Restaurant Group Partners Splitting Up: Leases, Liquor Licenses, and Who Keeps Which Location

When restaurant group partners split up, the recipes and the brand are rarely what stall the deal. The leases and the liquor licenses are. Each location typically sits on a lease signed by a specific business entity, sometimes backed by a personal guaranty, and the state generally must approve changes in who owns a liquor license. Here is how those pieces decide who keeps which location.

Who Decides Which Partner Keeps Which Restaurant Location?

Your operating agreement or partnership agreement decides first, then the lease for each location, then the liquor license for each location. If those documents do not settle a split, the partners negotiate one. If talks fail, a court can be asked to dissolve the company, and in some cases an owner can be bought out instead.

Picture a three-location restaurant group owned 50/50 by two partners. One location holds a full liquor license, one has a landlord that must approve any change in the tenant, and one lease carries a partner’s personal guaranty. Each location needs its own answer.

If a partner is also blocking access to the books or misusing company funds, read signs a co-owner is mismanaging your company and how to inspect company records in Florida.

How Do Restaurant Leases Complicate a Split?

Each lease names a specific tenant entity, and the lease language decides whether the landlord must approve a handoff of that location. Read every lease before you divide anything, because the answer can differ from one location to the next.

• Tenant entity. If one company is the tenant on every lease, giving each partner a location means moving leases to new entities or splitting the company. If each location has its own entity, the split can be cleaner.
• Landlord consent. Check the assignment and subletting clauses, and whether the lease treats a change in the tenant’s ownership like an assignment. Our lease assignment and subletting page explains how those transfers work.
• Personal guaranties. The guaranty’s own wording decides whether it ends when a location changes hands. Ask the landlord for a written release of the departing partner, and until you have one, plan as if the guaranty still applies. See our page on personal guarantors.
• Assignment rights. The key lease terms small businesses should negotiate include assignment and subletting rights.

Other commercial lease questions, such as renewal or rent, should be settled before a location changes hands.

What Happens to Liquor Licenses When Restaurant Partners Split?

A Florida liquor license does not follow a partner out the door. It is issued to a licensed business for specific premises, and the state must approve a sale of that business and, with narrow exceptions, changes in who owns or runs it. Plan the split around what the Division of Alcoholic Beverages and Tobacco will approve.

• Ownership changes need approval. Under s. 561.17, a transfer of 10 percent of any financial interest, a change of executive officers or directors, or a divestiture or resignation of such an interest or position, in a business holding a vendor’s license is contingent on the Division’s express approval. Publicly traded companies and banks are among the narrow exceptions.
• Sales need an approved buyer. Section 561.32 makes licenses nontransferable except in limited cases. A bona fide sale of the business to a purchaser the Division approves is one of them.
• The lease and the license travel together. Section 561.17 also requires a license application to include proof of the applicant’s right of occupancy for the entire premises, so decide who holds the lease and who holds the license at the same time.
• A pending proceeding can block a transfer. Under s. 561.32, no one is entitled as a matter of right to a license transfer or a change of executive officers or directors if the Division has notified the licensee in writing of a revocation, suspension, or administrative proceeding, or if a licensee, officer, director, or interest holder has been arrested or charged with a disqualifying crime.
• Lenders count. Under s. 561.32, anyone with a security interest in a license is treated as interested in it and must be disclosed and qualified before enforcing that interest.
• Quota licenses have a three-year lock. For three years after original issuance, a license issued under the population quota in s. 561.20 cannot be transferred, directly or indirectly, including by a change in ownership of the entity holding it, except by probate or guardianship or on payment of a statutory transfer fee. An attempted transfer outside those paths is void, and the license reverts to the state.
• Special restaurant licenses differ. Section 561.20 also allows special licenses for qualifying restaurants outside the quota, with their own food-revenue and seating requirements. The three-year lock is written for licenses issued under the quota.

Confirm which type each location holds. Our guide to Florida’s 2APS, 2COP, and SFS licenses compares common types, and our alcoholic beverage and tobacco licenses page covers licensing matters for hospitality businesses.

What Are Your Options for Dividing the Restaurant Group?

Restaurant partners generally have four paths: each partner takes locations, one buys the other out, the group sells a location or the whole business, or a court is asked to dissolve the company. Each path touches the leases and liquor licenses differently.

• Divide the locations. Each partner takes designated restaurants. Leases move to new tenant entities with landlord consent. A license moves only through a route the statute allows, such as a bona fide sale to a purchaser the Division approves, so a handoff to a new entity may need to be structured as a sale.
• Buy out one partner. The company keeps its leases and licenses, but the ownership change needs Division approval, a young quota license adds the transfer fee, and the departing partner needs a guaranty release. How the price is set is covered in buyout valuation in Florida, and a buyout agreement can set terms in advance.
• Sell a location or the business. A bona fide sale to an approved purchaser is the license route described above.
• Ask a court. An LLC manager or member can petition to dissolve the company on grounds that include a management deadlock the owners cannot break while irreparable injury to the company is threatened or being suffered, or that it is not reasonably practicable to carry on its affairs under the operating agreement (s. 605.0702). If the operating agreement has a deadlock sale provision that was initiated first, that provision resolves the deadlock instead of a dissolution or buyout order.

When a member starts that kind of proceeding, the company, or if it does not, other members, may elect to buy the petitioner’s entire interest at fair value (s. 605.0706). The election may be filed within 90 days after the petition, or later if the court allows, and it is irrevocable unless the court finds it equitable to set aside or modify it.

Corporations and partnerships follow different statutes. Our comparison of business divorce vs. dissolution explains the choice, and our pages on dissolution, shareholder disputes, and business litigation cover the court route. Joby Birr is one of the firm’s attorneys whose practice includes business litigation and real estate law.

What Should You Check Before You Agree to a Split?

Five facts change the answer for your restaurant group:

• Which entity is the tenant on each lease, and who signed a personal guaranty.
• Whether each lease requires landlord consent for an assignment or for a change in the tenant’s ownership.
• Which type of liquor license each location holds, when it was first issued, who is listed with the Division as owner, officer, or director, and whether any proceeding or disqualifying charge is pending.
• What your operating or partnership agreement says about buyouts, deadlocks, and valuation.
• Whether any lender holds a security interest in a license or in the business.

These facts decide which options are open to you, and an attorney needs to review them before you sign anything.

Are you and your partners deciding who keeps which restaurant? Talk with a Jimerson Birr business divorce attorney before you sign a split agreement.

How Can Jimerson Birr Help With Restaurant Group Partners Splitting Up?

If your restaurant group partners are splitting up, Jimerson Birr’s business divorce attorneys represent shareholders, LLC members, and partners across Florida, including the owner who wants out and the owner who wants to keep the business. Call (904) 389-0050 or request a free consultation. If a member files a dissolution petition, the company or other members have 90 days, unless the court allows more, to elect a buyout at fair value, so settle your position first.