Case 2:21-cv-13726 Document 1 Filed 07/16/21 Page 1 of 52 PageID: 1
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF NEW JERSEY
`TRENTON DIVISION
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` CIVIL ACTION No. 21-13726
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` JURY TRIAL DEMANDED
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`A HUNTS MILLS ASSOCIATES LLC, a New
`Jersey Limited Liability Company, individually
`and on behalf of all others similarly situated,
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` Plaintiff,
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`v.
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`HOLIDAY HOSPITALITY FRANCHISING,
`LLC, SIX CONTINENTS HOTELS, INC. d/b/a
`INTERCONTINENTAL HOTELS GROUP
`and IHG OWNERS ASSOCIATION, INC.
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` Defendants.
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`COMPLAINT – CLASS ACTION
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`Plaintiff A HUNTS MILLS ASSOCIATES LLC, a New Jersey Limited Liability
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`Company, individually and on behalf of all others similarly situated, brings this class action lawsuit
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`against Holiday Hospitality Franchising, LLC, Six Continents Hotels, Inc. d/b/a Intercontinental
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`Hotels Group and IHG Owners Association, Inc. and alleges as follows upon personal knowledge
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`as to itself and its own acts and experience and as to all other matters upon information and belief,
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`including investigation conducted by its attorneys.
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`INTRODUCTION
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`1.
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`Defendant Six Continents Hotels, Inc. (“SCH”) is the world’s largest hotel
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`company by room count, and does business under the name InterContinental Hotels Group
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`(“IHG”) (SCH and IHG may hereinafter be collectively referred to as “IHG”).
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`2.
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`IHG operates approximately some 5,600 hotels across more than 15 brands. IHG
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`takes an asset-light approach, owning, franchising and/or managing hotels for third parties, with
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`Holiday Inn as its mainstay chain, under such brands as Holiday Inn, Holiday Inn Express and
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`Holiday Inn Resorts (collectively, the “Holiday Inn Brands”), each bearing the identification as
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`“an IHG Hotel.”
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`3.
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`IHG also owns, manages and/or franchises other hotel brands such as Crowne
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`Plaza, InterContinental, Staybridge Suites, Candlewood Suites, Hotel Indigo, Regent and
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`Kimpton.
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`4.
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`5.
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`IHG’s Holiday Inn Brands account for approximately 70% of its total hotel count.
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`IHG owns Defendant Holiday Hospitality Franchising, LLC (“HHF”), its affiliate
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`which markets, offers and sells Holiday Inn Brand franchises including, but not limited to, Holiday
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`Inn, Holiday Inn Express and Holiday Inn Resort.
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`6.
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`Defendant IHG owns and acts through its franchising affiliate, HHF and its agent
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`and representative IHG Owners Association, Inc. (“IHGOA”).
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`7.
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`HHF enters into standardized franchise agreements entitled “Holiday Hospitality
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`Franchising, LLC License Agreement(s)” (“License Agreement”) with its franchisees.
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`8.
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`Plaintiff A HUNTS MILLS ASSOCIATES LLC, a New Jersey Limited Liability
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`Company, is a franchisee that owns and operates a hotel located at 111 West Main Street in
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`Clinton, New Jersey 08809 (the “Hotel”), that bears an HHF brand mark pursuant to a License
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`Agreement.
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`9.
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`Many HHF franchisees are individuals, single member limited liability companies
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`or closely held corporations who are either immigrants or second-generation Americans of Indian
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`or other South Asian origin.
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`Plaintiff is one such HHF franchisee.
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`The hotel franchise industry holds particular appeal and attraction to these
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`franchisees by providing investment and traditional family business ownership opportunities
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`which they can build through diligence, dedication and hard work.
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`12.
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`This class action lawsuit seeks to put an end to IHG/HHF’s unlawful, abusive,
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`fraudulent, anticompetitive and unconscionable practices designed solely to benefit and to enrich
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`IHG/HHF’s shareholders and to do so at the expense and to the detriment of Plaintiff and the class
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`members, namely, similarly situated HHF franchisees in the State of New Jersey.
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`13.
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`At the heart of IHG/HHF’s unlawful scheme is its requirement that its franchisees
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`use certain mandated vendors and suppliers for the purchase of virtually all goods and services
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`necessary to maintain and to operate a hotel.
