Legal Checklist for Hospitality Operators

19 June 2019
Posted by Jennifer Tutty

 

The hospitality industry can be a risky business to get into, and we take our hats off to those who are willing to give it a shot.  Whether it be a bar, café, restaurant, nightclub, event space or other venue, it is critical to take time to learn about the risks and understand your legal obligations when operating a business in the hospitality space.

Here is a simple checklist of some of the most important issues facing hospitality operators in Victoria.

Get your business structure right

Before getting into business, speak to your accountant about choosing an appropriate business structure.  Whilst a company is expensive to establish and tax reporting obligations are more onerous, choosing a company structure, rather than operating as a sole trader or partnership, will allow you and your business partners to better protect your personal assets from creditors if something goes wrong.

Negotiate a fair lease

Your lease is everything! Before you jump in and sign a binding heads of agreement, make sure you take time to get legal advice on whether the terms of the lease are commercially reasonable.

Here are some key things to look out for:

– Have you got enough time on the lease? Do you need additional lease options?
– Are you permitted to carry out planned renovation works?
– Does the landlord legally own the premises?
– Are any rent increases commercially reasonable?
– Are ‘make good’ obligations too onerous?

Understand planning, licensing and permit requirements

When checking out sites for your new venue, make sure you do your due diligence from a planning perspective. Not all sites can be used for hospitality venues!  Before you sign a lease or buy a property, make sure you:

– Checklist DELWP’s Planning Maps Online to find out what planning zones and overlays apply to the site you are considering;
– Speak to the local council or a building surveyor about your plans and whether they are possible;
– Use the Australian Business Licence and Information Service to work out what licences you will need for your business; and
– Speak to the VCGLR about whether the site has a liquor licence with suitable conditions or whether you would need to apply for a new one.

Make sure your trading name does not infringe someone else’s

Choosing a name for your venue can be one of the most creative and fun tasks in setting up your business.  However, there is nothing worse than being forced to change your name after launch because it infringes another business’ trade mark.

To get a preliminary idea on whether your chosen name is available to use, we recommend doing a search on IP Australia’s trade mark database and ASIC’s company and business names register to see if there are any identical or similar registrations.  However, we strongly recommend engaging a trade mark lawyer to carry out a brand clearance and trade mark application to secure your brand.

Understand your responsibilities as an employer

There has been no shortage of restaurants underpaying staff in the news of late.  Understanding employment laws with regard to hospitality workers can be difficult, even for established operators.

Before hiring staff and working out what to pay them, it’s important you are across all relevant laws that apply to your business, such as the Fair Work Act, the National Employment Standards and modern awards such as the Restaurant Industry Award.  Hospitality workers often receive entitlements such as penalty rates and overtime, and if you fail to meet your obligations, you could find yourself in front of the Fair Work Ombudsman and up for significant civil penalties.

Get an agreement in writing with your business partners

Going into business with other people can be exciting at the start, especially when things are new and stress-free. Whether you are operating as a partnership, company or other operating entity, we strongly recommend making time to put an agreement in place. It’s so much easier to negotiate and agree on terms when the going is good, and is an important safeguard in case things turn sour.

Key things to agree on include:

– ownership of equity;
– entitlement to profits;
– decision making processes;
– services and responsibilities of each person;
– rules regarding sale of equity when someone wants to leave;
– default terms; and
– deadlock processes.

If you would like further advice on any of the above, please give us a call on 03 9521 2128, or email us at hello@studiolegal.com.au.

DISCLAIMER

The information in this article is of a general nature. It does not constitute formal legal advice, and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.