What is The Standardx franchisee's immediate obligation if the hotel is damaged by a casualty?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
e 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.
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 immediately notify Hyatt. This initial notification is crucial, as it triggers subsequent obligations and options for the franchisee, depending on the cost to repair the damage.
If the cost to repair the damage is less than or equal to the Damage Threshold, the franchisee is obligated to repair the damage promptly, adhering to the System Standards and other terms and conditions outlined in the agreement. Should the damage necessitate the closure of all or part of the hotel, the franchisee must commence reconstruction as soon as practicable, but within four months of closing, and reopen for continuous business operations as a Brand Hotel within twenty-four months of closing, while still complying with all other terms and conditions of the agreement.
However, if the cost to repair the damage exceeds the Damage Threshold, the franchisee has two options: either repair the damage promptly according to the System Standards and the agreement's terms, or elect to terminate the agreement by providing written notice to Hyatt. If the franchisee chooses to terminate the agreement, they and their owners must sign a Termination Agreement and pay a termination fee, which is the lesser of the liquidated damages calculated under 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. Franchisee must also provide documentation to allow Hyatt to calculate the Damage Threshold, insurance proceeds, and Net Recovery amount.