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`14.
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`IHG/HHF’s forced exclusive use of certain chosen vendors and suppliers imposes
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`well above-market procurement costs on its franchisees which include, but are not limited to, those
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`associated with its onerous and exorbitant Property Improvement Plan (“PIP”).
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`15.
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`Under the guise of improving the franchisees’ hotels to maintain “brand standards,”
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`IHG/HHF forces its franchisees to frequently undertake expensive renovations, remodeling and
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`construction as part of a PIP.
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`16.
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`And, in so doing, IHG/HHF manipulates and shortens the warranty periods on
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`mandated products the franchisees must purchase, then disingenuously uses this to justify PIP
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`requirements as purportedly necessary to meet “brand standards” when, in reality, IHG/HHF’s
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`sole purpose is to maximize its kickbacks and unjustifiably run up costs and fees on their
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`franchisees in bad faith.
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`17.
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`IHG/HHF deceitfully represent to their franchisees that they select vendors with
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`the laudable goal of using the franchisees’ collective bargaining power to secure a group discount
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`and to ensure adequate quality and supply of products and services, and refer to these procurement
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`programs as the “IHG Marketplace.”
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`18.
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`In fact, however, IHG/HHF’s primary goal in negotiating with vendors has little to
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`nothing to do with the best interests of its franchisees. Rather, IHG/HHF’s primary and overriding
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`interest is to secure the largest possible profit and kickback (or “rebates”) for itself, which the
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`chosen vendors finance through the above-market rates charged to HHF franchisees in collusion
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`with IHG/HHF.
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`19.
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`Furthermore, the above-market priced products which IHG/HHF forces franchisees
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`to purchase through the IHG Marketplace (and related programs) is overwhelmingly of inferior
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`quality.
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`20.
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`These low-quality “IHG Approved” purchases are forced upon franchisees and
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`disingenuously characterized as meeting supposed brand standards of quality, when in truth the
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`sole purpose is to maximize kickbacks for IHG/HHF and unjustifiably run up costs on their
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`franchisees in bad faith.
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`21.
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`Upon information and good faith belief, IHG/HHF have each netted tens of millions
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`of ill-gotten dollars as a result of illicit vendor supply arrangements.
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`22.
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`Additionally, IHG/HHF engages in other oppressive, bad-faith, fraudulent and
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`unconscionable conduct as more fully described herein. For instance, IHG holds itself out to the
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`public as offering discounts, travel benefits and other perks to repeat guests through its IHG
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`Rewards Club loyalty program.
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`23.
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`IHG has a mobile booking app as well as cloud-based hotel solutions which it
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`represents as driving demand for its hotel owners and which ostensibly allows hotel owners to
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`reach potential guests at a lower cost. Hotel guests can accumulate points per dollars spent which
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`can be redeemed at IHG hotels.
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`24. When those points are then redeemed at a hotel, however, only a small fraction of
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`the value is reimbursed to franchisees while IHG/HHF requires that Plaintiff and franchisees (and
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`not IHG/HHF) pay taxes on the full value of the product or service obtained by the redeeming
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`hotel guests.
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`25.
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`Furthermore, in instances where hotel guests’ accumulated reward points from
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`stays at Plaintiff’s (or other franchisees’) hotel expire, the points never return to Plaintiff or to any
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`source-of-origin franchisees.
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`26. Whenever a guest calls IHG Guest Relations to complain about poor service,
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`regardless of who is at fault, the hotel is penalized without appropriate investigations and charged
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`case management fees of over $150, in addition to any other monetary reimbursements provided
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`to the guest. In an attempt to appease guests, IHG Guest Relations representatives unjustly assess
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`penalties to the hotels and rarely considers the franchisees’ perspective, depriving franchisees the
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`right to address and to remedy the situation with minimal loss.
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`27.
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`IHG/HHF also frequently introduces new marketing programs under the guise of
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`providing franchisees with a “choice” as to whether they should participate or not.
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`28.
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`In reality, however, all such marketing programs are forced upon the franchisees
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`insofar as any and all decisions to “opt out” are met with vindictive, punitive and retaliatory action
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`by IHG/HHF.
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`29.
