Management and Concession Agreements at Permitted Premises
Not every business that wants to be involved in selling alcohol can or wants to hold the permit itself. A hotel may want a restaurant group to run its bar; a stadium may bring in a concessionaire to handle drink sales; an investor may want to manage a permitted venue. These arrangements are accomplished through management and concession agreements, but they operate under a strict rule: the permit holder must keep control. This article explains management and concession agreements at permitted premises and the control requirement that governs them.
What these agreements are
Management and concession agreements are arrangements that allow alcohol operations to be conducted in cooperation between a permit holder and another party. A concession agreement allows a permit holder to operate at a location belonging to a third party, such as a hotel, a stadium, a public entertainment facility, or an event center. A management agreement, broadly, involves arrangements for the operation of a permitted business, often delegating day-to-day operations while the permit remains with its holder. Both let parties combine their roles, one bringing the permit, another bringing a location or operational capacity.
These arrangements exist because the alcohol business often involves multiple players: property owners, operators, and permit holders who are not always the same entity. A stadium owner is not necessarily a licensed alcohol seller, and a hotel may prefer a specialist to run its bar. Management and concession agreements provide the legal structures to bring these parties together around a permitted operation. But because they involve someone other than the permit holder being closely involved with the alcohol business, they bump up against a fundamental rule about control.
The control requirement
The governing principle is that the permit holder must retain control of the permitted operation. The Alcoholic Beverage Code prohibits a permit holder from acting as a mere subterfuge for another party, and it forbids any device, scheme, or plan that surrenders control of the employees, premises, or business to someone else. In other words, the permit holder cannot be a figurehead while another party actually runs the alcohol business; the holder must genuinely be in control.
This control requirement is the dividing line between a lawful arrangement and a prohibited one. Management and concession agreements are permissible only so long as the permit holder remains genuinely in control of the operation. The moment an arrangement effectively hands control to a non-permittee, it crosses into the prohibited territory of subterfuge. The entire validity of these agreements turns on preserving the permit holder’s real authority, which is why they must be structured with the control requirement front and center.
Concession agreements in venues
Concession agreements are especially common in large venues. A single stadium may have dozens of concession points, premium club areas, and suite-level service, and these are often operated through a master concessionaire that holds the relevant permit and may engage subcontractors for specific locations or services. The concession structure allows a venue that is not itself the alcohol permit holder to have alcohol sold throughout its facility by parties who are properly authorized.
These venue arrangements illustrate the concession concept at scale. The venue provides the location and the events; the concessionaire brings the permit and the operation. The structure must still respect the control principles, ensuring that the permit holder genuinely controls the permitted operation rather than serving as a front for the venue. For large facilities, getting these arrangements right is essential, because the complexity of many sales points and parties makes it all the more important that control resides where the law requires it.
Preserving the permit holder’s authority
Because the control requirement is paramount, management agreements in particular must be carefully drafted to preserve the permit holder’s authority. The agreement should ensure the permit holder retains genuine control over the matters that define running the alcohol business, such as personnel decisions, purchasing, pricing, and TABC compliance, even when day-to-day operations are delegated to a manager. A management agreement that strips the permit holder of these powers risks being an unlawful surrender of control.
This drafting challenge is where these arrangements succeed or fail legally. It is possible to delegate operational tasks while keeping ultimate control with the permit holder, but the line must be respected. An agreement that, in substance, lets the manager make all the real decisions about the alcohol business, while the permit holder merely lends its name, is exactly what the law prohibits. Careful drafting that keeps genuine authority with the permit holder is what makes a management arrangement lawful, which is why these agreements demand precision rather than boilerplate.
Why getting it right matters
The stakes of these arrangements are high because a defective one implicates the permit itself. An arrangement that surrenders control or makes the permit holder a subterfuge is not just a contract problem; it violates the Code and can jeopardize the permit. For all the parties involved, the venue, the operator, and the permit holder, a poorly structured agreement is a serious risk, while a properly structured one enables a legitimate and valuable business relationship.
Consider a hotel that wants a restaurant group to run its bar and lounge. Rather than having the hotel simply hand the operation to the group while holding the permit as a formality, the parties structure the arrangement so that the permit holder genuinely controls the alcohol operation, including authority over staff, purchasing, pricing, and compliance, with the management role respecting those boundaries. Structured this way, the agreement lets the restaurant group bring its expertise while the permit holder remains in real control, satisfying the law. An arrangement that instead made the permit holder a mere front would put the permit at risk.
The throughline is that management and concession agreements let parties combine a permit, a location, and operational capacity at permitted premises, but they are governed by the requirement that the permit holder retain genuine control, with the Code prohibiting subterfuge or any plan that surrenders control of the employees, premises, or business. Because a defective arrangement can jeopardize the permit, these agreements must be carefully structured to keep real authority with the permit holder.
Frequently Asked Questions
What is a concession agreement?
It is an arrangement that allows a permit holder to operate at a location belonging to a third party, such as a hotel, stadium, public entertainment facility, or event center. Large venues often use a master concessionaire that holds the permit and may engage subcontractors, letting a venue that is not itself the permit holder have alcohol sold by properly authorized parties.
What is the key rule governing these agreements?
The permit holder must retain genuine control of the operation. The Code prohibits the holder from acting as a mere subterfuge for another party or entering any device, scheme, or plan that surrenders control of the employees, premises, or business. An arrangement that hands real control to a non-permittee crosses into prohibited territory.
Can a permit holder delegate day-to-day operations?
Yes, but carefully. A management agreement can delegate operational tasks while preserving the permit holder’s authority over matters like personnel, purchasing, pricing, and compliance. The line is that ultimate control must remain with the permit holder; an agreement that strips those powers and lets a manager truly run the alcohol business risks being an unlawful surrender of control.
This article is general information about management and concession agreements. It is not legal advice and does not create an attorney-client relationship. The rules can change and depend on the specific arrangement. Anyone entering such an agreement should consult a qualified Texas attorney.
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