What happens if The Standardx revokes approval of the management company for a franchise?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
If the management company or you (if we approve you to manage the Hotel) at any time becomes a Competing Brand Owner, fails to meet our minimum qualifications (as we may periodically modify them) or fails to comply with the Franchise Agreement (including any System Standards and/or if the Hotel remains in any remedial or non-compliant status under our then current Quality Assurance and Compliance Program for 3 or more consecutive months), the Management Company Rider, or any conditions of operator approval that we previously imposed, then we may: (a) revoke our approval of that management company or you as the Hotel's manager; or (b) as a condition of our continued approval, we may impose on that management company or you additional requirements, including participation in remedial training and other operational programs, at the Management Company's or your expense. If we revoke our approval of the Management Company or you as the manager, then you must promptly terminate the Management Arrangement (if applicable) and either assume direct control of the Hotel's management and operation, if we approve you to manage the Hotel, or engage another management company we approve.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 71–74)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, if The Standardx revokes approval of a management company, the franchisee must promptly terminate the management arrangement. Following termination, the franchisee has two options: assume direct control of the hotel's management and operation, if The Standardx approves the franchisee to manage the hotel, or engage another management company that The Standardx approves. This ensures that the hotel continues to operate under approved management.
This requirement is triggered if the management company becomes a Competing Brand Owner, fails to meet The Standardx's minimum qualifications (as modified periodically), or fails to comply with the Franchise Agreement. Non-compliance includes any System Standards or if the Hotel remains in any remedial or non-compliant status under The Standardx's then-current Quality Assurance and Compliance Program for 3 or more consecutive months, the Management Company Rider, or any conditions of operator approval previously imposed.
This stipulation is important for prospective franchisees because it highlights the need to maintain compliance and choose management companies carefully. The franchisee bears the responsibility of ensuring the management company adheres to The Standardx's standards and requirements. Failure to do so can lead to the revocation of approval and the need to find a replacement or take on direct management, which could involve additional costs and operational challenges. The Standardx may also impose additional requirements such as remedial training at the management company's expense as a condition of continued approval.