Karina B. Sterman

Partner
Fax 310-201-1788
PRINTPDF

From Soup to Nuts: A Round-Up of Legal Guidance for Food & Beverage Companies

July 19, 2021Article
Los Angeles Business Journal

The Los Angeles area is home to iconic food innovators, family-run restaurants of every ethnic stripe, and competition-winning restaurateurs. A successful restaurant or food and beverage company is also a business enterprise associated with high risks, hard-earned rewards, and the need to comply with numerous federal and state regulations. Our Restaurant, Food & Beverage Law Group provides trends to assist you with your growing business. 

This was originally published in the Los Angeles Business Journal Food and Beverage Outlook - A Legal Perspective

A SURGE IN TRADEMARK APPLICATIONS – PLAN AHEAD

The USPTO recently announced thatThe USPTO recently announced that trademark applications have surged to unprecedented levels in recent months. As of June 2021, the increase is roughly 63% over last year. One of the consequences of this drastic increase is that, whereas historically, a newly filed trademark application was examined by a PTO attorney 3-4 months after the application was ÿled, it is now taking about 6 months (or more!) for that initial examination to take place. This means that if you are planning to open a new restaurant or food business, and have filed a trademark application for the name and/or logo of your new venture, you will need to take into consideration that you may not know whether your trademark application will be approved or not by the time you are ready to launch.

-Natasha Shabani, intellectual property attorney

THE PANDEMIC HAS CHANGED REAL ESTATE CONTRACTS

As a result of lessons learned from the stay-at-home orders, retail tenants have become emboldened in negotiations, requiring rental abatement in leases should governmental orders result in their inability to operate entirely or at full capacity. This trend started with large, multi-location restaurants and quick-service tenants, and is now a frequent ask even with smaller retail tenants. Going forward, tenant abatement rights that were written speciÿcally with COVID-19 in mind may apply to use and occupancy limitations from any governmental order in order to hedge against future shutdowns. 

- Sarkis Haroutunian, real estate attorney

ACRYLAMIDE & PROP 65 WARNINGS

It has thus far been a noteworthy year for acrylamide, a Proposition 65-listed sub-stance that naturally forms in the cooking  and heating of many plant-based foods.°Both the courts and the California Ofÿce of Environmental Health Hazard Assessment 
(OEHHA) appear to be responding to a proliferation of Prop 65 acrylamide lawsuits. In the first quarter of 2021, there were 109 60-day notices issued to companies based on failure to warn for acrylamide. In March, a federal district court judge issued a preliminary injunction temporarily barring Prop 65 acrylamide lawsuits based on the failure to warn for cancer risk. However, the Ninth Circuit recently stayed the preliminary injunction pending an appeal of the injunction, meaning these suits can be filed again. In addition, OEHHA is in the process of a regulatory rulemaking potentially amending the Prop 65 regulations to specify new safe harbor levels for certain classes of heat-pro-cessed foods, which would potentially eliminate Prop 65 warning requirements for foods created by cooking or heat processing if the producer, manufacturers, distributor or holder of the food has utilized quality control measures that reduce the chemical to the lowest level currently feasible. The new regulation would also specify acrylamide safe harbor levels for a variety of food categories, such as almonds, bread, crackers, and potato products. While relief may be near, be aware of this rapidly evolving landscape.

- Sherry Jackman & Sedina Banks, environmental attorneys 

LABELING OF PLANT-BASED MEAT PRODUCTS

Of the recent trends that have emerged in the false advertising space involves the labeling of plant-based meat products. Several states have passed laws dealing with these products, with proponents saying consumers may be misled into believing they contain actual meat. At least one federal court has held even where the term ‘vegan’ appears on the label, a false advertising claim may still lie because hurried shoppers may not scrutinize the packaging before purchasing, especially where the label otherwise contains traditional meat terminology (e.g., “Classic Burger, “meatballs,” and “chorizo”). Companies offering products in this space should therefore avoid relying on fine-print disclaimers and ensure that the plant-based nature of their products is conspicuously disclosed. In addition, traditional meat terminology should be avoided in favor of more transparent choices, such as “chik’n,” “veggie bacon strips” or “beefless crumbles.”

- James Molen, business litigation attorney

CONDUCT PERIODIC EMPLOYMENT PRACTICES AUDITS

The health of a company’s personnel practices and policies is often an unsung anchor to an M&A deal. Conducting due diligence on employment practices and documentation before a potential sale, especially with the benefit of confidential legal review, is important in aiding the founders to get the most value from their life’s work and increase attractiveness to a buyer. It is strongly recommended to conduct a periodic employment practices audit to assess legal liability exposure, especially once the company is established enough to consider investment or sale. This audit includes, but is not limited to: ensuring all of your employment relationships are properly classified; confirming whether all employees have current written terms of employment; identifying any key employees who were part of the founding or major growth; determining if arbitration agreements exist for all employees, and checking for a compliant employee handbook. In today’s market, where competition is swift and deals move quickly, it is essential to audit and update your employment practices to facilitate a smooth and profitable sale.

- Karina Sterman, employment attorney

VIRTUAL DINING EXPERIENCES

With the struggles endured by restaurants during the pandemic corresponding with the proliferation of food delivery services, we saw the birth of the “virtual dining” experience. Celebrities and well-known brands license their IP to create a branded, online-only restaurant that delivers through food delivery apps. The food is prepared by a variety of local restaurants, sourced by the “virtual dining” provider, that are supplied with the recipes, ingredients, and branded packaging. Users can buy a hamburger from their favorite celebrity without realizing that it was actually cooked by the Indian restaurant down the street. Brands have gotten involved not only to expand their reach but also to help support local restaurants by providing them with an additional income stream. However, celebrities and brands need to ensure they have sufficient approvals/controls so that if any of the local restaurants aren’t meeting quality control standards, they have the ability to remove them from the pool of participating restaurants. In addition, assuming all goes well, they need to reserve rights that would allow for the launch of a branded brick-and-mortar restaurant.

- Jesse Saivar, intellectual property attorney

Resources