What factors influence how Crowne Plaza adjusts the amount in the Reserve Account?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
You expressly authorize us to establish a Reserve Account pursuant to the terms and conditions set forth in this Section 13. The amount of such Reserve Account shall be set by us and may be adjusted by
us from time to time, in our sole discretion, based upon your processing history and the potential risk of loss to us as we may determine from time to time.
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
According to Crowne Plaza's 2025 Franchise Disclosure Document, the amount of the Reserve Account is determined by Crowne Plaza and may be adjusted at their discretion. These adjustments are based on a franchisee's processing history and the potential risk of loss to Crowne Plaza. This means that if a franchisee has a history of frequent errors, chargebacks, or other issues that could lead to financial losses for Crowne Plaza, the franchisor may increase the amount held in the Reserve Account to mitigate these risks.
For a prospective Crowne Plaza franchisee, this implies that maintaining a clean processing history is crucial to avoid higher reserve requirements. A higher Reserve Account balance means that more of the franchisee's funds are held by Crowne Plaza, reducing the capital available for operating and growing the business. Franchisees should, therefore, focus on efficient and accurate transaction processing to minimize the perceived risk of loss to Crowne Plaza.
The Reserve Account can be fully funded immediately in instances of fraud, suspected fraud, an Event of Default, or if any party provides notice of termination of the Agreement. Otherwise, funding can occur upon three days' notice for any other reason. The Reserve Account may be funded through debits to the franchisee's Settlement Account, collection of payments otherwise due to the franchisee, or with Crowne Plaza's consent, the franchisee's delivery of a letter of credit.
Crowne Plaza will hold any Reserve Account for the greater of ten months after termination of the Agreement, or for as long as is consistent with their liability for card transactions and chargebacks, in accordance with Card Organization Rules. Unless specifically required by law, the franchisee is not entitled to interest on any funds held in a Reserve Account. Crowne Plaza may collect Servicers Fees, Third Party Based Fees, Chargebacks, and other amounts arising in connection with the Agreement from the Reserve Account.