What happens if The Standardx Owner is required to withhold taxes on payments to Hyatt?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
Without limiting the
generality of the foregoing, if under applicable laws, Owner is required to withhold or Hyatt is required to pay any taxes and/or levies assessed by any third party on Hyatt or any of its affiliates as a recipient, including, but not limited to, sales taxes and withholding tax, and also any similar taxes that can replace or append the existing taxes, the amount payable to Hyatt and/or its affiliates by Owner shall be increased in such a manner that the net amount received after withholding or payment of all such taxes or levies shall be equal to the amount which Hyatt and/or its affiliates would have otherwise been entitled to invoice under the terms of this Agreement in the absence of any such taxes, levies or deductions.
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 an Owner is legally required to withhold or Hyatt is required to pay taxes on Hyatt or its affiliates as recipients, the amount the Owner pays to Hyatt will increase. This increase ensures that after the withholding or payment of taxes, Hyatt receives the same net amount it would have invoiced without the taxes or levies. This covers taxes and levies assessed by any third party, including sales taxes and withholding tax, as well as similar taxes that could replace or append existing taxes.
In simpler terms, The Standardx franchisee bears the economic burden of any taxes imposed on payments to Hyatt. The franchisee must gross up the payment to cover the taxes, so Hyatt receives the full amount it would have received absent the tax. This is a fairly standard practice in franchising and other commercial contracts, where parties aim to ensure that agreed-upon payments are not eroded by unexpected tax obligations.
For a prospective The Standardx franchisee, this means that when budgeting and forecasting expenses, it's crucial to consider potential tax implications on payments to Hyatt. Franchisees should consult with tax advisors to understand which taxes might apply in their specific location and how to account for them in their financial planning. This clause protects Hyatt's revenue stream but places the responsibility for covering these taxes squarely on the franchisee.