Under what circumstances might Embassy Suites seek actual damages in lieu of the termination fee?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
- 13.5 Actual Damages Under Special Circumstances. [SELECT FOR ALL BRANDS EXCEPT CI, OL: You acknowledge that the Liquidated Damages described in Subsection 13.4 may be inadequate to compensate us for additional harm we may suffer, by reason of greater difficulty in re-entering the market, competitive damage to the System or the Network, damage to goodwill of the Marks, and other similar harm, as we reserve the right to seek actual damages in lieu of Liquidated Damages under the following circumstances: [SELECT FOR CI, OL: You agree that we may elect to seek actual damages in lieu of the Termination Fee under Section 13.4 above, in our sole and absolute discretion, under the following circumstances:
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, Embassy Suites may seek actual damages instead of the standard liquidated damages under specific circumstances. These circumstances involve situations where the pre-determined liquidated damages may not adequately compensate Embassy Suites for the harm suffered due to early termination of the franchise agreement.
Embassy Suites specifies that actual damages might be pursued if the company experiences greater difficulty in re-entering the market after the termination. This could occur if the franchisee's actions have significantly damaged the brand's reputation or market position. Additionally, if the franchisee's actions lead to competitive damage to the Embassy Suites system or network, Embassy Suites may opt to pursue actual damages. This could include scenarios where the franchisee operates a competing hotel nearby or takes actions that directly undermine the performance of other Embassy Suites locations.
Furthermore, Embassy Suites may seek actual damages if the goodwill of the brand's trademarks has been damaged. This could arise from issues such as consistently poor service, failure to meet brand standards, or other actions that negatively impact the public's perception of Embassy Suites. By reserving the right to seek actual damages, Embassy Suites aims to protect its brand and system from potential harm caused by franchisee actions that go beyond the scope covered by the standard liquidated damages.