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What to cater for in your Catering Agreement

As seen in the February March 2021 Edition of Clubs Queensland's Club Insight magazine.

As hospitality businesses explore alternative revenue opportunities in the wake of COVID, and as patrons continue to place an increased emphasis on a venue's quality of food offering, more and more Clubs are outsourcing some or all of their catering responsibilities to third-party caterers. Commonly, Clubs may engage a caterer to manage the on-site restaurant or café, or to cater for specific events and functions at their premises, or both.

Such catering agreements generally fall into one of two categories:

  • The third-party caterer pays a fixed fee to the Club licensee for the right to use part of the premises to provide their catering service, and the caterer receives the full profit from all food sales. This is common where your Club engages a more experienced caterer, and you take a more hands-off role when it comes to running the catering operation.
  • The Club pays a fee to the caterer, whether a fixed fee or one calculated as a percentage of profits from the food sales, so that the Club can still participate in some of the profits from the food sales. This is common with smaller catering operators who may be happy to allow your Club to retain greater control over the food offering.

Key Considerations

First and foremost, you should carefully consider the financial nature of the agreement. As above, one consideration is the rent or leasing costs, as well as any kind of profit-share or turnover-based arrangement. A further consideration is who will be responsible for the payment of operating expenses such as electricity, gas, water, and other outgoings, as well as the repair and maintenance of plant and equipment. Commonly, the caterer will be required to obtain suitable insurances and to pay a security bond to assist in covering the costs associated with any breach of the agreement.

It is also important that all parties are clear on staffing and management arrangements, including which staff are employed by the Club, as opposed to the caterer. In this regard, while your Club can subcontract food and meals services to the caterer, the same cannot be said for service of liquor. Accordingly, the caterer cannot be involved in the service, or collection of payment for alcohol, and all staff involved in the service of liquor, including "glassies" employed to clear tables, should be employed by the Club and should hold a valid Responsible Service of Alcohol (RSA) certification. For this reason patrons will commonly order their meal from the caterer at a separate counter, before purchasing their drink from the Club at the bar.

Other issues that need to be considered include allocating responsibility for cleaning of different parts of the premises and confirming whether there will be any restraints to prevent the caterer providing a similar service to your local competitors. Clubs should also consider general contractual controls over the caterer, such as the imposition of minimum standards in terms of the quality of food, trading hours, menu offerings and pricing.

OLGR Approval

Technically, the Liquor Act and Gaming Machine Act do not require catering agreements to be approved by the OLGR. However, it is prudent to take proper legal advice regarding the preparation of your agreement to ensure it does not take on the flavour of a lease or management agreement, which does require OLGR approval.

The items outlined above are just a few of the issues Clubs should consider in preparing a catering agreement. Clearly, different Clubs will have different requirements, and it is important that any agreement is tailored the specific needs of the individual Club and caterer.

If you are thinking of engaging a caterer at your Club but are not sure where to start, or if you require assistance to prepare a catering agreement, please call me on 07 3224 0353.

Article written by Matthew Bradford (Partner) and Glen Rolley (Associate).

"The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication."