Check-In, Chow Down: The Legal Buffet of Hotel Management and Catering Agreements

As featured in the July edition of QHA Review

For those looking to simplify or streamline their hotel business, you may be considering entering into a management agreement or catering agreement. This could help you free up capacity to enable you to focus on certain areas of the hotel business.

Management Agreements and Catering Agreements for Hotels:

Historically, a hotel business may employ a ‘hotel manager’ to run operations on a day-to-day basis. However, in recent times, we have seen some hotels entering into third party agreements to provide management arrangements on a contractual basis. This means that operators retain the majority of the risk and reward from the operation, but they are not responsible for the day-to-day management of the hotel. If an operator wishes to enter into a management agreement for only part of the premises, the agreement cannot allow the third party operator to sell liquor under the licence.

Alternatively, a hotel business may outsource some or all their catering (food) responsibilities to third-party caterers for part of the premises but explicitly excluding liquor sales. The most typical forms of catering agreements involve either:

  1. A caterer paying a fixed fee to the hotel licensee for the right to use the premises with the caterer then receiving the full profit from all food sales; or
  2. A caterer receiving a fixed fee from the hotel licensee to operate and manage food sales with the hotel licensee receiving the full profit from all food sales.

When deciding how you wish to proceed, it will come down to where your focus is, if you want to be more hands-off or if you want to retain control but with an external operator. However, no matter where you end up, you must ensure compliance in relation to the OLGR and its administration of the Liquor Act 1992 (Qld) and the Gaming Machine Act 1991 (Qld).

OLGR Implications:

In relation to management agreements, a licensee is restricted from:

  1. entering into an agreement for all of the licensed premises without the approval of the OLGR; and
  2. entering into an agreement that purports to authorise a person other than the licensee to sell liquor under the licensee’s licence from part of the premises (this cannot be varied).

Therefore, all management agreements should be prepared and reviewed by qualified legal professionals who can guide you through any application process you require.

In relation to catering agreements, it is technically not a requirement under the Liquor Act 1992 (Qld) or Gaming Machine Act 1991 (Qld) as a licensee for a catering agreement to be approved by the OLGR. However, due to the risks associated with the agreement potentially falling within the purview of being considered a lease or management agreement (which would require approval), it is important to ensure it is prepared and reviewed by qualified legal professionals and if appropriate submitted to the OLGR to avoid any issues down the line.

No matter what kind of agreement you are looking for or if you are looking to alter existing agreements, it is important to seek legal advice to ensure it is compliant. Please contact me on 07 3224 0230.

“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.”
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