Is an Even Hotels franchisee required to maintain a capital reserve and adhere to capital reinvestment and renovation cycles?
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:
(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.
Source: Item 23 — RECEIPTS (FDD pages 99–438)
What This Means (2025 FDD)
According to Even Hotels' 2025 Franchise Disclosure Document, franchisees may be required to establish a capital reserve. IHG (InterContinental Hotels Group) can mandate a capital reserve of up to 5% of gross revenue annually. This reserve is specifically for capital expenditures and upgrading the hotel, including renovations of public areas, guest rooms, corridors, and FF&E (furniture, fixtures, and equipment) replacement. IHG must provide at least 90 days' notice before imposing or changing this requirement. The franchisee must then establish a monthly-funded Capital Reserve account at a bank of their choosing and use the funds as IHG directs. The FDD notes that the Capital Reserve may not cover all costs to maintain the hotel to first-class standards, and the franchisee is responsible for providing any additional necessary funds.
Even if IHG doesn't require a Capital Reserve, Even Hotels franchisees must still complete significant renovations throughout the license term to maintain the hotel's first-class status. These renovations include replacing soft goods (like linens and draperies) at least every seven years and case goods (like furniture) at least every fourteen years. These replacements may need to occur more frequently to comply with brand standards, quality programs, prevent injuries, or meet legal requirements.
Ultimately, the Even Hotels franchisee is responsible for funding all ordinary and extraordinary maintenance and repairs, capital improvements, and renovations of the hotel. Gross revenue is defined as all income derived from the hotel's operation, including room sales, food and beverage sales, telephone, fax, and internet revenues, rental payments, and proceeds from business interruption insurance.