What constitutes an Event of Default related to card sales or chargebacks for an Even Hotels franchise?
Even_Hotels Franchise · 2025 FDDAnswer from 2025 FDD Document
- 12.3 Events of Default.
Each event set forth below is an "Event of Default":
(d) Irregular Card sales by you, excessive Chargebacks, or any other circumstances which, in our sole discretion, may increase our exposure for your Chargebacks or otherwise present a financial or security risk to us.
12.4 Termination Due to an Event of Default. Upon the occurrence of an Event of Default specified in subsections 12.3(b), 12.3(c), 12.3(d), 12.3(g) for any breach of Section 13, 12.3(i), or 12.3(k) (or for an Event of Default under Section 12.3(g) for failing to establish or maintain funds in a Reserve Account), the Agreement may be terminated immediately, without notice, and all amounts payable hereunder shall be immediately due and payable in full, provided that any disputed amounts shall be handled in accordance with Section 5.
If the Agreement is terminated for cause by us due to an Event of Default by you, you acknowledge that we may be required to report your business name and the names and other information regarding your principals to the Card Organizations for inclusion on such list(s).
Source: Item 23 — RECEIPTS (FDD pages 99–438)
What This Means (2025 FDD)
According to Even Hotels' 2025 Franchise Disclosure Document, an Event of Default includes irregular card sales, excessive chargebacks, or any other circumstances that, in the franchisor's sole discretion, may increase their exposure for the franchisee's chargebacks or otherwise present a financial or security risk to them. This clause grants Even Hotels broad discretion in determining what constitutes a default related to card sales and chargebacks.
For a prospective Even Hotels franchisee, this means that the franchisor has significant power to declare a default based on subjective criteria related to card transactions. The franchisee should ensure they understand what Even Hotels considers "irregular" card sales or "excessive" chargebacks. It would be prudent to ask for specific examples or metrics during the due diligence process to better gauge the potential risk.
Furthermore, the FDD states that if the Agreement is terminated for cause by Even Hotels due to an Event of Default, Even Hotels may be required to report the franchisee's business name and the names and other information regarding its principals to card organizations for inclusion on lists of terminated merchants. This can severely impact the franchisee's ability to conduct business in the future, as it may be difficult to secure merchant services from other providers.
In the event of termination due to default, Even Hotels may terminate the agreement immediately and all amounts payable become immediately due. This could create a significant financial burden for the franchisee. It is important to note that Even Hotels retains the right to exercise all of its rights and remedies under applicable law and the agreement, regardless of whether the Event of Default has been cured.