What is the 'CPI Increase' and how does it affect the Guarantor Monetary Threshold for The Standardx franchise?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
Each dollar amount in this Section 4 shall increase automatically each year, without notice from Hyatt, effective on the first day of the calendar month during which the Franchise Agreement's Effective Date falls, by an amount equal to the CPI Increase.
The "CPI Increase" means the amount to be adjusted multiplied by a fraction, the numerator of which is the Consumer Price Index for all Urban Consumers for All Items, as published by the U.S.
Department of Labor, Bureau of Labor Statistics (the "Base Index") as of the first day of the calendar month during which the increase is to take effect, and the denominator of which is the Base Index in effect on the Franchise Agreement's Effective Date or used for the most recent increase (whichever is later).
If the Base Index is no longer published, Hyatt may designate another reasonably comparable index for calculating changes in the cost of living or purchasing power for consumers.
Guarantor represents and agrees that, at the time of signing this Guaranty and at all times during the term of the Franchise Agreement, at least one of the undersigned or another then current guarantor of Franchisee's obligations under the Franchise Agreement satisfies the Guarantor Monetary Threshold (defined below).
The "Guarantor Monetary Threshold" means each of the following: (a) the amount of total assets less total liabilities (excluding Hotel assets and liabilities relating solely to the Hotel), each as calculated in accordance with U.S. generally accepted accounting principles, equal to or exceeding ____________________ Dollars ($) as of the date hereof; and (b) liquid assets (consisting of cash, cash equivalents and marketable securities) equal to or exceeding ____________________ Dollars ($) as of the date hereof.
Each dollar amount in this Section 4 shall increase automatically each year, without notice from Hyatt, effective on the first day of the calendar month during which the Franchise Agreement's Effective Date falls, by an amount equal to the CPI Increase.
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, the "CPI Increase" is a mechanism to adjust dollar amounts annually based on inflation. It's calculated by multiplying the original amount by a fraction. The numerator of this fraction is the Consumer Price Index for all Urban Consumers for All Items (the "Base Index") published by the U.S. Department of Labor, Bureau of Labor Statistics, as of the first day of the calendar month during which the increase is to take effect. The denominator is the Base Index in effect on the Franchise Agreement's Effective Date or used for the most recent increase, whichever is later. If the Base Index is no longer published, The Standardx can designate a reasonably comparable index. This adjustment happens automatically each year, without notice from The Standardx, on the first day of the calendar month of the Franchise Agreement's Effective Date.
The Guarantor Monetary Threshold represents the minimum financial requirements that a guarantor of the franchisee's obligations must meet. This threshold includes both a minimum amount of total assets less total liabilities (excluding Hotel assets and liabilities relating solely to the Hotel) and a minimum amount of liquid assets. The specific dollar amounts for these minimums are not provided in this excerpt but are to be listed elsewhere in the Franchise Agreement.
The CPI Increase directly affects the Guarantor Monetary Threshold by increasing the required dollar amounts each year. This means that the guarantor must maintain a financial position that meets the adjusted threshold, which rises with inflation. The Standardx may request annual financial statements from the guarantor to ensure compliance with the updated Guarantor Monetary Threshold. Failure to meet this threshold could lead to termination of the Franchise Agreement, subject to any applicable notice and cure periods outlined in the agreement. This mechanism protects The Standardx from inflation-related erosion of the guarantor's financial capacity to cover the franchisee's obligations.