Five Key Contracts for a Hospitality Business

Summary

• Hospitality businesses should use five core contracts: employment, commercial lease, catering, supplier and subcontractor agreements.
• Employment contracts must comply with section 1 of the Employment Rights Act 1996, which requires a written statement of particulars on or before day one.
• Supplier and catering contracts should include termination clauses, payment terms and a force majeure clause to manage unforeseen disruption.
• This guide explains the five key contracts hospitality businesses need in the UK.
• LegalVision’s business lawyers specialise in advising clients on commercial contracts for hospitality operators.

Tips for Businesses

Define scope, payment terms and termination clauses in every contract. Provide the written statement of particulars on or before day one for hospitality staff. Include force majeure wording in supplier and catering contracts. Review lease terms before renewal. Have a commercial lawyer check contracts before signing.

Summarise with:

ChatGPT Gemini Perplexity Microsoft Copilot

Open now

---

On this page

• What is the Hospitality Industry? 
• Catering Contracts
• Employment Contracts
• Lease Agreements
• Supplier Contracts
• Subcontractor Agreements
• Key Takeaways 
• Frequently Asked Questions

Hospitality businesses in the UK rely on five key contracts to manage day-to-day operations: employment contracts, commercial lease agreements, catering contracts, supplier contracts and subcontractor agreements. Each sets out the rights and obligations between the parties and helps avoid disputes. Employment contracts must include the written statement of particulars required under the Employment Rights Act 1996. Commercial leases for restaurants, cafés and pubs sit within the framework of the Landlord and Tenant Act 1954. This article covers that contracts should include payment terms, scope of work, termination provisions and a force majeure clause to cover unforeseen events.

What is the Hospitality Industry? 

The hospitality industry is an umbrella term used to describe businesses that operate in the service industry. Those organisations can include: 

• restaurant chains;
• hotel operators; 
• event planners;
• theme parks; and 
• travel and tourism businesses. 

The hospitality industry reaches across a broad range of services. Therefore, hospitality operators will inevitably require a variety of different contracts depending on what sort of franchise they are running. 

Catering Contracts

The industry uses catering contracts primarily in the restaurant and events industry. Specifically, catering companies secure work at events like weddings, corporate functions and celebrations through these contracts.

Importantly, catering companies will usually have to tender to secure a valid contract. In short, ‘tendering’ means submitting a prospective quote for how much your business expects the client to pay for organising an event’s catering. If your tender is accepted, you will have the foundation of a legally enforceable contract which will need to be written up and signed before its terms can be enforceable.

If your business is negotiating a catering contract, there are several elements you should look to include before you agree on the contract’s terms. The contract must set out: 

• your estimate of the extent and nature of the catering services you will provide;
• the time, date and address of the event’s venue;
• the menu, and any guest dietary requirements to be clear on your expectations; 
• how much the service will cost; 
• how you expect to be paid, including your bank account details; and
• termination clauses.

When drafting written contracts, it is very important to be very clear about the nature of the services. Additionally, you should also set out the expectations you and your clients have over the services you will provide.

Employment Contracts

Whether you are a hotel manager or are a restaurant owner, your workers will inevitably be an essential part of your business. Hospitality companies are often made up of several teams of workers who perform different tasks to ensure the successful running of your business.

To ensure those operations are carried out to a satisfactory standard, hiring the right people for those positions is key. From waiters to chefs, having clear and appropriate employment contracts in place can help you protect your business and hire and motivate top-quality workers. 

Employers must note that it is a legal requirement for them to clearly state the basic contract terms of employment in an employment contract. That means there are several things you will want to state in your employment contracts, including the: 

• nature and description of the job and the job title; 
• start date; 
• employee’s location or place of work; 
• hours and days of work, including the times the employee is meant to be working if appropriate; 
• details on probationary periods and employee assessments; 
• employee’s salary and bonuses; 
• details on claiming expenses; 
• terms on annual leave and sick pay;
• employee’s notice period; and 
• termination clauses or provisions on ending the contract. 

Lease Agreements

Lease agreements are an essential contract to get right if you are working in the hospitality business. For restaurant and pub owners, it is impossible to run a viable business without a premises to operate from. 

Disputes can often arise between landlords and their tenants. It is wise to ensure that you and your landlord agree to a clear and concise lease agreement to create an enforceable contract when you find the right building or plot of land. That contract should state:

• the duration of your lease; 
• what business operations you can and cannot run from the property;
• the rent for that lease; 
• how you can renew the agreement; 
• the notice period and termination clauses of that lease; and
• the landlord’s duties to repair and make changes around the property as needed. 

Supplier Contracts

Similar to catering contracts, supplier contracts are useful for restaurants and pubs who need to source new groceries for their food menus continually. Having a supplier contract in place can be a more efficient way to source goods and may also be a great way to save money if you regularly buy from one source. 

Importantly, you should include a frustration clause if you are using a supplier contract. A frustration clause is a term inserted into a contract to protect both parties if an unforeseeable event occurs, preventing them from performing their functions under the contract. For example, a supplier may not be able to deliver the promised goods because of the COVID-19 pandemic. In that case, frustration clauses in the contract will protect both parties from taking any losses. 

You should also remember that the price of goods might change throughout the year. Therefore, you may want to factor how a certain set of goods may fluctuate in price. By doing this, you can avoid having to pay disproportionate sums of money for the goods you purchase.

Subcontractor Agreements

Many hospitality companies need to rely on third parties to help them run certain aspects of their business. For example, restaurant managers may need to outsource cleaners to clean their kitchens, while theme park operators may need to employ external mechanics if a ride breaks down. 

Subcontractor agreements are a great way to outsource work to other parties and can ensure those parties perform the required services to the best possible standard. Those contracts should include detailed provisions on the subcontracted services, the price for the delivery of the services, and provisions around liability to ensure the main contractor has an indemnity against any future losses caused by the subcontractor. 

Compliance Requirements That Shape Hospitality Contracts

Beyond the five core contracts, hospitality operators in the UK must build statutory compliance into their agreements. Two pieces of legislation are particularly important for the sector.

The Employment (Allocation of Tips) Act 2023 came into force on 1 October 2024. It requires employers to pass 100% of qualifying tips, gratuities and service charges to workers without deductions. Employment contracts should set out how tips are allocated, when staff are paid and how to raise concerns. Failing to comply can lead to tribunal claims and compensation awards.

The Licensing Act 2003 governs alcohol sales in England and Wales. Any restaurant, pub, bar or hotel that sells alcohol needs a premises licence and a designated premises supervisor. Lease agreements should confirm whether the premises hold a licence. Supplier contracts should reflect the operator’s licensing obligations.

Building these requirements into your contracts protects your business and reduces the risk of regulatory breaches. Operators should review their contracts each year to stay aligned with statutory changes.

Key Takeaways 

As the hospitality industry encompasses a broad range of businesses, hospitality operators should use a wide variety of contracts in their daily operations. Hospitality owners will find themselves using:

• employment contracts;
• subcontractor agreements;
• catering contracts; 
• lease agreements; and
• supplier contracts. 

If you use one of these agreements to run your day-to-day operations, you should remember that the contract’s terms must be clearly set out. Doing this will ensure you and the parties you are dealing with are aware of the obligations and rights the contract is giving you. It is also advisable to get a lawyer’s advice when drafting or negotiating hospitality contracts. If you need more information, our experienced contract lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions