EVEN Hotels
Hospitality
Founded 198922 locationsCompany Profile
Year Founded:1989
EVEN Hotels Franchise Cost
| Franchise Fee: | $75,000Key Metric |
| Total Investment: | $17,740,000 - $27,410,000Key Metric |
| Liquid Capital: | $4,032,500 |
| Royalty Fee: | 5% of gross sales |
| Marketing Fee: | 4% of gross sales |
Quick ROI Calculator
Based on EVEN Hotels's actual financial data
Outlet Counts by Year
Historical outlet data extracted from FDD documents
Total US Locations:22
Scale relative to 1,000 locations
Franchised Units:22
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AI-Powered Due Diligence Analysis
Our advanced AI analyzes Franchise Disclosure Documents (FDDs) to identify potential risks and opportunities across 10 critical categories.
11
High Risk
Critical items
25% of total
25
Medium Risk
Monitor closely
57% of total
8
Low Risk
Manageable items
18% of total
44
Total Items
Factors analyzed
10 categories
5.34
Overall Score
Low RiskHigh Risk
010
Franchisor Stability Risks
5 risks identified
1
3
1
Potential Trademark Infringement
Medium
Explanation:
- While the FDD states there are no current infringements that could materially affect franchisee use, the language suggests the possibility of future infringements. The statement "it believes that there are no infringements..." lacks definitive assurance and relies on the franchisor's current understanding, which could change.
Potential Mitigations:
- Request clarification from the franchisor regarding their trademark monitoring and enforcement procedures. Seek details on past infringement cases and their resolution.
- Consult with an intellectual property attorney to assess the strength of the trademarks and the potential risks of future infringement.
FDD Citations:
- Introductory section before Item 8: "...it believes that there are no infringements of its principal trademark that could materially affect your use..."
Limited Recourse for Punitive Damages
Medium
Explanation:
- The FDD discloses that the License Agreement includes a waiver of the right to punitive damages against the franchisor. This limits the franchisee's potential recovery to actual damages, even in cases of egregious misconduct by the franchisor.
- While the FDD notes this may not be enforceable in California, it doesn't address other states.
Potential Mitigations:
- Consult with an attorney in your jurisdiction to understand the enforceability of this waiver and explore potential legal options.
- Carefully evaluate the implications of this limitation and consider the potential financial risks in case of disputes with the franchisor.
FDD Citations:
- Item 10: "The License Agreement contains a provision requiring you to waive your right to punitive damages against Holiday..."
Venue Restrictions and Choice of Law
Medium
Explanation:
- Item 9 encourages prospective licensees to consult legal counsel regarding potential restrictions on venue outside California. This suggests the License Agreement may contain such clauses, which could make legal action more difficult and costly for franchisees.
- The North Dakota Addendum explicitly deletes venue clauses outside North Dakota, confirming the existence of such clauses in the standard agreement.
Potential Mitigations:
- Review the License Agreement carefully with legal counsel to understand the specific venue and choice of law provisions and their implications.
- Negotiate with the franchisor to establish a more favorable venue or choice of law, if possible.
FDD Citations:
- Item 9: "Prospective licensees are encouraged to consult private legal counsel to determine the applicability of California and federal laws...restricting venue to a forum outside the State of California."
- North Dakota Addendum, Item 2: "Any provision in the License Agreement which designates jurisdiction or venue...in a forum outside of North Dakota, is deleted..."
Lack of Detailed Financial Performance Representations
Low
Explanation:
- The provided FDD excerpt does not include Item 19, which typically contains financial performance representations (FPRs). The absence of FPRs makes it difficult to assess the potential profitability of the franchise and increases the risk of unrealistic financial expectations.
Potential Mitigations:
- Request the complete FDD and carefully review Item 19 for any available FPRs. If no FPRs are provided, inquire about the reasons and consider the implications.
- Conduct independent market research and financial analysis to develop realistic projections for your specific location and market conditions.
- Consult with a financial advisor to assess the financial viability of the franchise opportunity.
FDD Citations:
- N/A - Item 19 not provided
Potential for Immediate Termination Related to Bankruptcy
High
Explanation:
- The Maryland Addendum reveals a provision in the License Agreement allowing for immediate termination if the licensee seeks bankruptcy protection. This poses a significant risk to the franchisee, as it could lose the entire investment if faced with financial hardship.
- While acknowledged as potentially unenforceable under federal bankruptcy law, the presence of this clause raises concerns about the franchisor's approach to franchisee financial difficulties.
Potential Mitigations:
- Consult with a bankruptcy attorney to understand the implications of this clause and the potential legal protections available under federal law.
