I have been representing restaurants since the 1990’s and often remark that operating a restaurant is the most difficult business other than a law firm. I mean that seriously.
One of my first restaurant success stories was the reorganization of a famous Italian Restaurant in Washington, D.C. in 1991 which has become one of the top five Italian Restaurants in the United States – Filomena Ristorante in the Georgetown Area of Washington, D.C.
What I learned decades ago, is still true today. The reputation and revenue of a restaurant is based on the success of its menu items. The entrees, appetizers, and deserts are the product of the unique creative efforts and incredible talents of the chefs and restaurant ownership. Unfortunately, most restaurants fail to recognize that these menu items/recipes are trade secrets and need to be protected from employee theft and misappropriation.
In a typical horror story, a lower-level employee or even a manager or chef will leave the restaurant voluntarily or involuntarily and open up a competitive eating establishment which features the exact menu items at a lower price. Owners are continually horrified by this but take few steps to obviate this risk.
The critical takeaway is that the recipes are trade secrets and protectable under Texas Law. The Texas Uniform Trade Secret Act or TUTSA provides new safeguards to protect the recipes of restaurant owners. Here are a few highpoints to keep in mind:
1. Menu Items are Trade Secrets under Texas Law:
TUTSA or the Texas Uniform Trade Secrets Act provides an extensive definition of trade secrets which would include menu items and particularly recipes as they constitute “business information”. You never want to copyright a recipe as it would be subject to public disclosure!
2. Restaurant Must Take Steps to Protect the Menu Items and Recipes.
Pardon the digression, but TUTSA requires that the following measures be undertaken to protect the menu and recipe items from public disclosure:“(A the owner of the trade secret has taken reasonable measures under the circumstances to keep the information secret; and(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.”What this means is that (1) the restaurant takes real steps to keep to menu items and recipes secret. Typically, this requires that ownership keep the recipes in a password protected file which cannot be accessed by anyone other than key personnel.
I would also recommend that key personnel sign a non-disclosure agreement which specifically identifies the recipes as being trade secrets which cannot be downloaded to any external device and taken out of the restaurant premises. Obviously, the NDA must prohibit the misappropriation of trade secrets (recipes) to any third party particularly a competing restaurant.
I would further recommend that the above NDA be executed as a matter of course by any employee of the restaurant regardless of rank. That means waiters, dishwashers, everyone.
Finally, TUTSA, provides for a wide-ranging injunction which can be granted for “threatened misappropriations”. You heard that correctly! It is easy to get an injunction under TUTSA.
3. The recipes derive independent economic value.
TUTSA requires that the trade secret – here the recipes – derive independent economic value. That is an easy requirement to meet as the recipes are critical to the generation of revenue and success of the enterprise. Also, the recipes must not be readily known to the public and would derive economic benefit to the party who disclosed them. This dovetails with the necessity of restricting access to the trade secrets. Given the inherent value of the recipes, disclosure would cause immediate injury.
Restaurants large and small must protect their recipes as trade secrets. The Texas Uniform Trade Secrets Acts provides new protections to restaurant owners to protect their trade secrets. We at the Moster Craft Law Firm highly recommend that management consult with an experienced trade secret attorney to protect their recipes from disclosure and preserve their independent economic value.