What are the potential consequences for a franchisee who fails to meet their obligations as outlined in Item 9, considering The Standardx's right to litigate as described in Item 3?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
Upon Franchisee's failure to remedy any default or failure to comply with this Agreement specified in any written notice issued to Franchisee under Section 15.1 (following any cure period specified for such default or failure in Section 15.1) or Section 15.2, Hyatt has the right, until Franchisee remedies such default or failure to Hyatt's satisfaction, to (a) suspend Franchisee's right to use, and Franchisee's access to, the CRS, the GDS and ADS, and/or other System Services; (b) remove the Hotel from Hyatt's advertising publications and programs and/or remove the Hotel's webpage from the Hotel System Website; (c) suspend or terminate any temporary or other fee reductions to which Hyatt might have agreed in this Agreement or any amendment(s) to this Agreement; and/or (d) refuse to provide any operational support that this Agreement otherwise requires.
(h) Franchisee (or any of its Owners) knowingly makes any unauthorized use or disclosure of any part of the System Standards or any other Confidential Information;
(i) Franchisee violates any law, ordinance, or regulation and does not begin to cure the violation immediately after receiving notice from Hyatt or any other party and to complete the cure as soon as is reasonably practicable or within the timeframe allowed by law, whichever is shorter;
(j) Franchisee (1) fails on three (3) or more separate occasions within any twelve (12) consecutive month period to comply with this Agreement, whether the failures
relate to the same or different obligations under this Agreement and whether or not Hyatt provides formal written notice to Franchisee of or Franchisee corrects the failures; or (2) fails on two (2) or more separate occasions within any six (6) consecutive month period to comply with the same obligation under this Agreement, whether or not Hyatt provides formal written notice to Franchisee of or Franchisee corrects the failures;
If Hyatt determines that the Hotel is failing to comply with the System Standards or any other terms and conditions of this Agreement, then, without limiting Hyatt's other rights or remedies under this Agreement, any other agreement or applicable law, Franchisee must: (a) reimburse Hyatt for its costs related to that non-compliance, including fees, travel and living expenses, guest satisfaction payments or expenses, and other costs for administering any necessary actions, follow-up inspections, audits or re-evaluation visits until the failures to comply have been fully corrected, and (b) ensure that applicable Hotel personnel attend meetings and additional brand standard training programs that Hyatt specifies, at Franchisee's sole expense, relating to that non-compliance.
All matters relating to arbitration will be governed by the Federal Arbitration Act (9 U.S.C. Sections 1 et seq.). Except to the extent governed by the Federal Arbitration Act, the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Sections 1051 et seq.) or other federal law, and except as otherwise required by law for any claims arising under the Rhode Island Franchise Investment Act, this Agreement, the franchise, and all claims arising from the relationship between Hyatt (and/or any of its Affiliates) and Franchisee will be governed by the laws of the State of Illinois, without regard to its conflict of laws rules, except that any Illinois law regulating the offer or sale of franchises, business opportunities, or similar interests, or governing the relationship between a franchisor and a franchisee or any similar relationship, will not apply unless its jurisdictional requirements are met independently without reference to this Section.
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, franchisees have several obligations as detailed in Item 9, which span from site selection and pre-opening activities to ongoing operational standards, fees, and legal compliance. Failure to meet these obligations can lead to a suspension of rights and services. Specifically, The Standardx has the right to suspend the franchisee's access to central reservation systems (CRS), global distribution systems (GDS), and advertising systems (ADS). They can also remove the hotel from advertising publications and programs, including taking down the hotel's webpage from The Standardx's website. Furthermore, The Standardx can suspend or terminate any fee reductions previously agreed upon and refuse to provide operational support. These actions can occur if the franchisee fails to remedy a default or comply with the Franchise Agreement after receiving written notice and any applicable cure period.
In addition to the suspension of rights and services, there are specific instances of non-compliance that can trigger consequences. For example, if a franchisee knowingly makes unauthorized use or disclosure of The Standardx's System Standards or Confidential Information, or if they violate any law, ordinance, or regulation without promptly beginning to cure the violation, it can lead to penalties. Repeated failures to comply with the agreement, even if corrected, can also result in action from The Standardx. Specifically, three failures within a 12-month period or two failures regarding the same obligation within a 6-month period can trigger consequences, regardless of whether formal notice was given or the failures were corrected.
Moreover, The Standardx emphasizes compliance with System Standards and applicable laws. Franchisees must reimburse The Standardx for costs related to non-compliance, including fees, travel and living expenses, guest satisfaction payments, and other administrative costs for follow-up inspections, audits, or re-evaluation visits until the issues are resolved. Franchisees must also ensure that hotel personnel attend additional brand standard training programs at their own expense. The Franchise Agreement also stipulates that all matters relating to arbitration will be governed by the Federal Arbitration Act, while the laws of the State of Illinois govern the agreement and the relationship between The Standardx and the franchisee, except where federal law or the Rhode Island Franchise Investment Act applies. This means that The Standardx can pursue legal remedies for breaches of the Franchise Agreement, subject to arbitration obligations and jurisdictional considerations.