What happens to the equipment lease if the Crowne Plaza Agreement is terminated?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
If you have an equipment lease, termination of the Agreement does not terminate that equipment lease.
If you have rented equipment from us, termination of the Agreement does not relieve you of your obligation to make rental payments until the rented equipment is paid for in full or returned to us.
Unless otherwise agreed in writing, the Equipment will also include, where applicable, all permanent merchandising, menu boards, refrigeration units, ice makers and water filtration equipment installed by Company on Equipment Lessee's premises.
Each piece of Equipment is leased commencing on its installation date (the "Commencement Date").
Equipment Lessee may request the removal of any Equipment upon thirty (30) days prior written notice to Company, and in addition, Company may remove any piece of Equipment for any reason upon thirty (30) days prior written notice to Customer.
Removal of Equipment will not affect the term of any agreement between the parties.
If this Lease is terminated with respect to any piece of Equipment for any reason, other than Company removing a piece of Equipment without cause under this section, prior to 100 months from the Commencement Date for that piece of Equipment, Equipment Lessee will pay Company the actual cost of removal (including standard shipping and handling charges) and remanufacturing of that Equipment, as well as the unamortized portion of the costs of (i) installation, (ii) non-serialized parts (e.g., pumps, racks and regulators) and other ancillary equipment.
Collectively, removal costs and items (i) and (ii) are referred to as "unbundling costs." The terms of this Lease will continue in effect with respect to each piece of Equipment until the Equipment has been removed from Equipment Lessee's premises and will survive the expiration or termination of any agreement into which this Lease is incorporated.
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
According to Crowne Plaza's 2025 Franchise Disclosure Document, the termination of the franchise agreement does not automatically terminate any existing equipment lease. The franchisee remains obligated to fulfill the terms of the equipment lease, which includes continuing rental payments until the equipment is either fully paid for or returned to Crowne Plaza. This means that even if the franchise agreement ends, the financial responsibility for the leased equipment continues.
Furthermore, if the equipment lease is terminated before 100 months from the installation date, and the termination is not due to Crowne Plaza removing the equipment without cause, the franchisee is responsible for the actual cost of removal, including shipping and handling, as well as the cost of remanufacturing the equipment. The franchisee will also be responsible for the unamortized portion of the costs of installation, non-serialized parts, and other ancillary equipment. These costs are collectively referred to as "unbundling costs."
These terms ensure that Crowne Plaza is protected against losses associated with early termination of equipment leases. The terms of the lease will remain in effect until the equipment is removed from the franchisee's premises, even after the franchise agreement has expired or been terminated. This could represent a significant financial obligation for a former Crowne Plaza franchisee, especially if the equipment is relatively new or expensive to remove and remanufacture.
Prospective franchisees should carefully evaluate the terms of the equipment lease, including the costs associated with early termination, before entering into a franchise agreement with Crowne Plaza. Understanding these obligations is crucial for assessing the overall financial risk and potential liabilities associated with the franchise.