Are liquidated damages provisions enforceable in the Embassy Suites Franchise Agreement?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
osed by Minnesota Statutes 1973 Supplement, sections 08C.01 to 80C.22, as amended, which also provides that the voluntary settlement of disputes is not barred."
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- Section 16.11 is amended to delete subsections 16.11.1 and 16.11.2.
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- Minn. Rule 2860-4400J prohibits waiver of a jury trial. Subsection 17.1 of the Franchise Agreement is deleted in its entirety.
[INSERT FRANCHISEE ENTITY], a [INSERT TYPE OF ENTITY] HILTON FRANCHISE HOLDING LLC, a Delaware limited liability company Title: Authorized Signatory Executed on:
NEW YORK ADDENDUM TO FRANCHISE AGREEMENT
Notwithstanding anything to the contrary set forth in the Franchise Disclosure Document or Franchise Agreement, the following provisions will supersede and apply to all franchises offered and sold under the laws of the State of New York:
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- Subsection 9.6 of the Franchise Agreement requiring you to consent to the entry of an injunction is amended to provide that you consent to the seeking of such an injunction.
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- Subsection 16.8 is amended to provide that no release language set forth in the Franchise Agreement will relieve Franchisor or any other person, directly or indirectly, from liability imposed by the laws of the State of New York concerning franchising.
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- Section 16.11 is amended to delete subsections 16.11.1 and 16.11.2.
[INSERT FRANCHISEE ENTITY], a [INSERT TYPE OF ENTITY] HILTON FRANCHISE HOLDING LLC, a Delaware limited liability company Title: Authorized Signatory Executed on:
NORTH DAKOTA ADDENDUM TO FRANCHISE AGREEMENT
Notwithstanding anything to the contrary set forth in the Franchise Agreement, the following provisions shall supersede and apply to all franchises offered and sold in the State of North Dakota:
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- Subsection 16.2.1 is amended to provide that the laws of the State of North Dakota supersede any provisions of the Franchise Agreement, the other agreements or New York law if such provisions are in conflict with North Dakota law. The Franchise Agreement will be governed by North Dakota law.
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- Subsection 16.2.2 is amended to provide that any provision in the Franchise Agreement which designates jurisdiction or venue or requires the Franchisee to agree to jurisdiction or venue, in a forum outside of North Dakota, is deleted.
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- The Franchise Agreement is amended to reflect that all liquidated damages provisions in the Franchise Agreement are deleted in their entirety. Further, Subsection 13.4 of the Franchise Agreement is replaced by 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.
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, the enforceability of liquidated damages provisions within the franchise agreement is subject to certain state laws. Specifically, addenda for North Dakota, California, and Minnesota modify the standard agreement regarding liquidated damages.
In North Dakota, all liquidated damages provisions are deleted entirely from the Embassy Suites Franchise Agreement. Instead, if Embassy Suites terminates the agreement due to the franchisee's default, the franchisee is liable for all damages and losses suffered by Embassy Suites as a result of the early termination, as if the franchisee had improperly terminated the agreement.
For California, if the liquidated damages clause in the Embassy Suites Franchise Agreement is inconsistent with California Civil Code Section 1671, it may be unenforceable. Similarly, Minnesota law prohibits Embassy Suites from requiring a franchisee to consent to liquidated damages or termination penalties. Consequently, the standard liquidated damages clause is replaced with a provision holding the franchisee liable for all damages and losses resulting from early termination if Embassy Suites terminates the agreement due to the franchisee's default. Therefore, prospective Embassy Suites franchisees should be aware that the enforceability and specific terms of liquidated damages can vary significantly based on the state in which the franchise operates.