For The Standardx franchise, does the definition of 'Affiliate' require the power to direct management and policies?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
EXHIBIT A to the BRAND HOTEL FRANCHISE AGREEMENT
DEFINED TERMS
In addition to any other terms defined in this Agreement, the following terms shall have the respective meanings as indicated below.
- "Accessibility Laws" means the Americans with Disabilities Act and other laws, rules, regulations and ordinances governing accommodations for or relationships with persons with disabilities or similar individuals, as in effect from time to time.
- "ADS" means the online travel agencies and other alternative distribution systems that Hyatt may periodically authorize or require for Franchisee's Hotel and other similarly situated Brand Hotels (subject to Reasonable Deviations).
- "Affiliate" means, with respect to a party, any person or entity directly or indirectly owned or controlled by, under common control with, or owning or controlling, such party. For purposes of this definition, "control" means the power to direct or cause the direction of management and policies.
- "Anti-Corruption Laws" means any laws, rules or regulations relating to anti-corruption, anti-bribery, anti-money laundering, or similar prohibited conduct or otherwise relating to the maintenance of accurate books and records and internal controls.
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 definition of 'Affiliate' does include the power to direct management and policies. The FDD defines an 'Affiliate' as any person or entity directly or indirectly owned or controlled by, under common control with, or owning or controlling, such party. The definition further clarifies that 'control' specifically means the power to direct or cause the direction of management and policies.
This definition is important for prospective franchisees because it clarifies the scope of relationships that could be considered affiliated with either the franchisee or The Standardx. This could have implications for various aspects of the franchise agreement, including transfer restrictions, competitive restrictions, and default provisions. For example, if a franchisee's other business is deemed an affiliate and that business defaults on its obligations, it could potentially trigger a default under The Standardx franchise agreement.
The definition of 'Affiliate' is fairly standard in franchise agreements. It is designed to prevent franchisees from circumventing the terms of the agreement by operating through related entities. Franchisees should carefully consider this definition and how it might apply to their existing business interests and future ventures.
In summary, the definition of 'Affiliate' in The Standardx franchise agreement is broad and includes any entity over which a party has the power to direct management and policies. Prospective franchisees should carefully review this definition and seek legal counsel to understand its implications for their specific circumstances.