The Franchise Memorandum

In Six Continents Hotels, Inc. v. CPJFK, LLC, 2012 U.S. Dist. LEXIS 131675 (E.D.N.Y. Sept. 11, 2012), the franchisor of the Crowne Plaza Hotels system was awarded a large judgment against a terminated hotel franchisee that had failed to meet its financial obligations. The judge granted the franchisor’s unopposed motion for summary judgment on liability. The court ruled that franchisor Six Continents was entitled to terminate the agreement and collect damages. The court went on to find Six Continents could collect unpaid fees and liquidated damages, and it approved the formula set forth in the license agreement to calculate liquidated damages.

As to the specific amount of damages, at a magistrate judge’s request, the franchisor submitted a supplemental memorandum and declaration from its credit and collections manager. The magistrate found the franchisor’s submissions sufficient to provide a basis for the specified damages. The submission on unpaid fees of over $326,000 was properly supported by a “Fact Sheet” showing each credit and charge on the franchisee’s account, the court found, and the submission supporting liquidated damages of $1,973,689.37 properly tracked language in the license agreement and was compliant with the applicable state law of Georgia, which requires liquidated damages to bear a reasonable proportion to the probable loss sustained by the plaintiff.