Under what condition can either party terminate The Standardx Franchise Agreement due to condemnation?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
- 10.1 Condemnation.
Franchisee must immediately notify Hyatt of any proposed taking all or a substantial portion of the Hotel by eminent domain, condemnation or expropriation.
If the parties do not otherwise agree to relocate the Hotel, then either party may terminate this Agreement immediately upon written notice to the other.
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, either The Standardx or the franchisee can terminate the Franchise Agreement if the hotel is subject to condemnation, eminent domain, or expropriation, and the parties cannot agree to relocate the hotel. The franchisee must immediately inform The Standardx (referred to as Hyatt in the document) of any proposed taking of all or a substantial portion of the hotel.
This clause protects both parties in the event of unforeseen governmental actions that render the hotel unusable at its current location. It allows for a mutual agreement to relocate, which could benefit the franchisee by allowing them to continue operating the business in a new location, and benefits The Standardx by maintaining its brand presence. However, if relocation is not feasible or agreeable, either party can terminate the agreement.
It is important to note that if the franchisee and its owners sign a Termination Agreement, the franchisee will not be required to pay liquidated damages at the time of termination. However, the Termination Agreement stipulates that if the franchisee or its affiliates begin construction on or operation of a hotel of the same Hotel Type 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 the franchisee and its owners fail to sign such Termination Agreement within a reasonable time after The Standardx delivers it to the franchisee, then the franchisee must pay The Standardx 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.
This section of the FDD highlights the importance of carefully reviewing the terms of the Franchise Agreement and any related Termination Agreements with legal counsel to fully understand the obligations and potential liabilities in the event of termination due to condemnation.