- Carefully assess the financial risks of the franchise and develop contingency plans in case of financial distress.
- Negotiate with the franchisor to remove or modify this clause, if possible.
FDD Citations:
- Maryland Addendum, Item 2: "The License Agreement provides that it may be terminated immediately upon...the Licensee commencing any case...seeking reorganization...under any law relating to bankruptcy..."
Disclosure & Representation Risks
3 risks identified
1
2
Misrepresentation of Applicant Information
High
Explanation:
- The FDD emphasizes the reliance of IHG on the accuracy and completeness of the information provided in the application. Misrepresentation or omission of material facts could lead to termination of the license agreement and significant financial losses.
- The application process requires extensive documentation and disclosures, increasing the risk of unintentional errors or omissions that could be interpreted as misrepresentations.
Potential Mitigations:
- Engage experienced legal counsel to review the application and all supporting documents to ensure accuracy and compliance with disclosure requirements.
- Implement a rigorous internal review process involving multiple stakeholders to verify all information before submission.
- Maintain meticulous records of all communications and documentation related to the application process.
FDD Citations:
- Exhibit A-1, Application Letter: "The undersigned understand(s) that “HHFL” relies on the information provided in the Application and all documents submitted by the undersigned and co- owners…"
- Exhibit A-1, Application Letter: "All information contained in this Application is true, correct and complete as of this date."
Non-Refundable Application Fee
Medium
Explanation:
- The application fee, which is substantial (minimum $50,000 - $100,000 depending on the brand), becomes non-refundable upon IHG's approval of the application. This poses a financial risk if the franchisee subsequently decides not to proceed or if unforeseen circumstances prevent the project from moving forward.
Potential Mitigations:
- Conduct thorough due diligence before submitting the application, including market analysis, site evaluation, and financial projections, to minimize the risk of later withdrawal.
- Negotiate with IHG regarding the terms of the application fee and explore the possibility of partial refunds under specific circumstances.
- Secure financing and finalize all necessary agreements before submitting the application to ensure project viability.
FDD Citations:
- Exhibit A-1, Application Fee: "The Application Fee becomes non-refundable upon IHG approval of your Application."
- Exhibit A-1, Application Fee: Fee schedule ranging from $50,000 to $100,000 based on brand and room count.
Incomplete Application Package Delays
Medium
Explanation:
- The FDD outlines a comprehensive list of required documents for a complete application package. Failure to provide all necessary information can significantly delay the application process, potentially impacting project timelines and increasing costs.
Potential Mitigations:
- Develop a detailed checklist and timeline for gathering all required documents well in advance of the application deadline.
- Assign specific responsibilities to team members for collecting and verifying each document.
- Maintain open communication with IHG throughout the process to address any questions or concerns regarding the application requirements.
FDD Citations:
- Exhibit A-1, Application Checklist: Detailed list of required documents.
- Exhibit A-1, Application Checklist: "A complete Franchise Application package will expedite the Application Process."
Financial & Fee Risks
3 risks identified
1
2
Unilateral Fee Increases
High
Explanation:
- IHG has the right to increase certain fees, such as the Technology Services Fee and Loyalty Program Contribution, at its discretion. This lack of control over costs can significantly impact profitability.
- While the Technology Services Fee increase is capped at 10% annually, other fees like the Loyalty Program Contribution can be modified without a specified limit.
- Unpredictable fee increases make it difficult to budget and forecast accurately, potentially squeezing profit margins.
Potential Mitigations:
- Carefully analyze the historical trends and future projections of these fees during due diligence.
- Negotiate with IHG for more predictable fee structures or limitations on increases where possible.
- Build a financial model that incorporates potential fee increases to assess their impact on profitability.
FDD Citations:
- Item 3, Section B(5): "The Technology Services Fee may be increased in IHG’s reasonable discretion…"
- Item 3, Section B: "IHG may modify the amounts or the terms and conditions of the Initial Loyalty Marketing Contribution and the Loyalty Program Contribution from time to time in its sole discretion."
Mandatory Marketing and Program Fees
Medium
Explanation:
- Franchisees are obligated to pay for various mandatory programs, including marketing, technology, guest satisfaction, quality assurance, and training. The specific costs of these programs are not fully detailed, creating uncertainty about the overall financial burden.
- The open-ended nature of "other systems and programs established by IHG" leaves room for additional mandatory fees to be introduced in the future.
Potential Mitigations:
- Request a detailed breakdown of all current and anticipated mandatory program fees during due diligence.
- Inquire about IHG's historical practice regarding the introduction of new mandatory programs and associated fees.
