What is the relationship between state law and the payment of Lost Revenue Damages for Sonesta Simply Suites?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
--------------------------------| | | 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.
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, state law has an impact on Lost Revenue Damages. Specifically, if a franchisee terminates the Franchise Agreement without cause, they must pay Lost Revenue Damages, but this is "subject to state law." This means that the enforceability and calculation of these damages can be affected by the specific laws of the state in which the franchise operates.
This provision suggests that the franchisor's ability to collect Lost Revenue Damages may be limited or altered depending on the state's franchise laws or general contract law principles. Some states may have laws that restrict or prohibit certain types of damage clauses in franchise agreements, or they may impose specific requirements for the calculation and proof of such damages.
A prospective Sonesta Simply Suites franchisee should consult with a legal professional to understand how their state's laws may affect the enforceability of the Lost Revenue Damages provision. This due diligence is essential to assess the potential financial risks associated with terminating the franchise agreement early. Franchisees should also inquire about any specific instances where state law has impacted the application of this clause in the past.