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`These programs are in addition to all marketing fees contracted and paid for by the
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`franchisees further to the License Agreements, and serve as an additional revenue source by
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`imposing additional fees and fines for the sole profit and benefit of IHG/HHF, and to do so without
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`disclosure or agreement by deceit, implied threat and actual retribution rendering franchisees’
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`supposed “opt-out” choice completely illusory.
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`30.
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`Furthermore, although the facts set forth herein predominantly existed before
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`March 2020 and continuously thereafter, IHG/HHF has ceased all of its marketing since the
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`imposition of Covid-19 related restrictions in early 2020 yet it has continued to collect marketing-
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`related fees from Plaintiff and the Class Members.
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`31.
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`That is, despite the fact that IHG/HHF has not been engaged in any marketing
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`activities or efforts for approximately a year, it continues to require Plaintiff and the Class
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`Members to pay significant marketing related fees for which they receive nothing in return.
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`32. Moreover, IHG/HHF routinely assesses additional fees and penalties against
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`franchisees which are not authorized by the applicable License Agreement and are fundamentally
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`excessive and unfair. These fees and penalties are disingenuously assessed as a means to
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`intimidate franchisees, including to serve as bad faith bases for default notices and threatened
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`termination, as well as to harm the economic viability, profitability and creditworthiness of the
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`targeted franchisees.
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`33.
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`For instance, IHG/HHF routinely requires its franchisees to pay multiple fees for
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`the same product or service. And, IHG/HHF routinely assesses additional fees against franchisees
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`for services and products that IHG/HHF either does not, in fact, provide or provides at an inferior
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`quality.
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`34.
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`IHG/HHF imposes requirements on its franchisees to undergo hotel inspections any
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`time there are conversions, construction, changes in ownership, brand changes or re-licensing. In
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`conjunction with IHG/HHF’s unilaterally imposed mandates for any such hotel changes,
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`IHG/HHF requires its franchisees to pay for the inspections, IHG/HHF’s written reports and any
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`re-evaluations and re-inspections that IHG/HHF alone deems necessary.
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`35.
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`In practice, IHG/HHF stages these inspections to maximize criticism of franchisee
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`hotels as a pretext for imposing additional inspections, reports and fines, all deliberately interposed
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`for IHG/HHF’s own financial benefit and to the detriment of franchisees.
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`36.
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`IHG/HHF arbitrarily imposes rules and regulations and/or unreasonably interprets
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`rules and regulations in order to justify assessing monetary penalties against franchisees.
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`37.
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`Quite egregiously, IHG/HHF routinely discriminates, demeans and is both
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`explicitly and implicitly hostile and bigoted towards Plaintiff and towards other Indian-American
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`and South Asian-American franchisees.
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`38.
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`IHG/HHF corrupts its Owners Association, the IHGOA, the function of which
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`IHG/HHF represents in the License Agreement is “to function in a manner consistent with the best
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`interests of all persons using the System” but instead is staffed almost exclusively with IHG/HHF
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`representatives to the exclusion of franchisees and operates to undermine and to harm the very
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`hotel owners and franchisees it purports to represent.
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`39.
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`HHF’s actions are unconscionable and outrageous, and have pushed franchisees to
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`the financial breaking point.
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`40.
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`This class action lawsuit, brought by Plaintiff on behalf of itself and all similarly
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`situated IHG/HHF franchisees in the State of New Jersey, seeks an accounting (COUNT VI),
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`declaratory (COUNT IV) and injunctive relief, monetary damages and other relief for breach of
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`contract (COUNT I) and breach of fiduciary duty (COUNT II), as well as recovery for violations
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`of the New Jersey Franchise Practices Act, N.J. Rev. Stat. § 56:10, et seq. (Count III), and the
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`Sherman Act, 15 U.S.C. § 1 (COUNT V).
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`JURISDICTION AND VENUE
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`This Court has subject matter jurisdiction over the federal law claims asserted in
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`41.
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`this class action lawsuit pursuant to pursuant to 28 U.S.C. § 1331 as Plaintiff alleges violations of
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`a federal statute, the Sherman Act, 15 U.S.C. § 1.
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`42.