- Assess the value and potential ROI of these mandatory programs relative to their cost.
FDD Citations:
- Item 3, Section B(6): "All fees due in connection with mandatory marketing, technology, guest satisfaction, quality assurance, training, new hotel opening and other systems and programs established by IHG or its Affiliates relating to the Brand System…"
Obligation to Maximize Revenue
Medium
Explanation:
- Franchisees are required to "maximize Gross Rooms Revenue" consistent with sound marketing practices. This obligation can limit flexibility in pricing and promotional strategies.
- The requirement could potentially conflict with other business objectives, such as attracting specific customer segments or offering discounted rates during slow periods.
Potential Mitigations:
- Clarify with IHG the specific criteria and metrics used to assess compliance with the revenue maximization requirement.
- Develop a detailed marketing and pricing strategy that aligns with IHG's revenue goals while addressing local market conditions.
- Document all marketing and pricing decisions to demonstrate compliance with the franchise agreement.
FDD Citations:
- Item 3, Section C: "Licensee will operate the Hotel so as to maximize Gross Rooms Revenue of the Hotel consistent with sound marketing and industry practice…"
Legal & Contract Risks
3 risks identified
1
2
Inconsistent Agreement Provisions with State Franchise Laws (WA & VA)
High
Explanation:
- The FDD acknowledges that provisions in the franchise agreement may conflict with specific state franchise laws in Virginia and Washington. This creates uncertainty and potential legal challenges if the agreement's terms are deemed unenforceable.
- In Virginia, termination without "reasonable cause" as defined by state law may be invalid. In Washington, several provisions, including termination, transfer fees, and non-compete clauses, are subject to the Washington Franchise Investment Protection Act.
Potential Mitigations:
- Carefully review the franchise agreement with legal counsel specializing in franchise law in both Virginia and Washington to identify any inconsistencies.
- Request clarification from the franchisor on how they intend to reconcile any conflicts between the agreement and state laws.
- Negotiate amendments to the agreement to ensure compliance with state-specific regulations before signing.
FDD Citations:
- Item 17, Virginia Addendum: "If any grounds for default or termination stated in the franchise agreement do not constitute \"reasonable cause\"...that provision may not be enforceable."
- Exhibit H, Washington Addendum, Item 1: "If any of the provisions...are inconsistent with...the Washington Franchise Investment Protection Act, the provisions of the Act will prevail."
Non-Compete Clause Enforceability Limitations (WA)
Medium
Explanation:
- Washington state law significantly restricts the enforceability of non-compete clauses against employees and independent contractors, based on earnings thresholds.
- This could limit the franchisor's ability to protect its brand and confidential information after termination or during the franchise relationship.
Potential Mitigations:
- Review the specific non-compete provisions in the franchise agreement with Washington legal counsel.
- Assess the potential impact of these limitations on business operations and employee recruitment.
- Consider alternative strategies for protecting confidential information, such as robust confidentiality agreements.
FDD Citations:
- Exhibit H, Washington Addendum, Item 7: "Pursuant to RCW 49.62.020, a noncompetition covenant is void and unenforceable...unless the employee’s earnings...exceed $100,000 per year..."
Restriction on Employee Solicitation (WA)
Medium
Explanation:
- Washington law prohibits the franchisor from restricting a franchisee from soliciting or hiring employees of other franchisees or the franchisor itself.
- This could lead to increased employee turnover and potential loss of trained personnel to competitors within the franchise system.
Potential Mitigations:
- Develop strong employee retention programs to mitigate the risk of employee poaching.
- Consult with HR and legal counsel to ensure compliance with Washington law while implementing appropriate employee management practices.
FDD Citations:
- Exhibit H, Washington Addendum, Item 8: "RCW 49.62.060 prohibits Holiday from restricting...a franchisee from (i) soliciting or hiring any employee of a franchisee of the same franchisor or (ii) soliciting or hiring any employee of the franchisor."
Territory & Competition Risks
2 risks identified
1
1
Lack of Exclusive Territory
High
Explanation:
- The FDD explicitly states that exclusive territories are typically not granted. This means you could face direct competition from other EVEN Hotels franchised by IHG, potentially impacting your market share and profitability.
- This is particularly concerning given the potential for IHG to open corporate-owned EVEN Hotels or other brands in close proximity, further intensifying competition.
- The "special circumstances" clause for granting exclusivity is vague and provides no guarantee, leaving franchisees vulnerable to increased competition.
Potential Mitigations:
- Thoroughly research the existing hotel landscape in your target market, including current and planned hotels of all brands, especially those under the IHG umbrella.
