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Holiday Inn Franchising Requirements Pennsylvania Class Action

This class action concerns Holiday Inn franchising costs, bringing suit against Holiday Hospitality Franchising, LLC (HHF), Six Continents Hotels, Inc. (which does business as Intercontinental Hotels Group) (IHG), and IHG Owners Association. The complaint alleges that the franchising arrangements impose onerous and unnecessary requirements on franchisees that are designed not to improve the business but to provide kickbacks for the franchisors.

The class for this action is all US residents, whether persons or business entities, who operate or operated a Holiday Hospitality Franchising franchise hotel in Pennsylvania pursuant to a License Agreement, between January 1, 2014 and the date the class is certified in this case.

IHG operates roughly 5,600 hotels under brands such as Crowne Plaza, InterContinental, and Staybridge Suites. Its “mainstay chain” is Holiday Inn, with Holiday Inn, Holiday Inn Express, and Holiday Inn Resort hotels, which account for 70% of its hotels. It franchises these hotels through its affiliate Holiday Hospitality Franchising (HHF).

The franchisees are often individuals, single-member limited liability companies, or closely-held corporations, the complaint claims, as well as immigrants or second-generation Americans from India or other South Asian countries who are attracted to family-owned businesses that they can build up “through diligence, dedication and hard work.”

However, the complaint alleges that the franchising arrangements involve “unlawful, abusive, fraudulent, anticompetitive and unconscionable practices designed solely to benefit and to enrich IHG/HHF’s shareholders and to do so at the expense and to the detriment of” the franchisees.

One of the things IHG/HHF does, the complaint alleges, is to require that its franchisees use only certain vendors and suppliers to obtain the goods and services needed to operate the hotels. This might not be a bad thing if it resulted in lower prices for the franchisees, but the complaint claims that it works the opposite way, “impos[ing] well above-market procurement costs” on them. According to the complaint, the expensive products bought through the approved vendors are “overwhelmingly of inferior quality.”

Particularly onerous and costly, the complaint claims, is the Property Improvement Plan (PIP). This involves requiring franchisees to do frequent renovations, remodeling, and construction. In doing this, the complaint alleges, IHG/HHF “manipulates and shortens the warranty periods on mandated products the franchisees must purchase, then disingenuously uses this to justify PIP requirements as purportedly necessary to meet ‘brand standards’ when, in reality, IHG/HHF’s sole purpose is to maximize its kickbacks and unjustifiably run up costs on their franchisees in bad faith.”

The complaint makes other allegations involving fees and penalties. These include marketing fees and programs, more than one fee charged for the same product or service, fees for hotel inspections, and penalties assessed for customer complaints, among other things.

The counts include breach of contract, breach of fiduciary duty, and anticompetitive actions, among other things.

Article Type: Lawsuit
Topic: Contract

Most Recent Case Event

Holiday Inn Franchising Requirements Pennsylvania Complaint

June 29, 2021

This class action concerns Holiday Inn franchising costs, bringing suit against Holiday Hospitality Franchising, LLC (HHF), Six Continents Hotels, Inc. (which does business as Intercontinental Hotels Group) (IHG), and IHG Owners Association. The complaint alleges that the franchising arrangements impose onerous and unnecessary requirements on franchisees that are designed not to improve the business but to provide kickbacks for the franchisors.

Holiday Inn Franchising Requirements Pennsylvania Complaint

Case Event History

Holiday Inn Franchising Requirements Pennsylvania Complaint

June 29, 2021

This class action concerns Holiday Inn franchising costs, bringing suit against Holiday Hospitality Franchising, LLC (HHF), Six Continents Hotels, Inc. (which does business as Intercontinental Hotels Group) (IHG), and IHG Owners Association. The complaint alleges that the franchising arrangements impose onerous and unnecessary requirements on franchisees that are designed not to improve the business but to provide kickbacks for the franchisors.

Holiday Inn Franchising Requirements Pennsylvania Complaint
Tags: Anticompetitive Actions, Breach of Contract, Excessive Fees, Franchise-Related