The Georgia Court of Appeals held that Holiday Hospitality Franchising, LLC, the franchisor of the Holiday Inn Express & Suites brand, was entitled to $1.97 million in liquidated damages from a former franchisee. Atlanta Hosp. Inv., LLC v. Holiday Hosp. Franchising, LLC, 2026 WL 1504381 (Ga. Ct. App. May 29, 2026). The franchisee, Atlanta Hospitality Investment, intentionally breached its license agreement with Holiday Hospitality only two years into the twenty-year term. Atlanta Hospitality then filed a declaratory judgment action arguing that the license agreement’s liquidated damages provision was unconscionable and an unenforceable penalty. Holiday Hospitality countersued for its contractual liquidated damages. The trial court denied Atlanta Hospitality’s motion for summary judgment and awarded Holiday Hospitality the contractual liquidated damages. Atlanta Hospitality appealed the judgment, and the Georgia Court of Appeals affirmed.
The parties’ license agreement included a liquidated damages provision that calculated damages based on a 36-month formula tied to the hotel’s historical performance. In the agreement, Atlanta Hospitality agreed that because it was difficult to ascertain the exact damages caused by early termination, liquidated damages represented the best estimate of the damages arising from premature termination. Atlanta Hospitality likewise agreed that the liquidated damages were “only damages for the premature termination of th[e] [l]icense, and not as a penalty or as damages for breaching th[e] [l]icense.” The court noted that the 36-month formula was based on Holiday Hospitality’s reasonable estimate that it took about 36 months to identify, onboard, and begin receiving revenue from a replacement licensee following an early termination. Thus, the court held that the liquidated damages provision was enforceable and not an unlawful penalty. Instead, the liquidated damages were a “reasonable pre-estimate of [Holiday Hospitality’s] probable loss” caused by Atlanta Hospitality’s early termination of the agreement.
*Angelina Ferrara is a Summer Associate for Lathrop GPM who contributed to the writing of this post.