What is the franchisee's immediate obligation if The Standardx Hotel is damaged by a casualty?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
If the Hotel is damaged by fire, flood, accident, hurricane or other casualty, Franchisee must notify Hyatt immediately.
- (a) If the cost to repair the damage is less than or equal to the Damage Threshold, then Franchisee must repair the damage promptly according to the System Standards and this Agreement's other terms and conditions.
If the damage or repair requires Franchisee to close all or any portion of the Hotel, then Franchisee must commence reconstruction as soon as practicable (but in any event within four (4) months) after closing the Hotel and reopen for continuous business operations as a Brand Hotel as soon as practicable (but in any event within twenty-four (24) months) after closing the Hotel, but not without complying with this Agreement's other terms and conditions.
The Term will be extended for the period of time during which the Hotel is closed pursuant to this Section 10.2(a), and Franchisee need not make any payments of Royalty Fees or System Services Charges while the Hotel is closed pursuant to this Section 10.2(a) unless Franchisee receives insurance proceeds compensating Franchisee for lost Gross Rooms Revenue during such period, in which case Franchisee must pay Royalty Fees and System Services Charges on the amount of proceeds received allocable to such loss.
- (b) If the cost to repair the damage from the casualty exceeds the Damage Threshold, then Franchisee may either: (i) repair the damage promptly according to the System Standards and this Agreement's other terms and conditions; or (ii) elect to terminate this Agreement upon written notice to Hyatt.
If Franchisee elects to terminate this Agreement pursuant to Section 10.2(b)(ii), Franchisee and its Owners must sign a Termination Agreement and pay a termination fee (in lieu of liquidated damages or Brand
Damages) in an amount equal to the lesser of the liquidated damages calculated pursuant to Section 16.5 and the Net Recovery, provided that if the Net Recovery is less than zero, no termination fee shall be required upon signing the Termination Agreement.
(c) Franchisee must provide Hyatt such documentation as Hyatt may reasonably request to calculate the Damage Threshold, the insurance proceeds Franchisee receives in connection with any casualty, and the Net Recovery amount (if applicable).
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, if the hotel is damaged by fire, flood, accident, hurricane, or other casualty, the franchisee must notify Hyatt immediately. The subsequent obligations depend on the cost to repair the damage. If the cost is less than or equal to the Damage Threshold, the franchisee must repair the damage promptly according to the System Standards and the agreement's terms.
If the damage requires the franchisee to close the hotel, reconstruction must begin as soon as practicable, but within four months of closing. The hotel must reopen for continuous business operations as a Brand Hotel as soon as practicable, but within twenty-four months of closing, while complying with all agreement terms. The term of the franchise will be extended for the period the hotel is closed, and the franchisee does not have to pay Royalty Fees or System Services Charges while the hotel is closed, unless they receive insurance proceeds compensating for lost Gross Rooms Revenue, in which case they must pay Royalty Fees and System Services Charges on the amount of proceeds received allocable to such loss.
If the cost to repair the damage exceeds the Damage Threshold, the franchisee can either repair the damage promptly according to System Standards or elect to terminate the agreement with written notice to Hyatt. If the franchisee chooses to terminate, they and their Owners must sign a Termination Agreement and pay a termination fee, which is the lesser of the liquidated damages calculated pursuant to Section 16.5 and the Net Recovery. If the Net Recovery is less than zero, no termination fee is required upon signing the Termination Agreement. The franchisee must also provide Hyatt with documentation to calculate the Damage Threshold, insurance proceeds, and Net Recovery amount.