fbpx

Holiday Inn Requirements Strain Franchisees Texas Class Action

Franchising companies have a great deal of say in how franchisees conduct their businesses. But the complaint for this class action alleges that the requirements imposed by Holiday Hospitality Franchising, LLC (HFF), Six Continents Hotels (which does business as Intercontinental Hotels Group (IHG), and IHG Owners Association (IHGOA), Inc. are excessive and detrimental to the franchisees.

The class for this action is all US residents that operate or have operated a Holiday Hospitality Franchising LLC hotel in Texas under a license agreement, between January 1, 2014 and the date the class is certified in this case.

The biggest brand name for IHG is Holiday Inn, which includes Holiday Inns, Holiday Inn Expresses, and Holiday Inn Resorts. According to the complaint, “IHG’s Holiday Inn brands account for approximately 70% of its total hotel count.” The franchises are sold through HHG. The plaintiff in this case, PH Lodging Tomball, LLC, is one such franchisee.

The complaint alleges that the defendant companies “engage in unconscionable, fraudulent, unlawful, anticompetitive and discriminatory business practices in connection with the IHG hotel franchise system” that are “designed solely to benefit and to enrich IHG/HHF’s shareholders and to do so at the expense and to the detriment of” franchisees.

For one thing, the complaint alleges that the companies require that franchisees use certain specific vendors to obtain the goods and services necessary for the hotels. According to the complaint, these suppliers charge higher rates, including in relation to what the complaint calls the “onerous and exorbitant Property Improvement Plan (‘PIP’).”

The PIP program is purportedly to maintain “brand standards,” where the companies regularly require franchisees to do renovations and remodeling, but the complaint claims that in reality, IHG/HHF’s sole purpose is to maximize its kickbacks and unjustifiably run up costs on their franchisees in bad faith.”

While IHG/HHF claims that its negotiations with specific vendors is to use collective bargaining power for group discounts and ensure the quality of products and services, the complaint alleges that the companies’ “primary goal” in these negotiations is “to secure the largest possible kickback for itself, which vendors finance through the above-market rates charged to franchisees…”

In fact, rather than this system maintaining quality for the franchisees, the complaint claims, it delivers products that are “overwhelmingly of inferior quality.”

Furthermore, franchisees are required to participate in a reward program that the complaint claims operate to their detriment in a number of ways. While franchises are supposedly permitted to opt out of certain programs, the complaint alleges that those who do are subject to retaliation.

These and other actions, the complaint alleges, “are unconscionable and outrageous, and have pushed franchisees to the breaking point.”

The counts include breach of contract, accounting violations, and violations of the Sherman (antitrust) Act, among other things.

Article Type: Lawsuit
Topic: Contract

Most Recent Case Event

Holiday Inn Requirements Strain Franchisees Texas Complaint

June 3, 2021

Franchising companies have a great deal of say in how franchisees conduct their businesses. But the complaint for this class action alleges that the requirements imposed by Holiday Hospitality Franchising, LLC (HFF), Six Continents Hotels (which does business as Intercontinental Hotels Group (IHG), and IHG Owners Association (IHGOA), Inc. are excessive and detrimental to the franchisees.

Holiday Inn Requirements Strain Franchisees Texas Complaint

Case Event History

Holiday Inn Requirements Strain Franchisees Texas Complaint

June 3, 2021

Franchising companies have a great deal of say in how franchisees conduct their businesses. But the complaint for this class action alleges that the requirements imposed by Holiday Hospitality Franchising, LLC (HFF), Six Continents Hotels (which does business as Intercontinental Hotels Group (IHG), and IHG Owners Association (IHGOA), Inc. are excessive and detrimental to the franchisees.

Holiday Inn Requirements Strain Franchisees Texas Complaint
Tags: Breach of Contract, Franchise-Related, Kickbacks