Key Business Clusters
Food and Beverage
In hospitality, food and beverage reigns supreme. It is the largest element of the hospitality industry and can take the form of high-end restaurants, fast-food eateries, catering establishments and many other manifestations. The food and beverage trade can symbiotically function as part of other businesses, such as being a third party service provider in hotels, casinos, arenas and theme parks.
Hotels, bed and breakfast enterprises and other places offering lodging represent a broad segment of the hospitality industry. Properties range from extravagant resorts to campgrounds. Your business' focus on providing lodging should integrate comfort, efficiency and attentive customer service as its foundation. In addition to convenience and comfort, travelers value and expect thoughtful attention to their privacy, enjoyment and most of all safety. When these needs are met and exceeded, your guests will tell others about their experience and may become repeat visitors.
Travel and Tourism
Another chief segment of the hospitality business encompasses transportation. This includes airlines, trains, cruise ships, auto transportation (Uber) and the staff for each. Business travelers and vacationers alike form the basis for this area of hospitality. The regulations surrounding these areas are numerous and are imposed by numerous governing bodies from the Federal Government, State Legislatures, and County Commission all the way down to city ordinances. What is worse, this myriad of regulation is often divergent and sometime in direct conflict across different jurisdictions.
Common Legal Issues
Knowledge of the laws surrounding the sale of alcoholic beverages encompasses State and Federal Regulations governing the importation and sale of alcoholic beverages (Code of Federal Regulations Ch. 27) and how these laws affect businesses selling alcoholic beverages. This includes licensing at both the federal and state level, including the transfer of licenses as part of a larger business transaction or on their own. It also includes arranging secured financing for holders of a certain class of license. Protection of these rights can sometimes require civil litigation, criminal defense and administrative action.
A liquor license authorizes the consumption of liquor and sale of liquor for consumption on the premises at any time with or ancillary to a genuine meal. If you are opening a new business, or acquiring an existing establishment, it is critical that you take steps to be awarded a license (or have it properly transferred) well before an opening date is declared.
The benefits of playing recorded music in your business are many and varied and certainly can enhance the ambience when dining. If you intend on playing music, screening music videos/DVD’s or even having music on hold on your telephone, you will need to be aware that a license fee is required. There are at least two copyrights in most recordings and music videos:
- The copyright in the song (lyrics, composition etc.)
- The copyright in the recording and/or music video of the song
The music industry is very aggressive in enforcing their intellectual property rights. Organizations such as ASCAP, BMI and SESAC are dauntless in pursuing unlicensed uses of their works.
Essential clauses for providing products and services to guests
Hotel operators need to be aware of certain laws, regulations and policies that impact their guest’s visits. Special concerns affect the hospitality industry because these establishments are open to the public. For example, hotels are not liable for every accident or loss that occurs on the premises, nor do they insure the absolute safety of every guest. However, hotels have a general duty to exercise "reasonable care" for the safety and security of their guests and to reasonably protect guests from harm caused by others - including guests and non-guests. This extends further, in that hotels may be "vicariously liable" for the negligence of their employees.
Hotels are also generally liable for damages if they cannot honor a confirmed reservation because of "overbooking." On the other side, hotels must be careful when seeking damages hotels may generally seek damages or retain deposits if confirmed reservations are not honored by prospective guests, but there are very specific policies that must be followed to avoid counter claims.
As with most contractual matters, hotels may waive, exclude, or limit liability coverage for certain losses or harms, including dollar amount limitations on loss of valuables, and may exclude from coverage any assaults or crimes committed by third parties. It is imperative that hotel's post these policies and make them available to guests – preferably prior to checking in. All states have enacted legislation that permits hotels to limit their liability for damage to guests or their personal property. This action even may include limits placed on damages resulting from the hotel's own negligence ("exculpatory clauses"), unless found to be "unconscionable" in certain jurisdictions.
Whenever hotels intend to limit their liability, it is almost always required that they notify guests in a conspicuous manner. Failure to post adequate notices in conspicuous locations may result in a court finding that the limits are not in effect and that the hotel must cover the entire loss, if applicable.
Management operating agreements
An operating agreement is a contract that details the areas of responsibilities of the owner of a business and the entity selected by the owner to operate the business. It may also be referred to as a ‘management contract’ and created when the owner of a hospitality facility allows another party to assume the day-to-day operation of that facility.
Hotels, from the smallest to the largest, are often managed in this way. Typically, a management contract will set out, in great detail, the period that the agreement will be in effect, the payment terms, the responsibilities of each party, and a variety of legal and operational issues. These agreements are typically very detailed and, as a result, understanding their basic components as well as areas of possible contention is very important.
Recent Cases Relevant to the Hospitality Industry (Hotel and Restaurant especially)
- Negligence in the maintenance of its premises (including pests such as bed bugs)
- Failure to comply with the Fair Labor Standards Act
- minimum pay
- overtime pay
- equal pay child labor
- Discrimination against employees based on minority status
- Denial of services to guests perceived as illegal discrimination
- Contending with internet reviews (how not to reply on Trip Advisor)
- Disagreements with a franchisor
- Overstepping bounds with unions
- Misapplying tip pools
- Dram shop violations
- Food issues
- Security concerns
- Insufficient insurance
- Trademark and copyright violations
- Securing and maintaining necessary business licenses
- Tax obligations
- Sanitation issues in spas
- Contract disagreements with suppliers
- Guests' rights to privacy
- Sec mandates
- Managing employees to ensure compliance with all of the above