How is the amount of liquidated damages calculated for The Standardx franchise if the Franchise Agreement is terminated early?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
Liquidated Damages.
The amount of liquidated damages you must pay us if the Franchise Agreement terminates varies depending on when the Franchise Agreement terminates.
Upon termination of the Franchise Agreement before the term expires for any reason (subject to Article X of the Franchise Agreement), you must pay us, within 15 days after the date of that termination, liquidated damages in a lump sum equal to (a) the lesser of 36 or the number of months then remaining in the Franchise Agreement term had it not been terminated, multiplied by (b) the sum of (i) the Average Monthly Revenue times 5% for lost future Royalty Fees, plus (ii) the Average Monthly Revenue times 3.5% for lost future System Services Charges.
"Average Monthly Revenue" means: (i) if, as of the effective date of termination, at least 36 months have elapsed since the Hotel's opening date, the average monthly Gross Rooms Revenue of the Hotel during the 12 full calendar months preceding the month of termination; or (ii) if, as of the effective date of termination, the Hotel's opening date has not yet occurred, the average monthly Gross Rooms Revenue per available guest room for all Brand Hotels in the United States (including those that we and our affiliates own, manage, and franchise) during the 12 full
calendar months preceding the month of termination, multiplied by the number of guest rooms approved for the Hotel; or (iii) if, as of the effective date of termination, the Hotel's opening date has occurred but less than 36 months have elapsed since the Hotel's opening date, either (a) the amount determined under part (ii) above or (b) the average monthly Gross Rooms Revenue of the Hotel during the period from the Hotel's opening date until the effective date of termination, whichever of (a) or (b) is greater.
However, if "Average Monthly Revenues" as determined under any part of (i) through (iii) above was materially and negatively impacted during the preceding 12 full calendar month period by a disruption in Hotel operations resulting from force majeure, casualty, suspension of operations (whether or not we consented to it), renovation of the Hotel, or any other similar circumstances, then we will determine "Average Monthly Revenue" by referencing the most recent 12 full calendar month period before termination during which the Hotel performance was not impacted.
If we or you terminate the Franchise Agreement because of a Consequential Termination, then the liquidated damages are 150% of the amount calculated above.
Source: Item 6 — Other Fees (FDD pages 20–36)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, the amount of liquidated damages payable upon early termination of the Franchise Agreement depends on when the agreement is terminated. The franchisee must pay a lump sum within 15 days of termination. This sum is calculated by multiplying two factors: (a) the lesser of 36 or the number of months remaining in the Franchise Agreement term, and (b) the sum of (i) 5% of the Average Monthly Revenue for lost future Royalty Fees, plus (ii) 3.5% of the Average Monthly Revenue for lost future System Services Charges.
The "Average Monthly Revenue" is determined based on the hotel's operating history. If the hotel has been open for at least 36 months as of the termination date, the average is calculated from the hotel's Gross Rooms Revenue over the 12 months preceding termination. If the hotel's opening date hasn't occurred yet, the average is based on the average monthly Gross Rooms Revenue per available guest room for all Brand Hotels in the United States over the 12 months preceding termination, multiplied by the number of guest rooms approved for the hotel. If the hotel has been open for less than 36 months, the average is the greater of either the amount calculated as if the hotel's opening date hasn't occurred yet, or the average monthly Gross Rooms Revenue of the hotel from its opening date until termination.
However, if the Average Monthly Revenues were negatively impacted by events like force majeure, casualty, suspension of operations, or renovation, The Standardx will determine the Average Monthly Revenue by referencing the most recent 12-month period before termination during which the hotel's performance was not impacted. If The Standardx or the franchisee terminates the Franchise Agreement due to a Consequential Termination (involving a transfer to a competitor or multiple terminated agreements), the liquidated damages are 150% of the initially calculated amount. Understanding these calculations is crucial for prospective franchisees as early termination can result in significant financial obligations.