- Negotiate with IHG for as much territorial protection as possible, even if full exclusivity is unlikely. Document any agreed-upon limitations on nearby EVEN Hotels or other IHG brands.
- Develop a strong local marketing strategy to differentiate your hotel and build a loyal customer base.
- Focus on operational excellence and guest satisfaction to outperform potential competitors.
FDD Citations:
- Item 12: "Holiday does not typically grant licenses for exclusive areas or territories. The License will be for a specific site only and for the licensing of one hotel."
- Item 12: "You may face competition from other licensees, from hotels that Holiday or its affiliates own, or from other channels of distribution or competitive brands that Holiday or its affiliates control."
Potential Trademark Infringement
Medium
Explanation:
- While the FDD states there are no current known infringements, the possibility of future trademark infringements cannot be entirely ruled out. Such infringements could dilute the brand and create confusion among consumers.
- The FDD mentions the absence of "material" litigation, implying that some level of trademark disputes might exist, even if not currently considered significant.
Potential Mitigations:
- Stay informed about any trademark-related updates or legal actions involving the EVEN Hotels brand by regularly reviewing IHG communications and industry news.
- Report any suspected trademark infringements to IHG immediately to protect the brand's integrity.
- Consult with a legal professional specializing in intellectual property to understand your rights and responsibilities regarding trademark protection.
FDD Citations:
- Item 12: "it believes that there are no infringements of its principal trademark that could materially affect your use in this state or in the state where your hotel is located."
- Item 12: "There are no effective determinations...no pending interference, no known infringing use...or any pending material litigation involving the Marks that could materially affect your use of the principal trademarks."
Regulatory & Compliance Risks
6 risks identified
1
3
2
Potential Trademark Infringement or Limitation
Medium
Explanation:
- While the FDD states there are no current agreements significantly limiting trademark use and no known infringements, future challenges or undiscovered issues could arise.
- This risk is exacerbated by the reliance on the franchisor's belief rather than a definitive statement.
Potential Mitigations:
- Conduct independent due diligence regarding potential trademark conflicts or limitations.
- Consult with a trademark attorney to assess the strength and enforceability of the trademarks.
- Request clarification from the franchisor regarding their process for monitoring and addressing potential trademark issues.
FDD Citations:
- Item 1: "Other than the Master License Agreement (see Item 1) and the SCL and IHGAP License Agreements (see Item 1), there are no agreements currently in effect which may significantly limit Holiday’s rights to use or license the use of its principal trademark, and it believes that there are no infringements of its principal trademark that could materially affect your use in this state or in the state where your hotel is located."
- Item 1: "There are no effective determinations of the USPTO, Trademark Trial and Appeal Board, the Trademark Administrator of any state or any court, and no pending interference, no known infringing use or opposition or cancellation proceedings or any pending material litigation involving the Marks that could materially affect your use of the principal trademarks."
Unforeseen Royalty Fee Increases
Medium
Explanation:
- The FDD mentions the possibility of additional royalties for new activities added to the hotel in the future.
- This lack of clarity on future royalty fees creates uncertainty and potential financial strain.
Potential Mitigations:
- Negotiate clear terms regarding potential future royalty increases in the franchise agreement.
- Request a detailed explanation of the criteria for imposing additional royalties.
- Model the financial impact of potential royalty increases on projected profitability.
FDD Citations:
- Item 4, Attachment A: "Licensee agrees and acknowledges that additional royalties may be charged on revenues from any activity if it is added at the Hotel by mutual agreement and it is not now offered at Brand System Hotels generally or it is designed or developed by or for IHG or its Affiliates."
Mandatory System Fund Contributions
Low
Explanation:
- The mandatory IHG System Fund Contribution represents an ongoing cost that may increase over time.
- Lack of transparency on how these funds are used and the potential for increases poses a financial risk.
Potential Mitigations:
- Request detailed information on how the IHG System Fund is utilized.
- Inquire about the historical increases in the System Fund Contribution.
- Factor potential increases in the System Fund Contribution into financial projections.
FDD Citations:
- Item 4: "IHG System Fund Contribution means the assessments paid by Licensee, comprised of the Services Contribution and the Loyalty Program Contribution, for the IHG System Fund Activities (as defined in paragraph 4.G) to be provided by IHG and its Affiliates."
Dependence on Franchisor-Mandated Vendors
Medium
Explanation:
- The requirement to purchase network services equipment from designated vendors limits flexibility and potentially increases costs.
- This dependence on franchisor-chosen vendors could lead to unfavorable pricing or service quality.
Potential Mitigations:
- Negotiate for the right to use alternative vendors if they meet specified performance standards.