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`This Court has subject matter jurisdiction over this action pursuant to the Class
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`Action Fairness Act of 2005, Pub. L. No. 109-2 Stat. 4 (“CAFA”), which, inter alia, amends 28
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`U.S.C. § 1332, at new subsection (d), conferring federal jurisdiction over class actions where, as
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`here: (a) there are 100 or more members in the proposed class; (b) some members of the proposed
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`Class have a different citizenship from Defendants and (c) the claims of the proposed class
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`members exceed the sum or value of five million dollars ($5,000,000) in aggregate. See 28 U.S.C.
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`§ 1332(d)(2) & (6).
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`43.
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`This Court has subject matter jurisdiction over the state law claims asserted in this
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`action pursuant to 28 U.S.C. § 1367 because they arise from the same set of operative facts as the
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`federal law claims.
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`44.
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`This Court has personal jurisdiction over Defendants IHG, HHF and IHGOA
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`because all Defendants regularly transact business within the geographic boundaries of this
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`District by, inter alia, entering into franchising agreements with franchisees and engaging in
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`routine, systematic and continuous contacts with franchisees in this District.
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`45.
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`Venue is proper in this judicial district pursuant to 18 U.S.C. §§ 1965(a) and (b)
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`because Defendants HHF, IHG and IHGOA regularly transact business within the geographic
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`boundaries of this District by, inter alia, entering into franchising agreements with franchisees,
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`collecting membership fees from franchisees and otherwise conducting and transacting business
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`with franchisees. In sum and short, the ends of justice require said Defendants to be summoned
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`to this District. See, e.g., Kubis Perszyk Assoc., Inc. v. Sun Microsystems, Inc., 146 N.J. 176, 195
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`(N.J. 1996) (“The strongest single factor weighing against enforcement of forum-selection clauses
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`in franchise agreements is the Legislature's avowed purpose, plainly expressed in the Franchise
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`Act, to level the playing field for New Jersey franchisees and prevent their exploitation by
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`franchisors with superior economic resources. The general enforcement of forum-selection clauses
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`in franchise agreements would frustrate that legislative purpose, and substantially circumvent the
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`public policy underlying the Franchise Act.”).
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`46.
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`The business conducted by Plaintiff is pursuant to a certain license agreement with
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`HHF, and Plaintiff’s business location is in Edison, New Jersey.
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`THE PARTIES
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`47.
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`Plaintiff A HUNTS MILLS ASSOCIATES LLC, a New Jersey Limited Liability
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`Company, is a franchisee that owns and operates a hotel, located at 111 West Main Street in
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`Clinton, New Jersey 08809 (the “Hotel”), that bears a HHF brand mark pursuant to a License
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`Agreement.
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`48.
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`Defendant HHF is a Delaware-registered limited liability company with its
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`principal place of business located at Three Ravinia Drive, Suite 100 in Atlanta, Georgia 30346.
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`49.
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`Defendant IHG is a Delaware-registered corporation with its principal place of
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`business located at Three Ravinia Drive, Suite 100 in Atlanta, Georgia 30346.
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`50.
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`Defendant IHGOA is a Georgia non-profit corporation with its principal place of
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`business located at Three Ravinia Drive, Suite 100 in Atlanta, Georgia 30346.
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`COMMON FACTUAL ALLEGATIONS
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`A.
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`The Parties’ Relationship
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`51.
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`52.
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`IHG has been in operation since 2003.
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`Throughout its history, IHG has created and acquired hotel brands, including, but
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`not limited to, Holiday Inn, Holiday Inn Express and Holiday Inn Resort.
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`53.
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`IHG’s franchising affiliate, HHF, licenses the right to use these hotel brand marks
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`to franchisees, including Plaintiff, by entering into franchise agreements with them, which in many
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`cases are referred to as “License Agreements.”
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`54.
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`IHG owns HHF and has developed relationships with various vendors and
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`suppliers to IHG/HHF franchisees.
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`55.
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`By virtue of its ownership of HHF and control over the IHG Marketplace, IHG is
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`an intended third-party beneficiary of the License Agreements.
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`56.
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`In connection with the License Agreements, HHF uses its superior bargaining
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`power to coerce the franchisees into accepting onerous, unequal and unconscionable terms in its
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`License Agreements.
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`57.
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`These onerous terms put immense financial stress and strain on franchisees,
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`threatening their economic viability.
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`58.
