What is the consequence for a Sonesta Simply Suites franchisee who terminates the agreement without cause?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
| PROVISION | SECTION IN | SUMMARY |
|---|---|---|
| FRANCHISE AGREEMENT | ||
| d. Termination by franchisee | Sections 14.G and 16.B | You may terminate the Franchise Agreement without paying Lost Revenue Damages (described in Item 6) in the event your Hotel is damaged by fire or other casualty, the damage or destruction is substantial and material, affecting over fifty percent (50%) of the Guest Rooms of your Hotel, the reasonable estimated cost to repair the damage exceeds the fair market value of your Hotel, and you provide us written notice within 60 days of such casualty event of your election not to repair or rebuild your Hotel. If you terminate the Franchise Agreement without cause, you must pay us Lost |
| e. Termination by Franchisor without cause | Section 16.A | Revenue Damages (subject to state law). If your Hotel is condemned, you must give us notice at the earliest possible time. If, in our sole discretion, the taking is significant enough to render operation of your Hotel in accordance with the Brand Standards impractical, then we may terminate the Franchise Agreement on written notice, effective as of the day of the consummation of the actual taking. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 66–70)
What This Means (2025 FDD)
According to Sonesta Simply Suites's 2025 Franchise Disclosure Document, if a franchisee terminates the Franchise Agreement without cause, they must pay Lost Revenue Damages to Sonesta Simply Suites. This means that if a franchisee decides to end the agreement for reasons not specified as justifiable within the franchise agreement, they will be financially responsible for the revenue that Sonesta Simply Suites anticipates losing as a result of the early termination. The specifics of how these Lost Revenue Damages are calculated are detailed in Item 6 of the FDD.
This provision is fairly standard in franchising, as it aims to protect the franchisor from financial losses incurred when a franchisee prematurely exits the system. It is important for prospective franchisees to carefully consider the implications of this clause, as terminating the agreement early can result in significant financial penalties. Franchisees should fully understand the conditions under which they can terminate the agreement without incurring these damages, such as in cases of substantial property damage as described in section 14.G and 16.B of the franchise agreement.
Prospective Sonesta Simply Suites franchisees should carefully review Item 6 of the FDD to fully understand how Lost Revenue Damages are calculated. They should also consult with a franchise attorney to discuss the implications of this clause and to ensure they understand their rights and obligations under the Franchise Agreement. Understanding these terms is crucial for making an informed decision about investing in a Sonesta Simply Suites franchise.