- Request detailed pricing information from the designated vendors.
- Compare pricing and services with alternative providers to assess the competitiveness of the franchisor's offerings.
FDD Citations:
- Item 8: "You must purchase all private network connecting services equipment needed to communicate with the Reservation System from any vendor designated by Holiday."
Payment Card Processing Program Requirements
Low
Explanation:
- The mandatory use of the NextGen Payments (NGP) program or its successor could lead to inflexible terms and potentially higher processing fees.
Potential Mitigations:
- Request detailed information about the NGP program, including fees, terms, and conditions.
- Compare the NGP program with alternative payment processing solutions.
- Negotiate for flexibility in choosing payment processing providers.
FDD Citations:
- Item 8: "A computerized payment card processing program, NextGen Payments (“NGP”) or such successor payments program as may be administered by SCH (see Item 8)."
Royalty Fee Not Tied to Services
High
Explanation:
- The FDD explicitly states that the Royalty Fee is solely for the franchise license and not for any goods, services, or assistance provided by IHG. This creates a risk that the value received may not justify the royalty payment, especially if IHG's support or services are lacking.
Potential Mitigations:
- Carefully evaluate the services and support provided by IHG and compare them to other franchise opportunities.
- Negotiate for performance guarantees or service level agreements to ensure adequate value for the royalty fee.
- Seek legal advice to understand the implications of this royalty structure.
FDD Citations:
- Item 4, Attachment A: "The Royalty Fee is solely in consideration of our granting Licensee the franchise conferred by this License and is not in exchange for any goods, services or assistance which may be furnished by IHG."
Franchisor Support Risks
5 risks identified
1
3
1
Lack of Control Over Employee Retention
Medium
Explanation:
- While you can hire your own staff, the FDD mentions no non-compete or non-solicitation agreements for employees. This means trained staff could leave to work for competitors, taking valuable knowledge and potentially impacting your hotel's performance.
- This is exacerbated by the mandatory training requirement by Holiday Inn, essentially making your investment in training benefit competitors if employees leave.
Potential Mitigations:
- Consult with a legal professional to explore the possibility of implementing enforceable non-compete and/or non-solicitation agreements within the bounds of applicable state laws.
- Develop attractive employee retention programs, including competitive compensation, benefits, and opportunities for professional development, to reduce employee turnover.
- Create a strong company culture that fosters loyalty and employee satisfaction.
FDD Citations:
- Item 11: "The General Manager and other department heads and staff, including Directors of Sales, must attend Holiday’s training programs."
- Item 79: "Holiday does not impose restrictions, nor does it require you to impose restrictions, on any of your employees."
Dependence on Franchisor's Technology and Vendors
High
Explanation:
- The mandatory use of Holiday Inn's designated vendors for private network connecting services and payment processing (NGP) creates a dependence on the franchisor and its chosen providers. This limits your flexibility in negotiating better pricing or switching to potentially superior alternatives.
- Any issues with the franchisor's chosen vendors, such as service disruptions, price increases, or inadequate technology, could directly impact your hotel's operations and profitability.
Potential Mitigations:
- Carefully review Item 8 for details about the NGP program and associated costs. Negotiate favorable terms regarding fees and service level agreements.
- Thoroughly investigate the designated vendors for private network connecting services. Assess their reputation, reliability, and pricing structure.
- Inquire about the franchisor's process for selecting and managing vendors, including performance monitoring and dispute resolution mechanisms.
FDD Citations:
- Item 8: "A computerized payment card processing program, NextGen Payments (“NGP”) or such successor payments program as may be administered by SCH (see Item 8)."
- Item 79: "You must purchase all private network connecting services equipment needed to communicate with the Reservation System from any vendor designated by Holiday."
Potential Conflicts with Management Companies
Medium
Explanation:
- While the FDD outlines requirements for management agreements, potential conflicts could still arise between the franchisee and the management company regarding operational decisions, financial performance, or adherence to brand standards.
- The requirement that the management company adhere to all of Holiday Inn's rules and regulations could create friction if those rules are perceived as overly restrictive or detrimental to the hotel's profitability.
Potential Mitigations:
- Engage experienced legal counsel to review and negotiate the management agreement, ensuring clear delineation of responsibilities, performance expectations, and dispute resolution mechanisms.
- Conduct thorough due diligence on potential management companies, including their track record, financial stability, and experience managing hotels under the EVEN® brand.
- Establish open communication channels and regular reporting mechanisms with the management company to address potential issues proactively.
