Management & Concession Agreements
Hotels, stadiums, concert venues, and other hospitality businesses in Texas frequently engage third-party operators to manage their alcoholic beverage programs. These arrangements offer significant operational advantages, including access to specialized expertise, established vendor relationships, trained personnel, and economies of scale. However, they also create a fundamental legal tension under the Texas Alcoholic Beverage Code that requires careful navigation by an experienced TABC attorney.
The Subterfuge Problem Under Section 109.53
Section 109.53 of the Texas Alcoholic Beverage Code prohibits arrangements where a permit holder serves as a mere “subterfuge” for another party, or where the permit holder has entered into a “device, scheme, or plan which surrenders control of the employees, premises, or business” to someone else. When the Texas Alcoholic Beverage Commission (TABC) concludes that a management agreement crosses this line, it can deny a new TABC permit application or cancel an existing license putting your entire investment at risk.
The challenge lies in distinguishing legitimate management services from an impermissible surrender of control. A 1981 decision from the Texas Court of Civil Appeals, Texas Alcoholic Beverage Commission v. Good Spirits, Inc., 616 S.W.2d 411, provides the framework courts and the TABC use to evaluate these arrangements. In that case, the court examined a retail beverage operation that leased space from a grocery chain, used the grocery store’s employees as managers, and contracted with the grocery company for accounting and cash register services. Despite this extensive integration, the court held that the arrangement was lawful because the permit holder retained meaningful control over the licensed operation.
The Good Spirits decision identified several factors that demonstrated legitimate independence: the permit holder retained ultimate authority to hire and fire employees involved in alcoholic beverage sales; managers ordered inventory and set prices subject to the permit holder’s approval; the business maintained its own bank accounts for beverage purchases; and the permit holder had the right to audit the books and inspect operations. The court also emphasized that the permit holder’s principal took an active role in overseeing all aspects of the business.
Common Applications for Management & Concession Agreements
Hotel Liquor License Arrangements
Hotel beverage operations present unique structuring challenges for Texas liquor license compliance. Many hotels operate under national brand flags that impose specific food and beverage standards, and hotel owners frequently contract with professional management companies to operate the entire property, including restaurants, bars, banquet services, room service, and minibar operations. The management company may operate dozens or hundreds of properties nationwide and possess far more beverage industry expertise than the hotel owner.
Despite this dynamic, the hotel owner (or a related business entity formed for this purpose) typically must hold the TABC permits, whether a Mixed Beverage Permit, Wine and Malt Beverage Retailer’s Permit (BG permit), or other applicable license, and maintain sufficient control to avoid subterfuge concerns. Management agreements must be carefully drafted to preserve the permit holder’s authority over personnel decisions, purchasing, pricing, and TABC compliance, even when day-to-day operations are delegated. The permit holder should maintain separate financial accounts for beverage operations, retain audit and inspection rights, and document ongoing oversight activities.
Stadium, Arena, and Concert Venue Alcohol Permits
Large public entertainment venues present a different set of challenges for alcohol permit compliance. A single stadium may have dozens of concession points, premium club areas, and suite-level service, often operated by a master concessionaire that in turn engages subcontractors for specific locations or services. Exclusive pouring rights agreements with beverage distributors add another layer of contractual relationships that must be navigated.
Throughout this chain, the permit holder must maintain control over the licensed operations. Concessionaire agreements should clearly establish the permit holder’s authority over all personnel involved in alcohol sales and service, require compliance with TABC seller/server training and certification requirements, and provide for direct oversight of operations. Revenue-sharing arrangements and operational delegations must be structured to avoid any implication that the permit holder has surrendered control of the business to the concessionaire. The TABC will scrutinize these arrangements, and a poorly drafted agreement can result in administrative action against the permit holder’s license.
Interim Management Agreements for Bar and Restaurant Purchases
When a buyer acquires an existing bar, restaurant, nightclub, or venue through an asset purchase, there is often a gap between closing and the issuance of new TABC permits. The buyer wants to continue operating immediately to preserve the business’s value and customer relationships; the seller wants to exit cleanly without ongoing liability. An interim management agreement can bridge this gap by allowing the buyer to manage operations under the seller’s existing permits while the buyer’s Texas liquor license applications are pending.
These arrangements require particular care from a Texas alcohol attorney. The seller remains the permit holder and bears regulatory responsibility for the licensed premises, yet the buyer is managing day-to-day operations and collecting revenue. The agreement must preserve the seller’s control in a manner sufficient to satisfy Section 109.53 while giving the buyer practical authority to run the business. Clear provisions addressing the scope of delegated authority, financial arrangements, insurance and indemnification, and termination upon permit issuance (or denial) are essential. Both parties face meaningful risk if the interim management agreement is not properly structured—the seller’s existing license could be jeopardized, and the buyer could face liability for operating without proper authority.
Essential Contract Provisions for TABC Compliance
Regardless of the specific context—whether a hotel management agreement, stadium concessionaire contract, or interim management arrangement—agreements involving TABC-licensed operations should address the following elements to ensure compliance with Texas alcoholic beverage law:
- Permit Holder Control Over Personnel. The permit holder should retain ultimate authority to approve, supervise, and terminate any employee involved in the purchase, sale, or service of alcoholic beverages, even if the management company handles day-to-day supervision and hiring recommendations.
- Purchasing and Pricing Authority. The permit holder should retain approval authority over inventory purchases and pricing decisions, or at minimum establish clear parameters within which the manager operates subject to the permit holder’s oversight.
- Separate Financial Accounts. Beverage operations should maintain dedicated bank accounts insured by the FDIC, with clear procedures for deposits, disbursements, and financial reporting to the permit holder.
- Audit and Inspection Rights. The permit holder should have unrestricted access to books, records, and premises related to alcoholic beverage operations, including the right to retain independent auditors and conduct unannounced inspections.
- TABC Compliance Responsibilities. The agreement should specify that the permit holder is responsible for maintaining all necessary TABC permits and licenses and ensuring regulatory compliance, with appropriate cooperation and reporting obligations from the manager.
- Insurance and Indemnification. Provisions should address liability for alcohol-related incidents, required coverage types and limits (including liquor liability coverage), and indemnification obligations running from the operator to the permit holder.
- Term and Termination. The agreement should specify duration, renewal terms, and the circumstances under which either party may terminate—including provisions addressing what happens if the TABC takes adverse action against the permit or if a new permit application is denied.
Houston TABC Lawyers for Management & Concession Agreements
Management and concession agreements sit at the intersection of commercial contract law and Texas alcoholic beverage regulatory compliance. An arrangement that makes business sense may nonetheless create unacceptable regulatory risk if not properly structured under Section 109.53 and the Good Spirits framework.
Our Texas liquor law attorneys work with hotels, venue owners, management companies, concessionaires, and buyers and sellers of hospitality businesses to structure agreements that achieve their commercial objectives while maintaining full TABC compliance. Whether you need to negotiate a hotel management agreement, draft a stadium concessionaire contract, or structure an interim management arrangement for a bar or restaurant acquisition, we have the experience to protect your interests.
Contact our TABC attorneys today at (713) 880-2992 to schedule a consultation and discuss your management or concession agreement needs.
About the Reviewer:
This article was legally reviewed by Albert T. Van Huff, Partner at Monshaugen & Van Huff, P.C., to ensure compliance with current TABC regulations as of January 5, 2026.