Zeidel & Associates Negotiates Coordinated Hotel Management and Food & Beverage Agreements for Historic Luxury New York City Hotel

Situation

Zeidel & Associates represented an innovative and successful hospitality company in connection with the management of a recently acquired hotel in New York City. The hotel, which was acquired by a joint venture between the client and a third party, also included food and beverage outlets that were intended to be operated as an integral part of the guest experience and overall property strategy.

The client was engaged to manage both the hotel and the food and beverage outlets. However, because of union-related considerations, the hotel management agreement and the food and beverage management agreement needed to be structured as separate, stand-alone agreements. As a result, the two agreements had to be carefully coordinated so that they would operate independently from a legal and labor-relations perspective, while still functioning together as part of a unified management structure for the property.

Approach

Zeidel & Associates was retained to draft both the hotel management agreement and the food and beverage management agreement. In order to maximize efficiencies, the firm suggested that the hotel management agreement would be drafted first, with the food and beverage agreement to follow and conform, where appropriate, to the structure and terms established in the hotel management agreement.

In drafting the hotel management agreement, the firm paid careful attention to the relationship between the two agreements, including cross-default and cross-termination rights, notice and cure periods, default remedies, termination consequences, and the extent to which a default or termination under one agreement should affect the other.

We worked closely with the client to navigate the competing legal, operational, and relationship considerations presented by the transaction. Because the hotel management agreement would serve as the foundation for the overall management structure, we focused first on preserving the client’s core management rights, compensation structure, operating authority, approval rights, indemnities, termination protections, and limitations on liability.

At the same time, we paid particular attention to the provisions that would need to coordinate with the separate food and beverage agreement. This included ensuring that the two agreements were consistent where necessary, while maintaining appropriate separation between hotel operations and food and beverage operations in light of the union-related considerations. We also negotiated the cross-default and cross-termination mechanics between the agreements, including when a default under one agreement would trigger rights under the other, whether termination of one agreement should automatically or conditionally permit termination of the other, and how notice, cure, transition, and post-termination obligations would operate across both agreements.

In response, counsel for the client’s joint venture partner in the ownership entity provided a heavily revised markup of the initial hotel management agreement, creating a more challenging negotiation dynamic and requiring careful attention to both legal protections and relationship management.

Given the related ownership structure, Zeidel & Associates approached the negotiation with a focus on practical solutions, preserving the client’s legal and economic protections while maintaining constructive deal momentum among the joint venture parties and counsel.

After finalizing the hotel management agreement, the firm leveraged that structure to efficiently prepare the food-and-beverage agreement, tailored to the distinct scope of the outlets, thereby enabling an accelerated path to signature.

Result

Zeidel & Associates negotiated a hotel management agreement and related food and beverage management agreement that provided the client with a coordinated management framework for the New York City hotel and its food and beverage outlets.

The final structure allowed the agreements to stand alone for union-related purposes while still working together operationally and preserving the client’s key management protections.