What is the meaning of 'Lost Revenue Damages' in the context of the Sonesta Simply Suites Franchise Agreement?
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 |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 66–70)
What This Means (2025 FDD)
According to Sonesta Simply Suites' 2025 Franchise Disclosure Document, 'Lost Revenue Damages' are mentioned in the context of franchise agreement termination. Specifically, a franchisee may terminate the Franchise Agreement without paying Lost Revenue Damages if the hotel is significantly damaged by fire or another casualty, affecting over 50% of the guest rooms, and the repair costs exceed the hotel's fair market value. The franchisee must provide written notice within 60 days of the event to elect not to repair or rebuild.
However, if a Sonesta Simply Suites franchisee terminates the Franchise Agreement without cause, they must pay Lost Revenue Damages, subject to state law. The FDD does not define 'Lost Revenue Damages' in Item 17, but refers to Item 6.
Prospective Sonesta Simply Suites franchisees should carefully review Item 6 of the FDD to fully understand how Lost Revenue Damages are calculated and what factors influence the amount owed upon termination without cause. Understanding the specific formula and potential financial implications is crucial before entering into a franchise agreement. Franchisees should also consult with a legal and financial advisor to assess the risks associated with this provision.