Latest news with #MarkPestronk
Travel Weekly
3 days ago
- Business
- Travel Weekly
20 questions to ask a travel agency seller
Mark Pestronk Q: There is another agency in my community that I want to acquire. With my attorney's help, I have already drafted a nonbinding letter of intent with the key business terms, which I expect the prospective seller to sign. I have also reviewed the agency's financials, tax returns and key contracts. Now, I need to have my attorney draft the actual purchase agreement. To enable my attorney to do the best job, what information do I need to ask the seller for now? A: Here are 20 questions for the seller that will help your attorney zero in on all the legal issues and draft a good agreement: 1. What is the agency's full legal name, and where is it incorporated or organized? 2. What are the owners' full legal names, and how much does each own? 3. Is there an agreement among the owners, and if so, what does it provide for? 4. Are the owners related to each other? 5. Who are the agency's officers, directors or managing members? 6. Are there any other companies that are under the same or partly the same ownership? 7. Are there any nontravel-related lines of business within the company? 8. Does the agency have any debts or liens on its assets? 9. Does the agency have any employment or IC agreements that can't be terminated at will? 10. Does the agency have an ARC appointment? 11. Does the agency have a GDS contract, and if so, when does it expire? 12. Does the agency have an office lease, and if so, when does it expire and how much is the security deposit? 13. What other contracts does the agency have that cannot be terminated in 30 days or fewer? 14. Does the agency hold client deposits, and if so, how much are they? 15. Are there any future bookings that will require a buyer to pay out of its own funds (e.g., cruise group deposits paid in advance of collecting from clients)? 16. Which key employees will be retained, for how long, for what compensation, and what duties will they have? 17. Is there any threatened or actual litigation, and if so, what are the details? 18. Are there any other obligations not in the ordinary course of business? 19. Why does the owner want to sell? 20. When would the owner like to close the transaction? Once the agreement is drafted and is acceptable to the seller, you will need to get lots more information to add as exhibits to the agreement, such as lists of tangible assets, contracts, employees, ICs, top clients, top suppliers, client receivables and accrued vacation and other pay. You will also need to add financial statements, along with a warranty that the financials are correct. Finally, in the typical agency acquisition, commissions that are unpaid as of closing will often be automatically deposited into the seller's bank account. If the purchase agreement provides that you get any of this money, you need to list those commissions plus a commitment for the seller to remit them to you after closing.
Travel Weekly
22-05-2025
- Business
- Travel Weekly
Beyond the Sabre Subscriber Agreement
Mark Pestronk Q: For the past several years, Sabre has periodically been sending our agency documents that it calls "programs." Some of these offer new (though small) incentives for new kinds of bookings, such as NDC, and some impose new fees for other kinds of bookings, such as those for low-cost carriers not previously in the Sabre system. I also note that Sabre posts its regular fees on a password-protected website called and Sabre reserves the right to change the raise fees or add new ones by posting them on the website. I have some legal questions about these programs and fees. First, do they constitute amendments to our existing Sabre contract; i.e., are they subject to the general financial and legal terms of our multiyear Sabre Subscriber Agreement, which we spent a long time negotiating? If not, why not, and is there anything we can do to make them part of the agreement? A: The standard Sabre Subscriber Agreement (the "Agreement") states that it cannot be amended without signatures. Two of the most important programs that I have seen do require signatures, but oddly, one is an amendment to the Agreement, and the other is not. For several years, Sabre has been offering Southwest Airlines incentives in an "Amendment to Sabre Agreement Southwest Airlines Opt-In" that is signed by both parties. The legal terms of the Southwest amendment differ from the Agreement in that either party can terminate the amendment immediately upon notice to the other party. Otherwise, the general legal terms of the Agreement apply to the Southwest amendment. For about a year, Sabre has also been offering an NDC program document called Global Agency New Distribution Capability (NDC) General Terms and Conditions. Unlike the Southwest amendment, this one isn't called an amendment, and it is probably not intended to have that effect. It is probably best viewed as a standalone contract. It can be changed by Sabre by posting the change on its website, and it can be terminated by either party on 30 days' written notice. Finally, as you noted, Sabre posts its regular fees on a password-protected website called and Sabre can change the fees or add new ones by posting them on the website, subject to any fee cap in the Agreement. So, what do all these developments have in common? Unlike the provisions of the Agreement itself, Sabre can change these deals at will, on 30 days' notice or no notice. Perhaps Sabre sees the need to retain the right to cut incentives and add new and higher fees as the way of the future for all parts of new Sabre contracts, given the decline in bookings that it is experiencing, according to a Business Travel News report. I imagine that Travelport and Amadeus see the same need and would concur with such a strategy. Your mission -- should you choose to accept it -- is to use whatever clout you have to limit Sabre's contractual rights to worsen the deal at will.
