1. Discuss in detail at least five essential contract clauses that protect a hotel when contracting to provide space and food products for a large wedding party. Draw information in your own words from Chapter 5 to support your statements.2. Describe the Franchise Rule and the six different requirements imposed by the Franchise Rule. Draw information in your own words from Chapter 5 to support your statements.3. Explain the various arrangements under which management companies operate businesses. As a hospitality or recreation professional, why is it important to understand how management companies are structured and managed? Use information in your own words from Chapter 5 to support your statements.
Chapter 1 Chapter 5 Significant Hospitality Contracts Images used under license from Shutterstock.com © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Significant Hospitality Contracts Specific Contract Clauses Franchise Contracts Management Contracts Conference Services Contracts © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved In This Chapter, You Will Learn: 1. Contract clauses commonly utilized in the hospitality industry. 2. The purpose of a franchise contract (franchise agreement). 3. The purpose of a management contract (management operating agreement). 4. Important forms of meeting space contracts used in lodging operations. 5. Important forms of group rooms contracts used in lodging operations. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Specific Contract Clauses Franchise-related Contracts Management Operating Agreements Meeting Space Contracts Group Lodging Contracts © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Specific Contract Clauses Legalese: Operating agreement – 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. Also referred to as a “management contract.” © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Specific Contract Clauses Legalese: Meeting Planners – A group of professionals that plan and organize meetings and events for their employers and clients. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Search the Web 5.1 Meeting Professionals International (MPI) is the world’s largest association of meeting planning professionals, with over 20,000 members. You can learn more about this group by visiting its Web site at http://www.mpiweb.org/ Note the large number of educational services it offers. Many of these are designed to help the members better negotiate and administer the meetings contracts they execute with the hotels they select for their meetings. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved http://www.mpiweb.org/ Group Lodging Contracts Legalese: Clause (contract) – a distinct contract provision or stipulation. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Group Lodging Contracts Legalese: Attrition – Reduction in the number of projected participants or attendees. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Essential Clauses for Providing Products and Services to Guests 1. Length of time the contract price terms exist. 2. Identification of who is authorized to modify the contract. 3. Deposit and cancellation policies. 4. Allowable attrition. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Essential Clauses for Providing Products and Services to Guests 5. Indemnification for damages. 6. Payment terms. 7. Performance standards related to quantity. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Essential Clauses for Purchasing Products and Services to Guests 1. Payment terms. 2. Delivery or start date. 3. Completion date. 4. Performance standards. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Essential Clauses for Purchasing Products and Services to Guests 5. Licenses and permits. 6. Indemnification/Insurance. 7. Nonperformance clauses. 8. Dispute resolution terms. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Exculpatory Clauses Legalese: Indemnification – To make one whole; to reimburse for a loss already incurred. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Exculpatory Clauses Legalese: Exculpatory clause (or contract) - A contract, or clause in a contract, that releases one of the parties from liability for his or her wrongdoings. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Analyze the Situation 5.1 Laureen Statte was a guest at the Vacation Inn Express, a mid-priced, limited service hotel in an urban area. When she arrived at the hotel she inquired about the availability of a workout room. Upon receiving assurances that the hotel did indeed have such an area, Ms. Statte checked into the hotel, put away her luggage, changed into workout attire and proceeded to the workout area. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Analyze the Situation 5.1 Upon entering the workout room, she noticed a sign prominently posted near the entrance to the workout room stating: “Hotel Not Liable for Any Injuries Incurred During Workouts.” According to her attorney, Ms. Statte lifted deadweights for approximately 10 minutes, and then mounted a treadmill. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Analyze the Situation 5.1 As an experienced treadmill user, she started slowly, gradually increasing the treadmill's speed. Shortly after beginning the treadmill workout, Ms. Statte fell backward into a plate-glass window that was approximately 2 feet behind the treadmill. The glass shattered and shards from the glass severely injured Ms. Statte. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Analyze the Situation 5.1 Ms. Statte's attorney claimed the accident was the fault of the hotel because the treadmill was too close to the window, and the hotel neglected to outfit the window with safety glass. As its defense, the hotel pointed out the presence of the exculpatory clause sign, clearly posted, that Ms. Statte agreed she had read prior to beginning her workout. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Analyze the Situation 5.1 1. Do you believe a guest who has agreed to be responsible for her own injuries during a workout has also agreed to be responsible for them in the presence of significant negligence on the part of the hotel? 2. As the hotel manager, how might you resolve this dispute? 3. Could a lawsuit have been prevented? © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Franchise Contracts Legalese: Disclosure - To reveal fully and honestly. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved The Franchise Rule The Federal Trade Commission (FTC) is the federal agency that regulates unfair or deceptive trade practices. FTC developed the “Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures” in 1979; commonly known as the Franchise Rule © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Revised Franchise Rule Effective July 1, 2008 Basic disclosures Earnings claims Advertised claims Franchise agreements Refunds Contradictory claims © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Search the Web 5.2 Visit https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform- proceedings/franchise-rule Read the entire FTC Franchise Rule (16 CFR Part 436), to familiarize yourself with its requirements, and then write a one-page bulleted summary of the rule. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/franchise-rule Franchise Contracts Legalese: Franchise agreement – A special hospitality contract that details the responsibilities of both parties (franchisor and franchisee) involved in the operation of a franchise. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Franchise Contracts Rights and Responsibilities of the parties under a Franchise Agreement include: License granted Franchisee responsibilities Franchisor responsibilities Proprietary rights Audit requirements Indemnification and insurance requirements Transfer of ownership policies Termination policies Renewal options Relationship of the parties to the contract Areas of protection Terms of the agreement (start and stop dates) © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Search the Web 5.3 Log on to Internet and log on to www.hospitalitylawyer.com. 1. Select: Solutions. 2. Select: Find Academics Resources. 3. Select: Hospitality Law Textbook Support. 4. Select: Referenced Articles. 5. Select “Joint Franchisor-Franchise Relations by Robert Zarco, Richard Barrett-Cuetara, and Andrew Loewinger Presented at the Third Annual Hospitality Law Conference” 6. Review this article, and be prepared to discuss it in class. © 2017 Stephen C. Barth P.C., Diana S. Barber, JD and John Wiley & Sons, Inc. All Rights Reserved Franchise Contracts Legalese: Right of first refusal – A clause in a contractual agreement between two parties in a business relationship in which one party, upon termination of the business relationship, can exercise the right to buy the interest of the other party before those rights