What factors influence the amount and adjustments to the Even Hotels Reserve Account?
Even_Hotels Franchise · 2025 FDDAnswer from 2025 FDD Document
nd any fiduciary acting in an agency capacity on behalf of any of the foregoing. "Prohibited Person" means any person identified by Her Majesty's Treasury of the United Kingdom ("UK"), by the Office of Foreign Assets Control of the Department of the Treasury of the United States ("US") as a "specially designated national" or otherwise subject to sanction by the European Union ("EU") and/or the United Nations ("UN"), (collectively, "Sanctioning Bodies"), or any other Person with whom IHG, or any of its Affiliates, is otherwise prohibited from transacting business.
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:
- (a) "Gross Revenue" means all revenues and income of any nature derived directly or indirectly from the Hotel or from the use or operation thereof, including without limitation room sales; food and beverage sales; telephone, fax and internet revenues; rental or other payments from lessees, subleases, concessionaires and others occupying or using space or rendering services at the Hotel (but not the gross receipts of such lessees, subleases or concessionaires); and the actual cash proceeds of business interruption, use, occupancy or similar insurance.
- (b) "Soft Goods" means textile, fabric, vinyl and similar products used in finishing and decorating the Hotel, including its public areas, guest rooms, and guest room corridors, such as wall and floor coverings, window treatments, cornice or valance coverings, carpeting, bedspreads, lamps, lamp shades, artwork, decorative items, pictures, wall decorations, upholstery and all other unspecified items of the same class.
- (c) "Case Goods" means furniture and fixtures used in the Hotel, including its public areas, guest rooms, and guest room corridors, such as cabinets, shelves, chests, armoires, chairs, beds, headboards, desks, tables, mirrors, lighting fixtures and all other unspecified items of the same class.
- (d) "FF&E" means Case Goods, Soft Goods, signage, including exterior signage, and equipment (including telephone systems, printers, televisions, vending machines and computer hardware) as well as other improvements and personal property used in the operation of the Hotel except for those items which are generally classified as "operating supplies" or "operating equipment".
- (4) For purposes of this paragraph 13.O. the following definitions apply:
Source: Item 23 — RECEIPTS (FDD pages 99–438)
What This Means (2025 FDD)
According to Even Hotels' 2025 Franchise Disclosure Document, several factors can influence the amount required in a reserve account. IHG (InterContinental Hotels Group), as the franchisor, has the right to require a franchisee to establish a capital reserve, which cannot exceed 5% of the hotel's gross revenue annually. This reserve is intended 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 must provide at least 90 days' notice before imposing or changing this requirement. The franchisee is responsible for funding the account monthly in a bank they select and must use the funds according to IHG's requirements.
Even if IHG doesn't mandate a capital reserve, the franchisee is still obligated to complete significant renovations to maintain the hotel's first-class status throughout the license term. This includes replacing soft goods (like linens and drapes) at least every seven years and case goods (like furniture) at least every fourteen years, or more frequently if needed to meet IHG's standards, prevent injuries, or comply with laws. The franchisee is responsible for funding all ordinary and extraordinary maintenance, repairs, capital improvements, and renovations.
Additionally, a separate reserve account may be required in instances of fraud, suspected fraud, the occurrence of an Event of Default, or any party providing notice of termination of the Agreement. This account shall be fully funded immediately in those instances, or upon three days' notice if required for any other reason. The Reserve Account may be funded by debits to the franchisee's Settlement Account, collection of payments otherwise due to the franchisee, or with the franchisor's consent, a letter of credit. The franchisor will hold any Reserve Account for the greater of ten months after termination of the Agreement or for such longer period of time as is consistent with their liability for the franchisee's Card transactions and Chargebacks in accordance with Card Organization Rules, at which time, they will return all remaining amounts in the Reserve Account to the franchisee. The franchisor may collect any Servicers Fees, Third Party Based Fees, Chargebacks, and other amounts arising in connection with the Agreement from the Reserve Account. If the funds in the Reserve Account are not sufficient to cover all such amounts, the franchisee agrees to promptly pay all such amounts upon request.