Travel Weekly
16-05-2025
- Business
- Travel Weekly
Avoiding IC reclassification
Mark Pestronk Q: Our travel agency is expanding by adding independent contractors in several states. We are always mindful of the need to avoid anything that could cause a state or federal agency to reclassify the ICs as employees. I have several questions related to our multistate operations. First, do we have to follow the laws of every state where we have an IC, or is it sufficient to follow the law of the state of our agency's headquarters? Second, can we avoid multistate complications by providing, in our IC agreement, that it will be governed by the laws of our headquarters state? Third, I understand that some states are tougher on IC relationships than others, but what would you say are the toughest states? Which are the most lenient? Finally, is there a test that, if we comply, will ensure that we can avoid the risk of reclassification in every state? A: First, as you probably can guess, you have to follow the law of every state where you have an IC. On the issue of what constitutes a valid IC relationship, the law of the state where your agency is headquartered is less important if you have no ICs there. Second, if you have a contract clause stating that the law of your headquarters state will govern, don't count on a state auditing agency or a court in another state to follow that clause. Although you should certainly have such a clause in case it is upheld, the chances are good that the auditing agency or court will disregard it to protect local workers. Third, the toughest states (i.e., the states where IC relationships are most often reclassified) are California, Massachusetts, New York and New Jersey, with Washington state and Oregon close runners-up. On the other end of the spectrum are states such as Texas and Florida. I don't mean to discourage you from retaining ICs in the tougher states, because a well-structured IC program can probably pass muster in every state as well as under federal rules. For example, in California you have the so-called ABC test, which is very tough to pass because it requires the host and the IC to be in different businesses. Fortunately, thanks to ASTA, California also has an exception for travel advisors (the so-called AB-5 Test) built right into the law. The host and the IC can be in the same business if the IC has: a) a business location, which may include a residence, that is separate from the host's location; b) a local business license; c) the right to set his or her own fees; d) the right to set his or her own work hours; e) the right to sell through any registered seller of travel; and f) discretion and independent judgment in the performance of services. If a relationship cannot pass muster under all six criteria, there is a very strong risk that a California state agency will reclassify the relationship and try to collect a lot of back taxes and penalties. Finally, no structure is guaranteed to avoid the risk of reclassification in every jurisdiction, so be sure to consult a knowledgeable attorney for further guidance.
Travel Weekly
09-05-2025
- Business
- Travel Weekly
Currency fluctuations can eat into profits
Mark Pestronk Q: A year ago, we began arranging a fall 2025 group trip to Italy for a high-end U.S. incentive client who, of course, pays us in dollars. Early this year, we entered into a contract with a Rome DMC under which we will owe a final payment of about 1 million euros this month. The euro has gone up almost 11% since the time we entered into our contract with the DMC, from about $1.02 to about $1.13. This means that we stand to lose most of our profit when the client pays us in dollars but we have to shell out euros. Can we collect the difference from the client? If not, what can we do next time to prevent this calamity? A: Your contract with the DMC undoubtedly states the price in euros, so you obviously owe the price in that currency. Unless your contract with the corporate client allows you to pass through the additional costs arising from currency fluctuations, you have no legal right to collect more from your client. There is nothing you could have done differently with the DMC. No supplier in a eurozone country would have allowed you to pay in dollars, in my experience. To prevent this loss next time, you must turn either to the client or a financial institution that will let you buy euros in the future at today's price, a practice called currency hedging. I have seen several client contracts that enabled the travel agency to pass on the additional costs due to currency fluctuation, so you should try to add a clause to your next contract stating that the client will reimburse you for any additional expenses arising from a change in exchange rates between the contract signing and trip dates. Sharp clients will then request that the opposite also be placed in the contract: If the euro drops in value, you will reimburse the client for the savings that result. Since you would probably prefer to avoid all risks related to currency fluctuation anyway, you might as well agree to the client's suggestion. I have also seen client contracts and disclaimers that are vague and simply state, "The agency is not responsible for currency fluctuations." Whether such a clause entitles the agency to pass on the additional cost is debatable, so you probably need to have a clearer and more specific sentence, such as, "The agency reserves the right to adjust the final price to reflect adverse currency fluctuations from the date the contract was signed." If the client refuses to agree to any such clause and you do not want to take currency risks in the future, you can enter into a contract with a bank or currency trading company, under which you agree to purchase euros a year from now at an established price. Major tour operators engage in this practice. You will pay a premium, but you can build that premium into the trip price. Alternatively, you could buy currency futures contracts through licensed financial institutions, subject to applicable securities regulations and risk disclosure requirements.
