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How to… negotiate hotel F&B deals

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How to… negotiate hotel F&B deals

Employing a renowned chef to operate your hotel restaurant can seem like an easy route to success, but certain guidelines must be set and boundaries established. Richard Bursby and Rebekah Prince from Taylor Wessing explain

There is a developing trend where hotel operators are partnering with recognised food and beverage experts to bring the requisite expertise, branding and know-how to their operations. In many cases this can work well for both parties, but there are a number of questions and considerations that hotel owners and operators need to be aware of. Here are some things to consider before you commission a consultant.

Choosing the right model: who is doing the cooking?
There are several different models to choose from – the right one depends on issues such as who will make operational decisions like procurement, hiring and firing staff, menu composition and pricing. Who has the ultimate responsibility to take a dish off the menu if it’s not selling well?

At one end of the spectrum, a pure franchise arrangement is a possibility. An F&B consultant or chef allows a hotel to operate a restaurant using their brand, provided the operation is carried out in accordance with the prescribed brand standards. In this case, other than providing training, know-how and checking the brand standards are being complied with, the consultant is not at all involved in the F&B operation.

At the other end of the spectrum is an operating and management agreement, where the consultant chef runs the F&B operation on behalf of the hotel.

A hybrid of these is a consultancy agreement. In this instance, the consultant is able to exhibit their own creative flair, designing menus and supplying initial and ongoing training. Sometimes the consultant might also be the executive chef; although they won’t be cooking the food, the hotel can use their name and brand. Alternatively, the consultancy agreement might be unbranded, with the consultancy expertise provided in the background under a ‘white label’ arrangement.

A variation on this is a consultancy ‘plus’ agreement, where the consultant is much more involved. In addition to being the executive chef and providing a brand, the consultant’s team will oversee the F&B operation on a daily basis and be hands-on, although the hotel operator will ultimately still have overall control.

How visible will the consultant be?
Key points to negotiate include how frequently the consultant or chef will be on the premises. Might they appear at the launch party with a small number of promotional visits thereafter, or will there be a more formal number of regular days per month?

Bear in mind that the most successful chefs are likely to operate a number of restaurants, so will have less time to be involved.

A basic consultancy arrangement will likely mean a fixed fee for the consultant chef, while a more operational role will likely mean a fixed or base fee (linked to turnover) plus a profit share arrangement. A franchise arrangement will involve a royalty fee linked to sales. A profit-based fee will drive a greater alignment of interests between the parties.

In most cases, these agreements are entered into so that the business benefits from a strong existing brand, but it must be established early on which brand will have overall control: the hotel’s or the chef’s. It’s also worth agreeing whether the chef will be visible or provide their know-how in the background (“white label”) basis.

It will also need to be decided if the chef’s brand will be used in the main restaurant only, or across the entire F&B operation, including the bar, breakfast and room service.

Employees and reporting
Will the consultant chef be bringing in their own team? If so, it needs to be established who they will be employed by and where the lines of reporting will be. Be wary of conflicting instructions.

Other issues
There are practicalities that can’t be overlooked, too. For instance, who will have responsibility for health and safety processes and dealing with obtaining all the necessary licences? It sounds obvious, but setting out how success is measured will be vital, too.

There are many issues to consider, but if these are all addressed up front and a clear and well-drafted agreement entered into, then both parties will be well-placed to prosper.

Richard Bursby is a corporate partner and the head of the hotels and leisure sector group at Taylor Wessing. Rebekah Prince is an corporate associate in the same group

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