Does the Even Hotels agreement specify any limitations on the Company's right to offset funds?
Even_Hotels Franchise · 2025 FDDAnswer from 2025 FDD Document
- 5.8 Secured Financial Accommodations. The Agreement is a contract whereby we are extending secured financial accommodations to you within the meaning of Section 395(c) of the U.S. bankruptcy code.
Your right to receive any amounts due or to become due from us is expressly subject and subordinate to Chargeback, recoupment, setoff, lien, security interest and our rights to withhold settlement funds under the Agreement, without regard to whether such Chargeback, setoff, lien, security interest and the withholding of settlement funds rights are being applied to claims that are liquidated, unliquidated, fixed, contingent, matured or unmatured.
Source: Item 23 — RECEIPTS (FDD pages 99–438)
What This Means (2025 FDD)
According to the 2025 Even Hotels Franchise Disclosure Document, Even Hotels has rights regarding setoff, recoupment, and withholding settlement funds. The agreement specifies that the franchisee's right to receive amounts due from Even Hotels is subject to chargeback, recoupment, setoff, liens, security interests, and the right to withhold settlement funds. These rights apply regardless of whether the claims are liquidated, unliquidated, fixed, contingent, matured, or unmatured. This indicates Even Hotels can offset funds owed to the franchisee under a broad range of circumstances.
This clause means that Even Hotels has considerable latitude to reduce payments to the franchisee if the franchisee owes money to Even Hotels for any reason. This could include chargebacks from customer transactions, recoupment of overpayments, or any other financial obligations. The franchisee's ability to dispute these offsets may be limited, as the agreement subordinates the franchisee's payment rights to Even Hotels' rights of setoff and recoupment.
For a prospective Even Hotels franchisee, this highlights the importance of understanding all potential financial obligations to the franchisor and maintaining meticulous records to reconcile payments. Franchisees should be aware that Even Hotels has significant power to offset payments, which could impact their cash flow. It would be prudent for a potential franchisee to seek legal counsel to fully understand the implications of this clause and negotiate for clearer definitions of the circumstances under which offsets can be applied.