Created by UNITE HERE as a resource for anyone who franchises (or is considering franchising) hotels.
The RESTART Act would establish a new federal loan program, the proceeds of which can be used for franchise fees.[i] The American Hospitality and Lodging Association (AHLA) is supporting the bill.[ii]
Small businesses are the ones that really need support—not franchisors. See the article we wrote showing the big brands had over $11 billion in combined liquidity in March and April.
If passed, the legislation would help franchisors justify charging the same fees as they did before COVID-19. Instead, franchisors should reduce fees until the industry makes a full recovery.
Small businesses and hotel franchisees who are concerned about unfair franchise fees can contact AHLA about withdrawing their support.
[i] Text: S.3814 — 116th Congress (2019-2020). Section 3.g.2.I.. https://www.congress.gov/bill/116th-congress/senate-bill/3814/text#id8E2724015E3D40E69A2F48AC7FC43839.
[ii] Senator Todd Young’s website, “Support for the RESTART Act,” accessed 8/10/20. https://www.young.senate.gov/imo/media/doc/RESTART%20Act%20-%20List%20of%20supporters%20FINAL.pdf.
Ever wondered if other Courtyard franchisees got the same deal as you did? Now you can find out.
Below find ten executed Courtyard agreements for you to download and read. They may not necessarily still be in effect. We have a collection of other brands’ agreements too, so look back here for more in the coming weeks.
We did some of the work for you to compare some of the core terms. The agreements below are similar in the categories we explored, but not identical. One franchisee got a roughly quarter-square-mile restricted territory around their hotel, where Marriott agreed not to allow any new “System Hotels” for six and a half years.
The table below does not summarize every aspect of the agreements. The best way to compare the agreements to your own is to read them.
DISCLAIMER: This is a high-level summary of terms and is not intended to state the complete terms of the relevant franchise agreement. The reader should review each franchise agreement for complete and accurate information as to its terms.
- Courtyard Brownsville Franchise Relicensing Agreement
- Courtyard by Marriott Baltimore Relicensing Franchise Agreement 3.21.14
- Courtyard by Marriott Providence Relicensing Franchise Agreement 3.21.14
- Courtyard by Marriott Richmond North Glen Allen Franchise Agreement 7.31.06
- Courtyard College Station Franchise Agreement and Amendment Combined
- Courtyard Detroit Southfield WPS CY Detroit Franchise Agreement March 2013
- Courtyard Harrisonburg Franchise Relicensing Agreement
- Courtyard Santa Clarita Valencia Franchise Relicensing Agreement
- Courtyard Somerset Franchise Relicensing Agreement
- Courtyard Times Square West Franchise Agreement 2014
After thousands signed a petition about unfair franchise fees from Choice Hotels, a group of Choice franchisees filed a lawsuit in US District Court on June 12th.
The Wall Street Journal reported the lawsuit “claims the hotel company is burdening operators with inflated costs for goods and imposing duplicative fees to boost its own revenue.”[i]
If you have any information you’d like to share about your own experience, please get in touch with us through the “About” page of this website.
[i] Wall Street Journal, “Operators Sue Choice Hotels Over Supplier Program, Fees, Alleged Discrimination,” 6/15/20. https://www.wsj.com/articles/operators-sue-choice-hotels-over-supplier-program-fees-alleged-discrimination-11592235026#:~:text=A%20group%20of%20Choice%20Hotels,to%20boost%20its%20own%20revenue
The COVID-19 economic crisis in the hospitality industry means many owners are faced with an uncomfortable decision about whether to close their doors permanently. As you weigh the pros and cons, make sure you fully understand what your contract says about termination fees and liquidated damages—and how you could use them to your advantage.
Marriott earned $50 million in termination fees last year, but in the current climate owners may not be able to afford those fees, or could escape them in bankruptcy. Marriott stated in an April SEC filing, “Hotel owners or franchisees in bankruptcy may not have sufficient assets to pay us termination fees, other unpaid fees or reimbursements we are owed under their agreements with us.”
The brands know that pushing a franchisee into bankruptcy will cut off their own income. That could give franchisees some latitude in making requests for different forms of relief, such as proposing a temporary halt in franchise fees in exchange for paying some amount of termination fees in the event of a permanent closure—or vice versa, or a total waiver of termination fees in exchange for future loyalty when the market supports re-opening or new development.
Attached to this article is a copy of a guide to Marriott’s termination fees and liquidated damages, first posted in 2018.
 Marriott International, Inc. Business Update Conference Call Transcript, March 19, 2020, Page 4, https://marriott.gcs-web.com/static-files/791fabc1-9897-4fff-a426-69027af1edcc
 Marriott Prospectus Supplement, 4/15/20, page S-7. https://www.sec.gov/Archives/edgar/data/1048286/000119312520108217/d915944d424b5.htm
This article explores three important contractual and statutory provisions related to franchise fee relief during the COVID-19 economic crisis. Two are franchise contract clauses: a force majeure clause, and a Business Interruption insurance clause. The third is the “impracticability” provision of the Uniform Commercial Code. This article is not intended to provide legal advice, and franchisees are encouraged to explore their options with the guidance of an attorney.
Force Majeure clause
Some contracts contain a Force Majeure—“Act of God”—clause that excuses one or both parties from performing their obligations when an event occurs that is beyond the ability of either party to control and makes performance of the contract impossible. These clauses sometimes enumerate the covered circumstances; common inclusions are acts of terrorism, natural disasters, acts of government or war, and strikes or labor disputes.
If “epidemic” or “pandemic” are not mentioned in the clause, state law varies as to whether the clause can still be invoked. Law firm Akerman LLP published an article outlining force majeure clauses in the context of the COVID-19 economic turmoil, including variations in relevant state law.
The article stated, “Businesses seeking to invoke the force majeure clause of their contracts likely have a strong argument that the coronavirus outbreak is an unforeseen event, unless the parties entered into the contract after the outbreak of coronavirus.” In order to invoke a force majeure clause, a contracting party must also demonstrate that performance under the contract is impossible, and the precise scope of this standard varies by state.
Business Interruption Insurance
Hotel franchise contracts often require a hotel owner to maintain certain types of insurance, sometimes including business interruption insurance. Depending on how the clause is written, if the pandemic is covered by business interruption insurance, the clause may limit your fees to the amount of proceeds from the payout of an insurance claim.
One such clause in a 2013 Aloft hotel’s franchise agreement reads:
Business Interruption. If the operation of the Hotel is interrupted, Owner shall nevertheless pay to Starwood Companies all fees and other amounts that would be due to them under this Agreement had such interruption not occurred, regardless of whether any business interruption insurance proceeds are available to Owner to cover such amounts. All amounts payable to Starwood Companies shall be calculated based on then-accepted practices in the hotel and insurance industries for such matters. However, if the business interruption insurance obtained by Owner satisfied the Insurance Requirements, Owner’s obligation to pay License Fees shall be limited to the insurance proceeds Owner receives provided that Owner pursues its claim with diligence and good faith. (emphasis added)
Impracticability under the Uniform Commercial Code
The Uniform Commercial Code § 2-615 is titled “Excuse by Failure of Presupposed Conditions,” and franchisees having difficulty affording franchise-related fees and charges may want to ask an attorney if the code can provide relief.
The code states,
“Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance:
(a) Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.
(b) Where the causes mentioned in paragraph (a) affect only a part of the seller’s capacity to perform, he must allocate production and deliveries among his customers but may at his option include regular customers not then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.
(c) The seller must notify the buyer seasonably that there will be delay or non-delivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.”