For what liabilities is the Crowne Plaza client responsible regarding card transactions submitted by unapproved assignees or following an unapproved Material Change?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
- 11.3 Responsibility for Transactions. You are liable to us for all Chargebacks, Servicers Fees, Third Party Based Fees, and other liabilities arising in connection with: (a) any Card transactions submitted to us for processing by any assignee or transferee of the Agreement (or any part of the Agreement) not previously approved as such by us; and (b) any Card transactions submitted to us following any Material Change not previously approved by us in writing. We may collect amounts owed under this Section 11.3 by setting off or recouping against settlement funds, debiting your Settlement Account, debiting a Reserve Account, or in any other manner we are permitted to collect any other amounts under the Agreement.
- 11.4 Assignment of Right to Receive Settlement Proceeds by Client. You may not enter into any agreement that would require the transfer of any payments or proceeds from Card transactions covered by the Agreement to the custody or control of any Third Party. You may not assign the right of payment under the Agreement to any Third Party. In the event that you make an assignment (or provide a security interest) of receivables covered by the Agreement, then we may, at
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
According to the 2025 Crowne Plaza Franchise Disclosure Document, a franchisee is liable for specific financial obligations if they fail to obtain approval for certain business changes or transfer their agreement without consent. Specifically, Crowne Plaza holds the franchisee responsible for all Chargebacks, Servicers Fees, Third Party Based Fees, and other liabilities related to card transactions under two conditions. The first is if card transactions are submitted for processing by an assignee or transferee of the agreement that Crowne Plaza has not previously approved. The second is if card transactions are submitted following any Material Change that Crowne Plaza has not previously approved in writing.
Material Changes include events like a change in control, merger, liquidation, or a transfer/sale of substantially all assets. It also encompasses any change that could significantly impact the products or services sold, payment acceptance procedures, or the fulfillment of obligations to cardholders. This means a Crowne Plaza franchisee needs to seek approval from the franchisor before making significant alterations to their business operations or transferring ownership.
Crowne Plaza has the right to collect these amounts owed by offsetting or recouping against settlement funds, debiting the franchisee's Settlement Account, debiting a Reserve Account, or through any other method permitted in the agreement. This highlights the importance of adhering to the agreement's terms regarding assignments and material changes, as failure to do so can result in direct financial liabilities for the franchisee. The franchisee bears the risk of financial losses stemming from transactions processed under unapproved circumstances, emphasizing the need for proactive communication and compliance with Crowne Plaza's requirements.
This clause protects Crowne Plaza from financial risks associated with unapproved changes to the franchise operation or unauthorized transfers of the agreement. It ensures that the franchisor maintains control over who operates a Crowne Plaza franchise and how it's run, safeguarding the brand's reputation and financial interests. For a prospective franchisee, this underscores the importance of understanding and adhering to the terms of the franchise agreement, particularly those related to assignments and material changes, to avoid potential financial liabilities.