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`HHF’S abuse of its position and unfair practices result in the imposition of
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`needless and costly fees, above-market costs for necessary supplies and other goods and results in
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`substantial impacts on franchisees’ ability—who manage and operate their properties
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`commensurate with the highest standards—to operate their properties profitably.
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`59.
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`Plaintiff A HUNTS MILLS ASSOCIATES LLC is an HHF Franchisee that
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`entered into a franchise agreement with HHF dated June 28, 2011 entitled “Holiday Hospitality
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`Franchising, LLC License Agreement” (the “License Agreement,” a copy of which is attached
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`hereto as Exhibit A) for a Holiday Inn Hotel to be developed and operated by Plaintiff and located
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`at 111 West Main Street in Clinton, New Jersey 08809. (See License Agreement, §§ 1(a), 15(b).)
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`60.
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`Pursuant to this License Agreement, Defendant HHF granted Plaintiff a non-
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`exclusive license to use Defendant’s System (as defined therein) only at the Hotel and in
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`accordance with the License Agreement. (See id., §§1(b), 2.)
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`B.
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`Vendor Mandates and Kickbacks – the IHG Marketplace Programs
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`61.
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`A particular manner by which IHG/HHF undermines the viability and profitability
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`of its franchisees is by mandating Plaintiff and the Class Members utilize only HHF approved
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`third-party vendors, the purpose of which is for Defendants to reap a significant financial benefit
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`at the direct expense and to the financial detriment of the franchisees.
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`62.
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`IHG/HHF’s fraudulent and unconscionable scheme cannot operate without
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`franchisees paying excessive, above-market rates for the goods and services necessary to run a
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`hotel, including, but not limited to:
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`a) its computerized credit card processing system, Secure
`Payment Solution (“SPS”) which all Hotels are required to
`use;
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`b) high speed guest internet services, designated workstations
`and multi-function printers in Hotel business centers (“Public
`Access Computers”), and a designated communication
`service referred to as “SCH Merlin”;
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`c) HHF’s approved Keycard System;
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`d) televisions and in-room entertainment compatible with SCH
`Studio;
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`e) an alert system that enables employees to notify hotel
`management of an emergency (“Employee Safety Devices”);
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`f) equipment, software, and services
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`for property-level
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`technology and telecommunications systems;
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`g) equipment associated with
`program;
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`the Defendants’ gift card
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`h) mandated food and beverage programs;
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`i) furniture, furnishing, linens, food products, utensils, and
`goods for guests’ consumption and
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`j) additional
`services,
`advertising materials, products,
`equipment or supplies, from which IHG/HHF profits.
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`63.
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`The above-market rate pricing charged by vendors and paid by Plaintiff and the
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`Class Members provides the money necessary for those vendors to pay IHG/HHF’s unreasonable
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`and unconscionable kickbacks.
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`64.
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`IHG/HHF knowingly and willfully engage in conduct that ensures Plaintiff and the
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`Class Members pay above-market prices for goods and services necessary in conjunction with
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`operation of the hotels.
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`65.
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`IHG/HHF requires that Plaintiff and HHF Franchisees strictly comply with its
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`requirements for the types of services and products that may be used, promoted or offered at the
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`hotel, and comply with all of HHF’s “standards and specifications for goods and services used in
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`the operation of the Hotel and other reasonable requirements to protect the System and the hotel
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`from unreliable sources of supply.” (See generally License Agreement.)
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`66.
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`If IHG/HHF requires Plaintiff and the Class Members to purchase equipment,
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`furnishings, supplies or other products for the hotels from a designated or approved supplier or
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`service provider, whether pursuant to the License Agreement, Standards or any communication
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`from HHF, then they must purchase the mandated product(s) from mandated vendors and cannot
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`deviate from those vendor mandates without prior approval from IHG/HHF.
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`67.
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`Defendants IHG and HHF run a program under the guise of being voluntary and
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`which they falsely represent as delivering value and lower cost purchasing opportunities to HHF
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`franchisees, including Plaintiff and the Class Members. Nothing could be further from the truth.
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`68.
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`Defendants refer to these procurement programs as the “IHG Marketplace.”