FDD Citations:
- Item 79: "Holiday requires that any management agreement between you and a management company be in writing, and that the agreement contain certain provisions including, for example the following: the management company accepts, agrees to abide by, and is subject to all rules, regulations, inspections and requirements of Holiday…"
Confidentiality Requirements May Limit Flexibility
Low
Explanation:
- The confidentiality requirements regarding Holiday Inn's marketing and reservation programs could restrict your ability to discuss or share information with consultants, potential investors, or other stakeholders.
Potential Mitigations:
- Clearly understand the scope of the confidentiality requirements and seek clarification from Holiday Inn if necessary.
- Implement robust internal confidentiality policies and procedures to ensure compliance.
FDD Citations:
- Item 79: "…you may not disclose without Holiday’s written permission information pertaining to Holiday’s marketing and reservation programs that has not yet been disclosed to the public."
Mandatory Training Program Costs and Disruptions
Medium
Explanation:
- The mandatory training programs for management and staff represent an additional cost and could cause operational disruptions while employees are away from the hotel.
- The FDD doesn't specify the frequency, duration, or cost of these training programs, making it difficult to budget accurately and plan for potential staffing shortages.
Potential Mitigations:
- Request detailed information from Holiday Inn about the training programs, including schedules, costs, and any available online or on-site options.
- Factor the estimated training costs into your operating budget and develop contingency plans to manage staffing levels during training periods.
- Explore the possibility of negotiating with Holiday Inn to conduct some training on-site to minimize travel expenses and disruptions.
FDD Citations:
- Item 11: "The General Manager and other department heads and staff, including Directors of Sales, must attend Holiday’s training programs."
Exit & Transfer Risks
5 risks identified
1
3
1
Limited Transfer Fee Justification
Medium
Explanation:
- The Washington Addendum states that transfer fees are only collectible to the extent they reflect the franchisor's reasonable estimated or actual costs. This lacks transparency on how these costs are determined and could lead to disputes during a transfer.
Potential Mitigations:
- Request a detailed breakdown of potential transfer costs from the franchisor before signing the agreement.
- Negotiate a cap on transfer fees or a clear process for determining them.
- Consult with a franchise attorney to review the transfer fee provisions and ensure they are reasonable and justifiable.
FDD Citations:
- Item 17, Washington Addendum, Point 5: "Transfer fees may only be collectable to the extent that they reflect the franchisor's reasonable estimated or actual costs in effecting a transfer."
No Renewal Guarantee
High
Explanation:
- The FDD explicitly states that there's no obligation for Holiday to offer a continued right to operate the hotel upon license agreement expiration. This creates significant uncertainty about the future of the business and potential loss of investment after the initial term.
Potential Mitigations:
- Negotiate for a renewal option or right of first refusal in the initial agreement.
- Develop a strong business plan and maintain excellent brand standards to increase the likelihood of renewal.
- Consult with a franchise attorney to understand the implications of non-renewal and potential legal recourse.
FDD Citations:
- Item 17, Washington Addendum, Point 6: "Holiday will have no obligation upon the expiration of your License Agreement to offer the licensee a continued right to operate its Hotel..."
State-Specific Franchise Laws Superseding Agreement
Medium
Explanation:
- The Washington Addendum repeatedly emphasizes that Washington state laws supersede the License Agreement in case of conflict, particularly regarding termination. This creates complexity in understanding the governing rules and potential variations in application across different states.
Potential Mitigations:
- Carefully review the Washington Franchise Investment Protection Act and relevant case law.
- Consult with a franchise attorney specializing in Washington state law to understand the implications for the franchise relationship.
- Ensure all business practices comply with both the License Agreement and Washington state law.
FDD Citations:
- Item 17, Washington Addendum, Point 1, 3, 4
Restrictions on Non-Compete Clauses
Low
Explanation:
- Washington law restricts the enforceability of non-compete clauses for employees and independent contractors below certain earning thresholds. This could limit the franchisor's ability to protect its brand and confidential information.
Potential Mitigations:
- Review the specific language of any non-compete clauses in the agreement with legal counsel.
- Focus on other methods of protecting intellectual property, such as confidentiality agreements and robust internal security measures.
FDD Citations:
- Item 17, Washington Addendum, Point 7
Limitations on Employee Solicitation Restrictions
Medium
Explanation:
- Washington law prohibits the franchisor from restricting a franchisee from soliciting or hiring employees of other franchisees or the franchisor. This could lead to increased employee turnover and competition for qualified personnel within the franchise network.
Potential Mitigations:
- Develop competitive compensation and benefits packages to attract and retain employees.
- Foster a positive work environment and company culture to reduce employee attrition.
- Consult with an HR specialist to develop strategies for managing employee relations within the legal framework.
