What rights does Crowne Plaza have regarding amounts due to a franchisee in the event of bankruptcy?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding anything to the contrary set forth in the above License Agreement ("License"), the following provisions shall supersede and apply to each License for an Crowne Plaza, Crowne Plaza Suites, and Crowne Plaza Resort issued in the State of California:
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- In accordance with the provisions under the U.S. Bankruptcy Code (11 U.S.C.A. Sec. 101 et seq.), paragraphs 11.C(1)(b) and (d) of the License shall be amended to include the following language: "Enforceability of this provision is a matter governed by the US Bankruptcy Code and enforceability or nonenforceability is subject to that law and rulings of a court of competent jurisdiction."
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
According to the 2025 Crowne Plaza Franchise Disclosure Document, the franchisor's rights regarding amounts due from a franchisee in the event of bankruptcy are subject to the U.S. Bankruptcy Code. Specifically, for franchises issued in California, Hawaii, Maryland, and Virginia, amendments to the license agreement clarify that the enforceability of certain provisions related to franchisee obligations under paragraphs 11.C(1)(b) and (d) of the license is governed by the U.S. Bankruptcy Code. This means that the bankruptcy court and the laws governing bankruptcy will ultimately determine the extent to which Crowne Plaza can enforce these provisions.
This amendment acknowledges that federal bankruptcy laws take precedence over the standard terms outlined in the Crowne Plaza license agreement. A prospective franchisee should understand that certain clauses related to their financial obligations or Crowne Plaza's rights might be limited or unenforceable if the franchisee declares bankruptcy. The franchisor is essentially recognizing the supremacy of federal law in these specific circumstances.
For a potential Crowne Plaza franchisee, this information highlights the importance of understanding bankruptcy law and how it could impact their franchise agreement. It suggests that franchisees should seek legal counsel to fully grasp their rights and obligations in the event of financial distress leading to bankruptcy. While the franchise agreement sets out the initial terms, the U.S. Bankruptcy Code ultimately dictates the enforceability of those terms if a franchisee enters bankruptcy proceedings.