For Caption By Hyatt, what is the impact of a casualty on the calculation of 'Average Monthly Revenue'?
Caption_By_Hyatt Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding the foregoing, if "Average Monthly Revenues" as determined pursuant to any part of (a) through (c) above has been materially and negatively impacted during the preceding twelve (12) full calendar month period by a disruption in Hotel operations resulting from Force Majeure, casualty, suspension of operations (whether or not consented to by Hyatt), renovation of the Hotel, or any other similar circumstances, "Average Monthly Revenue" shall be determined by reference to the most recent twelve (12) full calendar month period preceding termination during which the Hotel performance was not so impacted.
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to Caption By Hyatt's 2025 Franchise Disclosure Document, the calculation of 'Average Monthly Revenues' can be adjusted if hotel operations are negatively impacted by a casualty. Specifically, if a casualty materially and negatively impacts the 'Average Monthly Revenues' during the preceding twelve full calendar months, the calculation will reference the most recent twelve-month period before the impact. This adjustment ensures that the average monthly revenue reflects a period of normal operation, rather than one skewed by disruptive events.
This provision is important for prospective Caption By Hyatt franchisees because it affects how liquidated damages are calculated if the franchise agreement is terminated early. The document specifies that liquidated damages are based on the 'Average Monthly Revenue' multiplied by certain percentages to account for lost future royalty fees (5%) and system services charges (3.5%). If a casualty has temporarily lowered the hotel's revenue, using a more representative period for calculating 'Average Monthly Revenue' can lead to a fairer assessment of damages.
For example, if a fire significantly reduces hotel occupancy for several months, the 'Average Monthly Revenue' during that period would be lower than usual. By using a prior twelve-month period without such impact, the liquidated damages calculation would be based on a more accurate reflection of the hotel's potential revenue. This adjustment protects both the franchisee and Caption By Hyatt by ensuring that the financial implications of early termination are based on a realistic revenue baseline, rather than a temporarily depressed one.