For The Standardx franchise, what is the significance of the 'Ramp Period' in calculating 'Average Monthly Revenues'?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
"Ramp Period" means the period beginning on the first day of the month that the Hotel first began operating as a Brand Hotel (whether under Franchisee or any other party) continuing for the number of calendar months set forth in Exhibit B-1.
"Average Monthly Revenues" means:
- (a) if the date of termination occurs after the Ramp Period, the average monthly Gross Rooms Revenue of the Hotel during the twelve (12) full calendar months immediately preceding the month of termination; or
- (b) if the date of termination occurs after the Opening Date but before the end of the Ramp Period, the greater of (i) the average monthly Gross Rooms Revenue of the Hotel during the period from the Opening Date until the effective date of termination or (ii) the amount determined under part (c) below; or
- (c) if the date of termination occurs before the Opening Date, the average monthly Gross Rooms Revenue per available guest room for all Brand Hotels in the United States (including those that Hyatt and its Affiliates own, manage, and franchise) during the twelve (12) full calendar months preceding the month of termination, multiplied by the number of guest rooms approved for the Hotel.
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 'Ramp Period' is a defined term that significantly impacts how 'Average Monthly Revenues' are calculated, especially in the event of early termination of the franchise agreement. The Ramp Period is defined as the initial 36 months of operation as a Brand Hotel.
The length of the Ramp Period affects the calculation of 'Average Monthly Revenues,' which is used to determine liquidated damages if the franchise agreement is terminated. If termination occurs after the Ramp Period, the average is based on the 12 months immediately preceding termination. However, if termination happens after the Opening Date but before the end of the Ramp Period, the 'Average Monthly Revenues' is the greater of either the average monthly Gross Rooms Revenue from the Opening Date to termination, or an amount calculated based on system-wide performance. If termination occurs before the Opening Date, the average monthly Gross Rooms Revenue is calculated using the average monthly Gross Rooms Revenue per available guest room for all Brand Hotels in the United States during the 12 months preceding termination, multiplied by the number of guest rooms approved for the Hotel.
For a prospective The Standardx franchisee, this means that the initial 36 months of operation are considered a ramp-up phase. If the franchise agreement is terminated during this period, the calculation of 'Average Monthly Revenues' will not solely rely on the hotel's performance during that time. Instead, it may be based on the performance of other Brand Hotels or a combination of factors. This could potentially lead to higher or lower liquidated damages depending on how the hotel performs compared to the rest of the system during the ramp-up phase.
It is important for franchisees to understand the implications of the Ramp Period on potential liquidated damages, as early termination could result in financial obligations that are not solely tied to the individual hotel's performance. Franchisees should carefully consider the risks and potential liabilities associated with early termination, especially during the initial 36-month Ramp Period.