Does the Caption By Hyatt franchise agreement grant exclusive rights to the franchisee?
Caption_By_Hyatt Franchise · 2025 FDDAnswer from 2025 FDD Document
and obligation to use the Hotel System during the Term (defined below in Section 1.2) to build or convert, and operate, the Hotel at the Site in affiliation with the Proprietary Marks in accordance with this Agreement's terms.
- 1.2 Term. The term of this Agreement (the "Term") will commence on the Effective Date and expire without notice on the date which is twenty (20) years after the first (1st) day of the Opening Month, subject to its earlier termination as set forth in this Agreement.
- 1.3 Rights in Area of Protection During AOP Term. Subject to the one exception below, neither Hyatt nor any of its Affiliates will open and operate during the AOP Term, nor authorize any other party to open and operate during the AOP Term, any other Brand Hotels the physical premises of which are located within the Area of Protection. The one exception to this restriction is that, during the AOP Term, if Hyatt or any Affiliate acquires ownership of or the right to operate, manage, franchise or license (regardless of the form of transaction) another group of at least four (4) hotels, one (1) or more of which hotels are located or are under contract or construction to be located in the Area of Protection, then Hyatt and/or its Affiliates will have the unrestricted right to convert, or cause to be converted, the acquired hotel(s) within the Area of Protection from its (or their) original trade identity to operate in affiliation with the Proprietary Marks and the Hotel System, and thereafter to operate or authorize any other party to operate such hotel(s) as Brand Hotels, even if one (1) or more of the other acquired hotels, whether operating within or outside the Area of Protection, are not converted to Brand Hotels.
Franchisee's rights in the Area of Protection apply only during the AOP Term. Following the AOP Term, Franchisee will have no territorial rights or protection whatsoever, whether within or outside the Area of Protection, and Hyatt and its Affiliates may open and operate, and authorize
any other parties to open and operate, other Brand Hotels the physical premises of which are located within the Area of Protection, including pursuant to franchise applications submitted and/or franchise agreements and other agreements signed during the AOP Term.
- 1.4 No Other Restrictions. Except for the limited exclusivity provided in Section 1.3, Franchisee's rights under this Agreement are nonexclusive in all respects, the Hotel has no territorial protection whatsoever, and Hyatt and its Affiliates have the right without restriction to engage in any and all activities Hyatt and they desire (including with respect to any and all types of lodging facilities), at any time and place, whether or not using the Proprietary Marks or any aspect of the Hotel System, and whether or not those activities compete with the Hotel. Without limiting the foregoing, Franchisee acknowledges that Hyatt and its Affiliates currently operate other franchised and non-franchised systems for lodging facilities and other accommodations and hospitality affiliations that use different brand names, trademarks, and service marks, including those with the "Hyatt" name as part of their brand name, some of which might operate and have facilities in the Area of Protection during the AOP Term, that will compete directly with Franchisee.
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to the 2025 Caption By Hyatt Franchise Disclosure Document, the franchise agreement grants limited exclusivity to the franchisee within an Area of Protection (AOP) during the AOP Term. However, this exclusivity is subject to an exception: if Hyatt or its affiliates acquire a group of at least four hotels, they have the right to convert acquired hotels within the Area of Protection to operate under the Caption By Hyatt brand, even if other acquired hotels are not converted. This means that while Caption By Hyatt will not actively open new competing locations within the franchisee's protected area, they can convert existing hotels they acquire, potentially increasing competition. The AOP term length is not defined in the provided excerpts.
Beyond this limited exclusivity, the Caption By Hyatt franchise agreement explicitly states that the franchisee's rights are nonexclusive. Caption By Hyatt retains the right to engage in any activities they desire, including those that compete with the franchisee's hotel, at any time and place. This includes operating other franchised and non-franchised lodging facilities under different brand names, even those with the "Hyatt" name, which may compete directly with the franchisee during the AOP Term.
Caption By Hyatt and its affiliates may also use common systems (computer, administrative, reservation, purchasing) and personnel, and provide system services to other Hyatt Network Hotels and businesses, even if they compete with the franchisee. The franchisee has no right to pursue claims or damages resulting from these activities. This lack of broad exclusivity is a significant consideration for prospective franchisees, as it means they could face direct competition from other Hyatt-affiliated properties, impacting their potential revenue and market share.
Furthermore, the agreement includes a Right of First Offer, which may apply if Hyatt determines the site is in a strategic market. If this right is signed, it could further influence the competitive landscape. Prospective franchisees should carefully evaluate the implications of these non-exclusivity clauses and the potential for competition from other Hyatt-affiliated properties when considering a Caption By Hyatt franchise.