Legal issues affecting hospitality businesses

In such a fast-paced industry, it is not surprising that many hospitality businesses find their licensing and other legal arrangements have fallen out of date. Where profit margins are often quite small, it is critical that hospitality businesses do not expose themselves to avoidable legal difficulties.

Liquor and gaming licensing

Liquor and gaming licensing are both subject to considerable regulation under State law.

Different types of liquor licences exist to regulate different types of alcohol service. It is therefore important to ensure that the correct licence is obtained, and that the licence is varied or replaced as necessary where the activities and nature of alcohol service change.

Venue operators must ensure that the appropriate licence is held with respect to gaming machines, and are subject to ongoing requirements to notify the Victorian Commission for Gambling Regulation of any changes to licence holders, associates and nominees within 14 days of these changes taking place.

Obligations with respect to both liquor and gaming licensing will extend to the variation and transfer of licences on the sale of any part of the business.

Franchising

Many hospitality businesses, particularly retail food outlets, are operated as franchises. This provides small business operators an opportunity to establish a business which is part of a recognised brand, and to enjoy the support of their franchisor in assisting with day to day issues, which can arise in the running of any hospitality business.

In operating as a franchisee, it is important to have a clear understanding of obligations that exist under the franchise agreement with the franchisor. These obligations will operate in addition to any workplace relations, leasing and corporate obligations that the business may otherwise have.

The Franchising Code of Conduct operates to regulate the terms which may form part of the franchising agreement, including how the franchise agreement may be terminated in the event of a breach.

Business structuring and succession planning

The effective structuring of any business is critical to ensuring that assets of the business and its owners are protected and that the taxation and other liabilities of the business are minimised.

It is not uncommon for hospitality businesses to be family run businesses. It is therefore vital that there are clear plans established for the continued operation of the business if family members elect to leave the business or pass away.

Where a business has multiple owners, regardless of whether the owners are related, it is important that the owners enter into a partnership agreement or shareholders’ agreement to document each person’s rights and obligations. This helps to avoid possible disputes which can be crippling on a business.

Over time as the business grows and the nature of the services provided by the business changes and develops, it is important to ensure that the structure of the business also remains relevant and effective.

Conclusion

MST will be holding a number of hospitality focused forums and information sessions throughout 2009 touching on these and other legal issues typically faced by businesses in hospitality.

Click here to read part one of the Hospitality Article

Author: Katrina Sweatman