FDD Citations:
- Item 17, Washington Addendum, Point 8
Operational & Brand Risks
6 risks identified
1
3
2
Payment System Dependence and Security
High
Explanation:
- Reliance on a single, franchisor-mandated payment processing system (NGP) creates dependence on SCH and exposes the franchisee to potential disruptions, security breaches, and unfavorable contract terms.
- Changes or issues with NGP could significantly impact operations and revenue.
- Security breaches within NGP could lead to financial losses, reputational damage, and legal liabilities.
Potential Mitigations:
- Thoroughly review the NGP agreement, including terms related to fees, liability, and dispute resolution.
- Implement robust cybersecurity measures to protect against data breaches.
- Explore backup payment processing options in case of NGP outages or issues.
FDD Citations:
- "A computerized payment card processing program, NextGen Payments (“NGP”) or such successor payments program as may be administered by SCH (see Item 8)."
Mandatory Equipment Purchase from Designated Vendor
Medium
Explanation:
- Requiring purchase of network equipment from a designated vendor limits franchisee flexibility and potentially exposes them to higher prices and limited choices.
- Dependence on a single vendor can create difficulties if the vendor's service quality deteriorates or if the equipment becomes obsolete.
Potential Mitigations:
- Negotiate favorable pricing and service agreements with the designated vendor.
- Research the designated vendor's reputation and track record.
- Inquire about the possibility of using alternative vendors in the future.
FDD Citations:
- "You must purchase all private network connecting services equipment needed to communicate with the Reservation System from any vendor designated by Holiday."
Mandatory Training Programs
Low
Explanation:
- Mandatory training programs for staff, while beneficial, represent a cost and time commitment for the franchisee.
- The effectiveness of these programs may vary, and they may not fully address the specific needs of the franchisee's location.
Potential Mitigations:
- Factor the cost and time commitment of training programs into the budget.
- Evaluate the training program curriculum and assess its relevance to the franchisee's operations.
- Supplement the franchisor's training with additional training resources as needed.
FDD Citations:
- "The General Manager and other department heads and staff, including Directors of Sales, must attend Holiday’s training programs (see Item 11)."
Confidentiality Restrictions
Low
Explanation:
- Confidentiality restrictions, while necessary to protect the franchisor's intellectual property, can limit the franchisee's ability to discuss certain aspects of the business with external parties.
Potential Mitigations:
- Carefully review the confidentiality agreement and understand its scope.
- Establish clear internal procedures for handling confidential information.
- Consult with legal counsel if there are any uncertainties about the confidentiality requirements.
FDD Citations:
- "Holiday and you agree to comply with each other's reasonable requirements concerning confidentiality of information, and in particular, you may not disclose without Holiday’s written permission information pertaining to Holiday’s marketing and reservation programs that has not yet been disclosed to the public."
Management Agreement Restrictions
Medium
Explanation:
- The franchisor's requirements for management agreements can restrict the franchisee's choice of management companies and impose specific terms that may not be favorable.
- The requirement that the management company adhere to all franchisor rules and regulations can create potential conflicts of interest.
Potential Mitigations:
- Carefully review the franchisor's requirements for management agreements and negotiate any unfavorable terms.
- Seek legal counsel to ensure that the management agreement protects the franchisee's interests.
- Ensure that the chosen management company understands and accepts the franchisor's requirements.
FDD Citations:
- "Holiday requires that any management agreement between you and a management company be in writing, and that the agreement contain certain provisions including, for example the following: the management company accepts, agrees to abide by, and is subject to all rules, regulations, inspections and requirements of Holiday; you and the management company will cease operating the hotel as an EVEN® Hotel if the License terminates;"
License Termination Clause in Management Agreement
Medium
Explanation:
- The requirement that the management agreement terminate upon license termination can create instability and disruption for the franchisee if the license is terminated for any reason.
Potential Mitigations:
- Negotiate with the franchisor to allow for the continuation of the management agreement under certain circumstances, such as a change of ownership.
- Include provisions in the management agreement that address the consequences of license termination and protect the franchisee's interests.
FDD Citations:
- "you and the management company must agree that the License [terminates]..." (Partial quote, context indicates license termination clause)
Performance & ROI Risks
6 risks identified
2
3
1
Limited Historical Performance Data
High
Explanation:
- Item 19 explicitly states that only the information provided within Item 19 and any potential supplemental reports are authorized disclosures of historical performance. This severe restriction on accessing past performance data makes it difficult to accurately assess the brand's typical financial trajectory and ROI potential. Relying solely on limited information provided by the franchisor creates an information asymmetry and increases the risk of making an uninformed investment decision.
