For Caption By Hyatt, what is the impact of a renovation of the Hotel 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 the 2025 Caption By Hyatt Franchise Disclosure Document, a renovation of the hotel can impact the calculation of 'Average Monthly Revenue.' If the hotel's operations are disrupted due to a renovation, and this disruption materially and negatively impacts the 'Average Monthly Revenues' during the preceding twelve full calendar months, the 'Average Monthly Revenue' will be determined by referencing the most recent twelve-month period before the disruption occurred. This adjustment ensures that the calculation reflects a period when the hotel's performance was not negatively affected by the renovation.
This provision protects both Caption By Hyatt and the franchisee by ensuring that financial calculations, such as those used to determine royalty fees or liquidated damages, are based on a more representative period of normal operation. For example, if a renovation significantly reduces revenue for six months, those months would be excluded from the 'Average Monthly Revenue' calculation, preventing an artificially low average from being used. This is particularly important when calculating potential lost future revenue in the event of early termination, as outlined in Section 16.5, which references 'Average Monthly Revenue' in determining liquidated damages.
For a prospective Caption By Hyatt franchisee, this clause offers a degree of financial security. If renovations are necessary, the franchisee won't be penalized with lower revenue averages due to temporary disruptions. Instead, the calculation will revert to a period of normal operation, providing a fairer assessment of the hotel's potential revenue. This also encourages franchisees to invest in necessary upgrades and renovations without fearing long-term financial repercussions from short-term operational disruptions. This approach is fairly standard in the hotel franchising industry, as renovations are a common part of maintaining brand standards and property value.