If The Standardx franchisee and its owners sign a Termination Agreement after condemnation, is the franchisee required to pay liquidated damages?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisee and its Owners sign a Termination Agreement, then Franchisee shall not be required to pay liquidated damages pursuant to Section 16.5 at the time of termination.
However, such Termination Agreement shall provide that if Franchisee or any of its Affiliates begins construction on or operation of a hotel of the same Hotel Type at any location within the Area of Protection at any time during the twenty-four (24) month period following the effective date of termination of this Agreement, other than a Hyatt Network Hotel or a hotel that was already under contract to be developed at that particular location within the Area of Protection on the date that the Termination Agreement is signed, then Franchisee or its Owners must pay Hyatt liquidated damages equal to the amount set forth in Exhibit B-1 multiplied by the number of guest rooms in that new hotel of the same Hotel Type.
If Franchisee and its Owners fail to sign such Termination Agreement within a reasonable time after Hyatt delivers it to Franchisee, then Franchisee must pay Hyatt liquidated damages pursuant to Section 16.5 at the time of termination, in addition to complying with its other post-termination obligations under this 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 a franchisee's hotel is subject to condemnation and the franchisee and its owners sign a Termination Agreement, the franchisee will not be required to pay liquidated damages at the time of termination, which would otherwise be required under Section 16.5 of the agreement. However, this waiver of liquidated damages is conditional.
The Termination Agreement will stipulate that if the franchisee or any of its affiliates begins construction or operation of a hotel of the same type within the Area of Protection within 24 months following the termination date, and if that hotel is not a Hyatt Network Hotel or a hotel already under contract for development at that location when the Termination Agreement is signed, then the franchisee or its owners must pay The Standardx liquidated damages. The amount of these liquidated damages will be calculated by multiplying the amount set forth in Exhibit B-1 by the number of guest rooms in the new hotel.
If the franchisee and its owners do not sign the Termination Agreement within a reasonable time after The Standardx delivers it, the franchisee must pay liquidated damages as per Section 16.5 at the time of termination, in addition to fulfilling all other post-termination obligations outlined in the agreement. This highlights the importance of carefully reviewing and understanding the terms of the Termination Agreement and the potential financial implications of future hotel developments within the Area of Protection following termination.