What are the specific obligations of a Crowne Plaza franchisee regarding the maintenance of standards and specifications, as mentioned in Item 8, and how do these relate to the franchisee's obligations regarding the payment of royalty fees?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
SERVICES**
Except as described below, you are not required to purchase or lease products or services from Holiday or its affiliates, or from suppliers approved by Holiday, or under Holiday's specifications.
Standards and Specifications:
You must build, design, furnish, equip, decorate and supply the hotel subject to Holiday's approval of your plans. You must equip and operate the Hotel with products which meet the Standards and specifications, including those described in the License and the Standards for the applicable Crowne Plaza Hotel brand. All modernization, renovation and upgrading of your Hotel must also meet the Standards and specifications. Holiday issues specifications by brand of product and in many instances by brand "or equivalent", by physical characteristics and by other methods, depending on the product or service involved. Holiday can make changes to the Standards. These changes will become binding on you as if originally set forth in the Standards. Any change Holiday makes must be approved by Holiday's designated internal franchise committee or subcommittee, after seeking the advice and counsel of the appropriate committee of the IHG Owners Association. Holiday will provide you with an explanation of any change, in writing, at least 30 days before it goes into effect.
Holiday estimates that the Standards and specifications will apply to 90% to 95% of your purchases and leases. If you purchase or lease any equipment or supplies not previously approved by Holiday, Holiday may require you or the manufacturer to submit a written request for its approval. Holiday reserves the right to require removal of any non-approved product installed at the Hotel. While Holiday has no obligation to respond within a certain time frame, it expects to do so within 45 to 60 days from receipt of your request. Holiday may require certain information, tests, certifications and inspections, at no expense to Holiday, as a condition of approval.
All Crowne Plaza brand group hotels must install in all guestrooms the approved bedding components that comply with the Crowne Plaza Bedding Collection. To ensure brand-wide consistency of the sleep experience, you must purchase mattresses and pillows through the approved suppliers. You must purchase the brand-mandated components (for example duvets and sheets) through the IHG approved distributors.
Under the Crowne Plaza Bulk Bath Amenity Program, all Crowne Plaza brand group hotels must install in all guestrooms the approved bath components that comply with the Guest Bathroom and Supplies and Amenities standards and the IHG Journey to Tomorrow initiative. Approved IHG suppliers have been identified for Crowne Plaza bath amenities. To ensure brand-wide consistency of quality, look and feel, you must purchase the Crowne Plaza bath amenities and bulk amenity brackets from the specified vendors. Under the Crowne Plaza Fitness Center program, all Crowne Plaza brand group hotels must install the fitness center design elements outlined in the section of the Standards regarding fitness centers. Additionally, approved equipment vendors have been identified and all equipment purchases must go through one of the three approved vendors outlined in the section of the Standards regarding fitness centers. Lastly, minimum fitness center square footage requirements which must be adhered to are also outlined in the section of the Standards regarding fitness centers. All plans must be submitted to the IHG PIP and Plan Review team at amerplanreview@ihg.com for review and approval prior to ordering any equipment or design elements.
What This Means (2025 FDD)
According to the 2025 Crowne Plaza FDD, franchisees must adhere to strict standards and specifications in building, designing, furnishing, equipping, decorating, and supplying their hotels. These standards are subject to Holiday's approval, and all modernization, renovation, and upgrading must also meet these specifications. Holiday can change these standards, which become binding on the franchisee after a 30-day written notice, following approval by Holiday's internal franchise committee and advice from the IHG Owners Association committee. These standards apply to an estimated 90% to 95% of the franchisee's purchases and leases. Failure to comply with these standards can lead to the requirement to remove non-approved products and, in cases of design work by unqualified individuals, can result in a Plan default fee of up to $5,000.
Specific examples of these standards include the Crowne Plaza Bedding Collection, where franchisees must purchase mattresses and pillows through approved suppliers and brand-mandated components through IHG-approved distributors. Similarly, the Crowne Plaza Bulk Bath Amenity Program requires franchisees to install approved bath components and purchase bath amenities and bulk amenity brackets from specified vendors. The Crowne Plaza Fitness Center program mandates specific fitness center design elements and equipment purchases through approved vendors, along with adherence to minimum square footage requirements. All plans must be submitted to the IHG PIP and Plan Review team for approval before ordering any equipment or design elements. Franchisees are also required to hire qualified, licensed professional advisors with hotel experience for building or renovating a Crowne Plaza hotel, with architects and interior designers subject to Holiday's approval.
The FDD excerpts do not explicitly link the maintenance of standards and specifications to the payment of royalty fees. However, the document does state that franchise royalty fees are typically charged as a percentage of hotel gross rooms revenues. While not directly stated, it can be inferred that maintaining brand standards and high-quality facilities would positively impact guest satisfaction and, therefore, gross rooms revenue, which directly affects the royalty fees paid to Crowne Plaza. Furthermore, failure to adhere to standards could result in penalties or defaults, indirectly affecting the franchisee's financial obligations.
While the FDD does not provide a direct contractual link between adherence to standards and royalty fees, franchisees should recognize that maintaining brand standards is crucial for attracting and retaining guests, which ultimately impacts revenue and, consequently, royalty payments. Prospective franchisees should seek clarification from Crowne Plaza regarding any specific performance metrics or quality standards that directly influence royalty fee calculations or potential penalties for non-compliance.