Written By: Tom Ogg
Once you have developed a group leader the first thing there is to do is to have a written and signed agreement that spells out the details of the understanding between the group leader and you.
There is no fixed industry agreement so you will have to create your own to fit your specific needs. The best way to do this is to do your best to forge your own agreement and then take it to an business law attorney to put a professional legal format to it.
Every state in the U.S. has different laws that might affect the validity of the agreement and its enforceability. Here are sections to the agreement that you should consider.
Parties to the Agreement
Who is the agreement between? Once again you need to make sure you understand the authority of the potential group leader. If the agreement is being entered into by an organization, be sure the person signing has the authority to legally bind the organization.
Here is information you should capture in this section. The group leader’s formal name. This should match their passport. Their complete address, telephone numbers, email address, Social Media sites and any other contact information you might need. You should also get their social severity number (or EIN) in case you need to send them a 1099 later.
Description of Group Tour or Cruise
This is where you would describe what is being delivered with the group space. The best way to accomplish this is to attach a brochure of the tour and attach it to the agreement as “Attachment A”. Be as specific as you need to make sure there is complete understanding of the inclusions of the group event. Also, make sure that your group leader signs and dates the attachment.
Since you will be under contract for the group apace that you are marketing, you should always set option and payment dates 10 to 15 days in advance of their actual due date. More than one agency has been stuck by having the payment dates the same as contract date with the supplier.
I well remember we had a booking at Kona Village Resort for a wedding group of 40 people that an agency had booked with us. She had made the deposit on her credit card. When the final was due she couldn’t contact the booking party. She then went silent until I finally reached her at her home at night.
She swore the group was going and just needed a few more days to finalize it. Of course, the wedding was off and the group did not travel. Since we had the cushion between her final date and our contract date, we escaped without penalty. But, for the agent, it was an extremely costly mistake.
Group Leader Deposit
The agreed upon deposit and the deposit terms and conditions should go here. The status of the deposit should be clearly spelled out so that when it comes time to disburse it it is crystal clear as to what is going to happen.
Is it refundable if the group doesn’t materialize? What if the group falls short of the minimum number? The deposit is meant to protect you in case of events that might unexpectedly occur and should cover 100% of your exposure.
Individual Passenger Deposits
Each specific group departure should have its own trust account that the group leader may deposit funds into directly. This is where you would spell out the details of how the deposit will be made. Since there will potentially be cash, check or credit card you should spell out the process in its entirety. A key consideration is whether you are going to allow deposits to be made on the group leader’s credit card. This is normally a poor choice.
What will happen to the deposits in case the group fails should also be spelled out in great detail. Since the group leader’s deposit will cover your position, the passenger deposits should be immediately refunded upon final dissolution.
If there are going to be interim payments that will be made between the the initial deposit and the final payment the amount should be spelled out in detail. Again set at least 10 to 15 days between your passenger option date and your contract date.
Final Payment and Final Accounting
The final accounting and final payments should be executed at the same time. You should provide your group leader with the documents that you use and that are easily assimilated into your back office process for the final accounting. Obviously it should contain the passengers name and contact information, deposit amount and date, interim payment amount and date and final payment amount and date. This would be a minimum amount of information you should require, but every agencies backroom is different, so you should avoid using some sort of canned form for this effort.
Upon receiving the final accounting, you should verify all deposits and make sure that everything jives before moving forward on the liquidation of the group funds. Some group leaders will request that the trust account for the group require two signatures for money to be disbursed. This is normal, as they want to be just as sure that the money is sent to the right place and will want to also be signatory on the trust account. This protect them and their clients, as well.
Cancellation or Failure to Perform
You may, or may not want to include this element depending on how clearly your deposit clause is. If you are facing a heavy investment and potential damages if the group leader doesn’t perform, then that might signal its inclusion.
Group Leader’s Responsibilities.
The various group leader’s responsibilities should be thoroughly spelled out here. Refer to the tutorial on “Pied Pipers and Group Leaders to see the possibilities of what might be included here. But, suffice it to say that you want to document what your group leaders are responsible for.
You should also document your responsibilities so that everyone understands who is doing what to who.
Group Leader Remuneration
This is where you would document to agreement between you and the group leader in terms of free trip requirements and any incentive program. All details of what would happen in case the group fizzles, or grows beyond the anticipated block of space being help for the group. This should be extremely precise.
Some companies make it quite easy to take on the task of organizing groups and also can be quite rewarding without making too much of a financial commitment. Check out the YMT Vacations remuneration program as a potential model depending on what you business plan demands. Here is a link to it. https://www.ymtvacations.com/travel-free-group-leaderGroup Leader Marketing
Your agency marketing support should be spelled out clearly here. Most agencies provide an original copy of flyers, brochures and travel documents and the group leader would then generate what he needs for the group at his expense. You may want to detail the various elements that make up the marketing effort. Having a group specific website with the documents on it for the group will help the group leader immensely.
Group Review Dates
Don’t wait for the final accounting to see how it went schedule several review dates where the group leader provides you with the progress of the final accounting. Check to make sure the group leader is on track to fill the space. Set a critical review date and where the group leader should be in terms of signing new members for the group. You should try to help the group leader reach their full potential, but if it becomes obvious they are going to fall short you can amend the agreement to allow you to find a second group leader for the group to insure its success. This is not at all uncommon.
Because of the embedded variable marketing and operations allocation you will be able to easily invest in a second group leader.
Legal Mumble Jumble
Your attorney will add the legalese to your contract or agreement past this point which will vary state by state. Here are some things to consider.
Choice of Legal Venue
If you do not indicate the pre-chosen legal venue in the agreement then you may have a situation where you are located in San Diego and are being sued by a group leader that lice in Maine, in the state of Maine. You can easily see the disadvantages to this scenario. Elect a specific legal venue that is the most convenient to you and your attorney.
To Arbitrate, or Not to Arbitrate?
Many contracts use Arbitration clauses to avoid the cost of litigation. This is usually the case where the person choosing arbitration may have an attorney on retainer or fully employed by them. Here is the difference between arbitration and filing a lawsuit. Most disputes between group leaders and agencies fall way short of the small claims court maximum allowable amount that can be sued for. You should know this amount as it will make a difference in your decision to use arbitration, or not. Kentucky, as an example as a maximum limit for a suit of $2,500 while Georgia, Minnesota and North Dakota have $15,000 caps. Tennessee has a whopping $25,000 limit.
This is important because anyone can file a small claims action without using an attorney and for nominal filing fees. To make things worse small claims courts are notorious as being “the People’s Count” and judgements will normal be challenged in superior court which will cost a good amount of money.
On the other hand if arbitration is selected, the person filing the complaint will have to retain an attorney, which is a deterrent to filing as there must be funds invested to retain an attorney. Your attorney will advise you of the most prudent way to go.
You may also want to include an Indemnification clause depending on what kind of tours that you are going to operate. If your group leaders are taking groups into 3rd world nations on adventures that are riddled with risk, you certainly want your group leader to indemnify you against potential litigation.
Other Legal Considerations
Your attorney will certainly make suggestions on legalese for your agreement and you should listen to all of them. Since your attorney will be the one who defends you in any potential litigation, you should allow him or her to build the agreement for that purpose.