An operating agreement (for an LLC) or shareholders’ agreement (for a corporation) is where you and your partners decide how the relationship really works. Without it, New York’s default rules step in — and those rules weren’t written with an NYC restaurant in mind.

Here are ten clauses every restaurant operating agreement should address.

1. Capital Contributions and Capital Calls

• How much is each partner required to contribute at the start?
• Can the company call for additional capital later?
• What happens if a partner doesn’t meet a capital call (dilution, penalties, or loss of rights)?

2. Profit, Loss, and Distribution Rules

• Are profits split strictly by ownership percentage, or are there special allocations?
• How and when will cash distributions be made?
• Will the company make tax distributions so owners can pay income tax on their share of profits?

3. Roles, Responsibilities, and Decision-Making Authority

• Who is the “managing member” or manager?
• What decisions can they make alone (hiring, menu, vendors) vs. those requiring a vote (new locations, loans, lease changes)?
• Are there regular reporting requirements (monthly financials, annual budgets)?

4. Major Decisions and Veto Rights

Identify “Major Decisions” that require owner or investor consent, such as:

• Selling the restaurant or its key assets
• Signing or amending the lease
• Taking on material new debt or guarantees
• Issuing new equity, changing the business concept, or approving large capital expenditures

Spell out what percentage vote or whose approval is required.

5. Restrictions on Transfer and New Partners

• Can an owner sell or gift their interest freely, or do other owners have a right of first refusal?
• Are there restrictions on transfers to competitors or unknown third parties?
• How are new partners admitted, and at what valuation?

6. Buy-Sell and Exit Provisions

Address what happens if:

• An owner dies or becomes disabled
• An owner wants to leave voluntarily
• An owner is terminated for cause or breaches the agreement

The agreement should include:

• Valuation rules (formula, appraisal, or agreed method)
• Payment terms (lump sum vs installments)
• “Good leaver” vs. “bad leaver” distinctions, if appropriate.

7. Non-Compete, Non-Solicit, and Confidentiality

Within the limits of New York law, consider:

• Reasonable non-competes (time, geography, and scope) to protect the restaurant from a departing partner opening next door with the same concept.
• Non-solicitation of employees and key vendors.
• Confidentiality provisions regarding recipes, processes, and financial information.

8. Intellectual Property Ownership

• Who owns the restaurant name, logo, recipes, website, and social media accounts?
• Is IP owned by the company itself or a separate holding company?
• What happens to that IP if a partner leaves?

9. Dispute Resolution and Deadlock

• If there’s a tie vote or deadlock on a major issue, how is it resolved?
• Mediation or arbitration before court?
• “Shotgun” buy-sell provisions or tie-breaker mechanisms?

Having a roadmap for disputes reduces the chances that a disagreement becomes a business-killer.

10. Books, Records, and Information Rights

• Who keeps the books, and what accounting method is used?
• How often do owners receive financial statements?
• What rights do minority owners have to inspect books and records?

Transparency is one of the best tools you have to avoid partner mistrust.

Conclusion

A strong operating agreement doesn’t just satisfy a legal requirement — it keeps the partnership functional when things get stressful. For restaurant owners, that means fewer blowups, more stability, and a business that’s easier to grow or sell.