Franchising, Drunk Guests and ADA Compliance: How Hoteliers Can Prepare for Liability Issues – CoStar Group

By Bryan Wroten
Hotel News Now

ARLINGTON, Virginia — Through the normal course of operations, there are myriad legal issues hoteliers must navigate to protect themselves.
During the 2022 Hospitality Law Conference Washington, D.C., industry attorneys and legal experts addressed issues that could potentially expose hoteliers to civil and criminal liabilities and how to best mitigate those situations.

Franchise agreements are long, complicated documents that cover the entire relationship between a franchisor and franchisee, said Raja Patil, partner at Dentons Bingham Greenbaume. They address intellectual property rights, licensing, franchise fees, royalties, advertising and marketing fees, development, operational standards and expiration and termination provisions.
Often franchisees, believing the agreements are non-negotiable, sign without reading or understanding what’s in the agreement, he said.
Patil said he reviews agreements with clients to summarize and point out key provisions that can be negotiated.
“Franchisees who have prior experience with a particular flag may have more bargaining power,” he said. “Franchisees with newer brands might be able to get more concessions because the franchisors are trying to get some more franchisees in the door.”
Negotiations can help to establish areas of protection or geographic restrictions favorable to franchisees, said Michael McGee, partner at Dentons Bingham Greenbaume, noting it’s important that a franchisee is free from interference from the franchisor and other franchisees within the system.
That could include having another franchisee's hotel too close in proximity, which could cannibalize demand and affect the bottom line, he said. The area of protection would depend on factors including whether the hotel is in a rural or urban market and the demand those areas attract.
“There can be studies performed that'll show the impact of a competitor opening within a specific space, that they can certainly aid in determining the appropriate territory,” he said.
Frequently clients who have owned a hotel for years decide it’s time to exit, McGee said. Usually when that happens, the franchise agreement will be assigned to a new operator, and that requires negotiating provisions that protect the franchisee from undue burden or cost.
One way to do that is to include language that says the franchisor can’t unreasonably withhold its consent to the assignment if the client is selling to a buyer who is an established operator under the brand or otherwise approved by the brand to operate hotels, he said.
“We’ll also try to be on the lookout for transfer fees that are sought in connection with the assignment,” he said. “We’ve seen some pretty exorbitant fees from time to time.”
Deals have been held up when the franchisor requires either the current franchisee or the new one to undertake renovations or upgrades to the hotel not necessarily contemplated under the current brand standards, he said.
“We like to be clear that the consent by the franchisor to an assignment of the franchise agreement can't be held up as long as the franchisee is currently in compliance with any current brand standards, upgrades, et cetera,” he said.

Every state has laws that would prohibit a licensed establishment from overserving alcohol to patrons, and any violation opens up the business and staff to liabilities, said Hannah Becker, attorney and shareholder at GrayRobinson.
“[The patrons] can leave your premises or even stay on your premises and conduct illegal activity where you might be liable depending on your state’s dram shop laws,” she said.
The first step for hoteliers is to look at state and local ordinances for laws related to overserving patrons, she said. After that, much of it comes down to training.
Even if state or local laws don’t require that employees receive training, it’s important that every person working for the bar or restaurant can identify someone who has been or is close to being overserved, she said. Warning signs include slurred speech, inability to walk straight or poor reflexes.
Some states prohibit employees from consuming alcohol while they’re working and serving alcohol to patrons, Becker said. Regardless, the establishment shouldn’t allow them to drink while working.
“It’s important that you work with your employees to understand that while they are on their shifts, they should not be accepting a free shot from one of the patrons to ensure that they as an individual can recognize that a patron of yours is intoxicated,” she said.
There are 43 states in the U.S. with dram shop laws, Becker said, referring to laws that hold establishments that sell alcohol liable for intoxicated patrons who later cause injury or property damage. The laws vary by state, so it’s important to understand what each state’s laws require, she said.
“Should you have reasonably known that the individual was intoxicated when you served alcohol, or negligently served alcohol, to the individual?” she asked. “Was it obvious the person was intoxicated? Should you have known based on their behaviors? All that language varies.”

Under the Americans with Disabilities Act, Title III prohibits a place of public accommodation, such as a restaurant or hotel, from denying services and accommodations to individuals with disabilities, said Jordan Schwartz, partner at Conn Maciel Carey.
Hoteliers and restaurant owners are responsible for ensuring, for example, that the front door is wide enough to accommodate guests in wheelchairs, and that there’s an appropriate number of guestrooms with roll-in showers.
“Your obligation as an operator of a place of public accommodation is to remove the barriers to access, and that’s either physically with moving things away and building things, or eyes in your website,” he said. “This is all about barriers to access.”
There are two main ADA issues for websites of public accommodations, Schwartz said. The first is whether the website needs to be accessible for people who are visually or hearing impaired. The courts have come down on both sides of the issue, but it’s better to err on the side of caution.
“I almost never get a call from a client who’s getting sued where I say, ‘You know what, you don’t have to worry about it. Your website doesn’t need to be compliant,’” he said. “For the most part, we’re going to assume your website does need to be compliant unless there are extenuating circumstances otherwise.”
Website accessibility includes compatibility with users’ own software that enlarges fonts or reads text to them, he said. There’s also issues with PDF files potentially not being compliant. Color-coded diagrams or symbols and pictures without written descriptions, known as alt text, and video and audio files without captioning are also a problem.
Hotel websites need to identify the accessible features at the property with enough detail to reasonably permit someone to determine whether they could stay at the property, Schwartz said. Along with the guestrooms, that also includes the public spaces, such as the lobby, restaurants and pool areas.
This isn’t something that’s going to require thousands of dollars to change a website’s code because it’s simply adding a list to the website to provide the descriptions to the necessary pages, he said.
Hoteliers need to be careful with online travel agencies, Schwartz said. OTAs such as Expedia don’t necessarily include the accessibility features at the hotels they list or let users specifically book accessible rooms. When the plaintiff sues, the lawsuit will be against the hotel, not the OTA, because the ADA applies to places of lodging.
It’s possible hoteliers could work into their OTA agreements that the OTA would indemnify them in case of such a lawsuit.
“You can't just turn a blind eye and say, ‘Oh, that's Expedia,’ because you're the one that's going to get hit with the lawsuit,” he said.
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