Five Key Contracts for a Hospitality Business

As a hospitality business, you will know that the pressure is always high to deliver a top-quality service. That is why it is very important to get the right contracts in place to ensure you can deliver the best level of service to your customers. A wide variety of contracts are available to help you perform your business’ functions in the hospitality industry. In this article, we will be outlining five important contracts that you may come across as a hospitality business. 

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. 

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.

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