Who is responsible for Chargebacks and other fees arising from fraudulent activity processed through a Crowne Plaza franchisee's Merchant Systems and/or Merchant Account?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
You are responsible for all Chargebacks, Third Party Based Fees, Servicers Fees, and other amounts arising from fraudulent activity processed through your Merchant Systems and/or your Merchant Account (regardless of any AVS response that you receive).
You are exclusively responsible for: (a) all activity and transactions (including fraudulent activity and fraudulent transactions) that occur in connection with your Merchant Account or through your Merchant Systems, regardless of whether such activity and transactions are undertaken by authorized personnel, unauthorized personnel, Merchant Providers, or other Third Parties; (b) ensuring that the Merchant Account and Merchant Systems, including any point-of-sale equipment, terminals, and gateways, are used in accordance with the Agreement and are secure; and (c) implementing appropriate controls to prevent your authorized personnel, your unauthorized personnel, and Third Parties from submitting credits, voids, and other transactions that are not bona fide transactions. For avoidance of doubt, you are exclusively responsible and liable for: (x) all transactions sent to us for processing through your Merchant Account or Merchant Systems (including fraudulent transactions); (y) all use of the Services; and (z) all related Servicers Fees, Third Party Based Fees, Chargebacks, and other amounts, whether arising from bona fide, unauthorized, or fraudulent activities or transactions.
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
According to Crowne Plaza's 2025 Franchise Disclosure Document, the franchisee is responsible for all chargebacks, third-party based fees, servicer fees, and other amounts arising from fraudulent activity processed through their merchant systems or merchant account. This responsibility applies regardless of any Address Verification Service (AVS) response received. This means that even if an AVS system indicates a transaction appears legitimate, the franchisee bears the financial risk if the transaction turns out to be fraudulent.
This allocation of risk places a significant burden on Crowne Plaza franchisees to implement robust fraud prevention measures. While the franchisor may offer security features like CAPTCHA, velocity filters, and AVS, the ultimate responsibility for preventing and absorbing the costs of fraud rests with the franchisee. The franchisee is also responsible for ensuring that any Merchant Providers they use also adhere to data security standards.
Furthermore, the FDD states that franchisees are exclusively responsible for all activity and transactions, including fraudulent ones, that occur in connection with their Merchant Account or through their Merchant Systems, regardless of whether such activity and transactions are undertaken by authorized personnel, unauthorized personnel, Merchant Providers, or other Third Parties. This includes all transactions sent for processing and all related servicer fees, third-party based fees, chargebacks, and other amounts, whether arising from bona fide, unauthorized, or fraudulent activities or transactions.
This comprehensive responsibility highlights the importance of due diligence in managing payment processing systems and selecting Merchant Providers. Franchisees should carefully evaluate the security measures offered by different providers and implement internal controls to minimize the risk of fraudulent transactions. They should also stay informed about current fraud trends and best practices for prevention to protect their business from financial losses due to fraudulent activity.