Potential Mitigations:
- Thoroughly analyze all available data in Item 19 and request any supplemental financial performance representations for similar markets or hotel types.
- Consult with experienced hospitality industry financial analysts and consultants to benchmark the limited data against industry averages and competitors.
- Network with existing EVEN Hotels franchisees (listed in Exhibit E-1) to gather anecdotal information about their performance, while understanding they may be reluctant to share sensitive financial details.
- Negotiate with the franchisor for access to more comprehensive historical performance data, even if aggregated or anonymized.
FDD Citations:
- Item 19: "The only information we will furnish to you regarding historic (never projected) hotel performance is that set forth in this Item 19 and in any “supplemental financial performance representation” directed to a particular location or circumstance..."
Lack of Company-Owned Outlet Performance Data
High
Explanation:
- Table 4 in Item 20 shows that all company-owned outlets were sold to licensees by the end of 2022. This absence of ongoing company-owned hotel performance data eliminates a valuable benchmark for franchisee performance and raises concerns about the franchisor's confidence in the brand's profitability under their direct management.
Potential Mitigations:
- Inquire about the rationale behind the sale of all company-owned units and the performance of those units prior to the sale.
- Focus on benchmarking against the performance of existing franchisees (Exhibit E-1) and industry averages.
- Seek expert advice from hospitality consultants to assess the potential impact of the lack of company-owned data on investment projections.
FDD Citations:
- Item 20, Table 4: Shows zero company-owned outlets from 2023 onwards.
Limited Franchise System Growth
Medium
Explanation:
- While Table 1 shows a slight increase in total outlets from 19 to 22 between 2022 and 2024, the overall growth of the EVEN Hotels franchise system is relatively slow. Limited system growth can indicate challenges with brand recognition, market saturation, or franchisee profitability, potentially impacting future support and marketing effectiveness.
Potential Mitigations:
- Investigate the reasons for the slow growth by speaking with existing franchisees and industry experts.
- Assess the franchisor's plans for future expansion and marketing initiatives to drive brand awareness.
- Consider the potential impact of limited system growth on economies of scale for purchasing and marketing.
FDD Citations:
- Item 20, Table 1: Shows a net increase of only 3 outlets over three years.
Franchisee Turnover
Medium
Explanation:
- Table 2 indicates one franchise transfer in 2023. While not a large number, franchisee turnover can be a sign of underlying issues such as profitability challenges, disagreements with the franchisor, or operational difficulties. It's crucial to understand the reasons behind any transfers.
Potential Mitigations:
- Contact the former franchisee listed in Exhibit E-2 to understand their reasons for leaving the system.
- Analyze the overall turnover rate in comparison to industry benchmarks.
- Carefully review the franchise agreement for terms related to transfers and terminations.
FDD Citations:
- Item 20, Table 2: Shows one transfer in 2023.
Reliance on Affiliated Management
Medium
Explanation:
- The footnote to Table 3 reveals that Holiday affiliates manage 5 EVEN Hotels. While not inherently negative, a significant reliance on affiliated management can raise concerns about potential conflicts of interest and the franchisor prioritizing their own managed hotels over independently owned franchisees.
Potential Mitigations:
- Inquire about the franchisor's policies and procedures for managing potential conflicts of interest between company-managed and franchised hotels.
- Seek feedback from franchisees about their experiences with the franchisor's management practices.
- Carefully review the franchise agreement for any clauses related to affiliated management and its impact on franchisee operations.
FDD Citations:
- Item 20, Table 3 Footnote: "As of December 31, 2024, Holiday’s affiliates managed 5 EVEN Hotels."
Dependence on IHG Owners Association
Low
Explanation:
- The FDD highlights the IHG Owners Association's role in advising on marketing and reservation fund expenditures. While presented as a benefit, this structure creates a dependence on the association and its effectiveness in representing franchisee interests. There's a risk that the association may not adequately represent all franchisees or that the franchisor may not fully consider its recommendations.
Potential Mitigations:
- Research the IHG Owners Association's history, structure, and bylaws to understand its operations and influence.
- Contact current EVEN Hotels franchisees to gather their perspectives on the association's effectiveness and responsiveness to franchisee concerns.
- Review the franchise agreement for details on the association's role and any related fees or obligations.
FDD Citations:
- Item 20: Describes the role and structure of the IHG Owners Association.
FDD Documents by Year
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FDD Year: 2025
Uploaded: 8/8/2025
FDD Year: 2024
Uploaded: 8/25/2025
FDD Documents
Access and download Franchise Disclosure Documents by year