What are the conditions that a The Standardx franchisee must meet to be offered a Successor Franchise Right?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
When this Agreement expires, if Franchisee (and, as applicable, each Guarantor): (a) has substantially complied with this Agreement during its Term and is in full compliance with this Agreement (including all System Standards) as of the date upon which this Agreement expires; (b) then meets Hyatt's then applicable standards for franchisees and owners of franchisees of Brand Hotels; (c) has received passing Quality Assurance Scores (as defined in the System Standards) on all evaluations conducted during the preceding three (3)-year period; and (d) has the right to maintain possession of the Hotel for at least ten (10) years following this Agreement's expiration, then Hyatt will offer Franchisee the right to enter into a successor franchise agreement to continue operating the Hotel as a Brand Hotel for a term commencing immediately upon the expiration of this Agreement and expiring ten (10) years from that date (the "Successor Franchise Right") in accordance with this ARTICLE XIII.
If Franchisee (or any Guarantor) does not meet the requirements of this Section 13.1, then Hyatt need not enter into a successor franchise agreement with Franchisee, whether or not Hyatt notified Franchisee of the non-compliance or had, or chose to exercise, the right to terminate this Agreement during its Term.
- 13.2 Successor Franchise Notice and PIP.
Franchisee agrees to give Hyatt written notice of Franchisee's election to exercise or not to exercise the Successor Franchise Right no more than twenty-one (21) months, and no less than eighteen (18) months, before this Agreement expires.
Simultaneously with submitting its notice to exercise the Successor Franchise Right, Franchisee shall pay Hyatt its then current PIP fee, which is non-refundable.
Franchisee's failure to deliver such notice within such timeframe or to pay such PIP fee shall be deemed Franchisee's decision not to exercise the Successor Franchise Right.
Within ninety (90) days after Hyatt receives Franchisee's notice and payment of the PIP fee, Hyatt agrees to notify Franchisee of Hyatt's decision either to:
(a) deny Franchisee's election to exercise the Successor Franchise Right based on the failure to satisfy the conditions in Section 13.1 (and Hyatt shall provide the reasons for its decision); or
(b) approve Franchisee's election to exercise Successor Franchise Right, subject to (i) Franchisee's renovating, remodeling and/or expanding the Hotel (which may include structural alterations), adding or replacing improvements and FF&E, and otherwise modifying the Hotel as Hyatt requires to comply with the Hotel System and System Standards then applicable for new similarly situated Brand Hotels (subject to Reasonable Deviations), which must be completed to Hyatt's reasonable satisfaction before the Term expires in accordance with the PIP that Hyatt prepares (including the timeframes set forth therein); and (ii) Franchisee's (and each Guarantor's) continued compliance with the other provisions of this Agreement during the remaining Term.
Source: Item 18 — OTHER INCOME (LOSS), NET (FDD pages 187–399)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, a franchisee has the right to a successor franchise agreement when their current agreement expires, provided they meet specific conditions. To be eligible for a Successor Franchise Right, the franchisee must have substantially complied with the existing agreement throughout its term and be in full compliance, including all System Standards, at the time of expiration. Additionally, the franchisee must meet The Standardx's then-current standards for franchisees and owners, and have received passing Quality Assurance Scores on all evaluations conducted during the three years before the agreement's expiration. The franchisee must also have the right to maintain possession of the hotel for at least ten years following the expiration of the current agreement.
If all these conditions are met, The Standardx will offer the franchisee the right to enter into a successor franchise agreement. This agreement allows the franchisee to continue operating the hotel as a The Standardx branded hotel for a term that begins immediately after the expiration of the original agreement and extends for ten years. However, if the franchisee or any guarantor fails to meet any of these requirements, The Standardx is not obligated to offer a successor franchise agreement, regardless of whether The Standardx previously notified the franchisee of the non-compliance or had the opportunity to terminate the agreement during its term.
To exercise the Successor Franchise Right, the franchisee must provide The Standardx with written notice of their decision between 18 and 21 months before the agreement's expiration. Simultaneously with this notice, the franchisee must pay The Standardx's then-current PIP (Property Improvement Plan) fee, which is non-refundable. Failure to provide timely notice or pay the PIP fee will be considered a decision not to exercise the Successor Franchise Right. Within 90 days of receiving the notice and PIP fee, The Standardx will notify the franchisee of its decision to either approve or deny the request, based on whether the conditions in Section 13.1 have been met. If approved, the franchisee will be required to renovate, remodel, and/or expand the hotel to comply with the current Hotel System and System Standards for new, similarly situated The Standardx hotels, as detailed in a PIP prepared by The Standardx.