasonable (e.g, not solicit accounts, induce other staff members to leave, not copy or openly / publicly share trade secrets or work for/as direct local competition) – Think a non-compete that poses a hardship / precludes them from obtaining work or performing their specific skill set at all might be difficult to impossible to enforce. In other words, while you may be able to prevent someone from working in the same/similar capacity within a 5 miles radius, you probably couldn’t get away with restricting them from competing with you within a 30mile radius.

I really would just let it go and focus more of your energy on updating your menu for 2020.

As far as 2020 goes and the new prospective Chef who is presently running a catering business out of her home - why not start an open and honest discussion about it?

Determine what kind of commitment she can offer you.

Explain your concerns and see how she responds...but keep in mind that if you were a chef and someone asked you to sign a non-compete, how willing would you be to feature your best stuff at their restaurant?

If she didn’t need much more money, why wouldn’t she just keep doing what she’s doing?

Maybe she’ll love working with you.

Maybe you’ll be partners in another venture together.

Maybe she’ll screw you over.

I know it sounds cliché but you only open yourself to as much possibility as you do to loss.

If I had the opportunity to hire a star Chef for just 6mos, I’d not only take it...I’d make sure I brought on her protege before she even started.

Just try your best to approach her in an open and honest way about what you want and what you’re afraid of. Ask her what she wants and what she doesn’t want.

One last point...The moment your “competitor down the street” comes in looking for a job, they’re no longer your competitor....and even if you viewed them as such - you’re already competing with them now anyway right?

Good luck & Let me know how you decide to move forward,

Josh