If Embassy Suites terminates the Franchise Agreement in Minnesota, what damages is the franchisee liable for?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
- Minnesota Statutes, Sections 80C.21 and Minnesota Rule 2860.4400J prohibit Franchisor from requiring Franchisee to consent to liquidated damages, termination penalties or judgment notes. Subsection 13.4 of the Franchise Agreement is hereby deleted in its entirety and replaced with the following:
"Damages Upon Termination By Us. If we terminate the Agreement under Subsection 13.1 or 13.2 above, you acknowledge your default will cause substantial damage to us. You therefore agree that if we terminate this Agreement, the termination will not be our sole remedy, and you will also be liable to us for all damages and losses we have suffered arising from the early termination of this Agreement to the same extent as if you had improperly terminated the Agreement. You also agree that you will remain liable for all other obligations and claims under this Agreement, including obligations following termination under Subsections 13.6, 9.6, 10.3 and Section 14 and other damages suffered by us arising out of your breach or default."
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, Minnesota franchisees are subject to specific regulations regarding damages upon termination. The standard franchise agreement contains a subsection (13.4) outlining damages the franchisee must pay if Embassy Suites terminates the agreement due to the franchisee's default. However, Minnesota law modifies this provision to protect franchisees.
Specifically, Minnesota Statutes prohibit Embassy Suites from requiring franchisees to consent to liquidated damages or termination penalties. Therefore, the standard Subsection 13.4 of the Franchise Agreement is replaced with a modified version for Minnesota franchisees. This revised subsection states that if Embassy Suites terminates the agreement due to the franchisee's default, the franchisee acknowledges that this default will cause substantial damage to Embassy Suites.
Consequently, the franchisee is liable to Embassy Suites for all damages and losses suffered due to the early termination, equivalent to the damages Embassy Suites would incur if the franchisee had improperly terminated the agreement. The franchisee remains responsible for all other obligations and claims under the agreement, including obligations following termination as detailed in Subsections 9.6, 10.3, 13.6, and Section 14, as well as any other damages suffered by Embassy Suites due to the franchisee's breach or default. This means that while liquidated damages are prohibited, the franchisee is still responsible for actual damages proven to have been incurred by Embassy Suites.