Is establishing a Capital Reserve a requirement for Even Hotels franchisees?
Even_Hotels Franchise · 2025 FDDAnswer from 2025 FDD Document
O. Capital Reserve; Capital Reinvestment and Renovation Cycles.
- (1) IHG may require Licensee to establish a capital reserve ("Capital Reserve") in an amount not in excess of 5% of Gross Revenue annually to be used for capital expenditures and the upgrading of the Hotel, including the renovation of public areas, guest rooms, guest room corridors, and the replacement of FF&E. IHG shall give Licensee no less than ninety (90) days' notice of imposing such requirement to establish a Capital Reserve, as the same may be established or changed by IHG from time to time. In such event, Licensee must establish a Capital Reserve account funded monthly in a bank selected by Licensee. Licensee shall make expenditures from such account for the purposes hereinbefore specified in accordance with IHG's requirements. Licensee acknowledges that the Capital Reserve may not be sufficient to maintain the Hotel as a first-class facility in accordance with the Standards, and Licensee shall promptly provide any necessary additional funds to meet IHG's product quality and consumer quality requirements; as well as Licensee's renovation obligations specified herein.
- (2) Throughout the License Term, regardless of whether IHG has required Licensee to establish a Capital Reserve, Licensee must complete significant renovations of the Hotel, including, but not limited to, the public areas, guest rooms, and guest room corridors in order to maintain the Hotel as a first-class facility. These mandatory renovations include: (a) replacing Soft Goods at least every seven (7) years after such Soft Goods were installed and (b) replacing Case Goods at least every fourteen (14) years after such Case Goods were installed; and, if necessary replacing such Soft Goods and Case Goods more frequently in order to (i) maintain compliance with the Standards or IHG's quality and guest
satisfaction programs; (ii) remove risk of injury to persons or property; or (iii) ensure compliance with all applicable laws.
(3) Licensee must fund all ordinary and extraordinary maintenance and repair, capital improvements and renovations of the Hotel.
(4) For purposes of this paragraph 13.O. the following definitions apply:
Source: Item 10 — FINANCING (FDD pages 69–70)
What This Means (2025 FDD)
According to Even Hotels' 2025 Franchise Disclosure Document, establishing a Capital Reserve may be required by IHG (InterContinental Hotels Group). IHG can mandate that franchisees establish a Capital Reserve, with the amount not exceeding 5% of the hotel's Gross Revenue annually. This reserve is specifically designated for capital expenditures and upgrading the hotel, including renovations of public areas, guest rooms, corridors, and replacement of furniture, fixtures, and equipment (FF&E).
IHG is required to provide the Even Hotels franchisee with at least 90 days' notice before imposing or changing the Capital Reserve requirement. If mandated, the franchisee must establish a Capital Reserve account at a bank of their choosing and fund it monthly. Expenditures from this account must align with IHG's requirements for the specified purposes.
The FDD also clarifies that regardless of whether a Capital Reserve is in place, Even Hotels franchisees must still complete significant renovations to maintain the hotel's first-class status. This includes replacing soft goods at least every seven years and case goods at least every fourteen years. Franchisees are also responsible for funding all ordinary and extraordinary maintenance, repairs, capital improvements, and renovations of the hotel, ensuring it meets IHG's standards and quality requirements.