Is the Crowne Plaza franchisee required to maintain a capital reserve for the hotel?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
O. Capital Reserve; Capital Reinvestment and Renovation Cycles.
- (1) IHG may require Licensee to establish a capital reserve ("Capital Reserve") in an amount not in excess of 5% of Gross Revenue annually to be used for capital expenditures and the upgrading of the Hotel, including the renovation of public areas, guest rooms, guest room corridors, and the replacement of FF&E.
IHG shall give Licensee no less than ninety (90) days' notice of imposing such requirement to establish a Capital Reserve, as the same may be established or changed by IHG from time to time.
In such event, Licensee must establish a Capital Reserve account funded monthly in a bank selected by Licensee.
Licensee shall make expenditures from such account for the purposes hereinbefore specified in accordance with IHG's requirements.
Licensee acknowledges that the Capital Reserve may not be sufficient to maintain the Hotel as a first-class facility in accordance with the Standards, and Licensee shall promptly provide any necessary additional funds to meet IHG's product quality and consumer quality requirements; as well as Licensee's renovation obligations specified herein.
- (2) Throughout the License Term, regardless of whether IHG has required Licensee to establish a Capital Reserve, Licensee must complete significant renovations of the Hotel, including, but not limited to, the public areas, guest rooms, and guest room corridors in order to maintain the Hotel as a first-class facility.
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
According to the 2025 Crowne Plaza Franchise Disclosure Document, IHG (InterContinental Hotels Group) may require franchisees to establish a capital reserve. This capital reserve cannot exceed 5% of the hotel's gross revenue annually. The funds within this reserve are specifically designated for capital expenditures and upgrading the hotel, including renovations of public areas, guest rooms, corridors, and replacement of furniture, fixtures, and equipment (FF&E). IHG must provide at least 90 days' notice before imposing or changing this capital reserve requirement.
If IHG requires a capital reserve, the franchisee must establish a dedicated account at a bank of their choosing, funding it monthly. Expenditures from this account must align with IHG's requirements for the specified purposes. However, the FDD clarifies that the capital reserve might not always be sufficient to maintain the hotel at a first-class standard according to IHG's standards.
Regardless of whether a capital reserve is mandated, Crowne Plaza franchisees are obligated to complete significant renovations throughout the license term to maintain the hotel's first-class condition. These renovations include public areas, guest rooms, and corridors. This ensures that all Crowne Plaza hotels maintain a consistent standard of quality and appearance, regardless of whether a capital reserve is in place.