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`Defendant IHG describes the IHG Marketplace as:
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`an easy-to-use ordering platform that allows owners to take
`advantage of the buying power of IHG for operational and service
`needs. This not-for-profit platform is available to all IHG-branded
`hotels and gives access to globally negotiated contracts and optimal
`pricing from more than 200 suppliers and services, resulting in
`significant savings and value.1
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`69.
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`Defendant IHG further represents that the IHG Marketplace is “[d]esigned to cut
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`costs and streamline the hotel procurement process, the program provides owners with solutions
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`to achieve unparalleled cost savings and efficiency…Rebates and discounts are passed directly to
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`you, you earned them, you keep them!”2
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`70.
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`In reality, IHG Marketplace operates on a cost recovery basis with fees for both
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`procurement and technical ordering transaction services included in the supplier invoiced price.
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`71.
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`HHF franchisees, including Plaintiff and the Class Members, purchase goods and
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`services directly from suppliers at prices negotiated by HHF and/or IHG.
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`72.
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`These prices are frequently above-market prices which do not permit the HHF
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`franchisees, including Plaintiff and the Class Members, to seek competitive pricing for their own
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`benefit.
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`73.
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`Rather, these inflated prices allow for rebates that go to IHG and HHF directly by
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`1 https://development.ihg.com/en/americas/home/develop-a-hotel/support-for-owners (last visited July 7,
`2021).
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` https://www.ihgmarketplace.net/marketplace/home.php (last visited July 7, 2021).
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`suppliers which generally range from approximately 1-5% of the amount of the invoice price for
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`the goods and services purchased by franchisees, including Plaintiff and the Class Members.
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`74.
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`These kickbacks to IHG and HHF are the primary—if not the sole—reason HHF
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`franchisees, including Plaintiff and the Class Members, are forced to use expensive vendors and
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`suppliers not of their own choosing at supra-competitive pricing.
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`75.
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`Some primary examples of the IHG Marketplace sourced vendor mandates
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`involve credit card processing and high speed internet agreements, with Defendants requiring
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`franchisees, including Plaintiff and the Class Members, to execute these infrastructure related
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`agreements.
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`76.
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`Although IHG/HHF represent that franchisees, including Plaintiff and the Class
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`Members, have a choice between vendors, it is usually only between no more than two or three
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`vendors hand-picked by Defendants from whom they obtain significant rebates.
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`77.
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`Although franchisees, including Plaintiff and the Class Members, are able to
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`secure far more reasonable rates for, for example, credit card processing from alternate sources,
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`IHG/HHF do not permit franchisees, including Plaintiff and the Class Members, to do so on the
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`open market and instead require franchisees, including Plaintiff and the Class Members, to pay the
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`higher rates of Defendants’ selected vendors.
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`78.
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`This is similarly true in the case of hotel internet services which IHG/HHF does
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`not permit franchisees, including Plaintiff and the Class Members, to purchase on the open market
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`and instead requires franchisees, in most instances, to pay more than double the price for lower
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`speeds than what franchisees could purchase independently from the same or alternate sources.
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`79.
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`Under onerous mandates, Defendants require franchisees, including Plaintiff and
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`the Class Members, to enroll in various services, including, but not limited to, grossly overpriced
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`internet bandwidth services and marketing programs, such as IHG Ignite, without obtaining their
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`consent and under the guise of brand standard requirements. For a supposed voluntary program,
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`opting out of the IHG Ignite program is met with threats of property listing suppression and other
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`negative online search consequences despite franchisees, including Plaintiff and the Class
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`Members, contributing tens of thousands of dollars annually for marketing expenditures per hotel.
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`80.
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`This mandated lack of choice invariably increases franchisees’ costs and
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`expenses, and benefits only IHG/HHF in the form of kickbacks.
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`81.
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`The costs charged to franchisees, including Plaintiff and the Class Members, in
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`the IHG/HHF procurement programs such as the IHG Marketplace are almost always higher than
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`if the same product or service were purchased by an independent hotel outside of the HHF System.
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`82.
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`Defendants frequently use the pretext that the vendor requirements imposed on
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`franchisees are necessary for standardization or—more curiously—for security.
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`83.
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`In fact, many products and services that HHF franchisees, including Plaintiff and
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`the Class Members, are required to obtain based on Defendants’ vendor mandates are at an
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`excessive cost but inferior quality.
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`C.
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`Franchisee Fees & Property Improvement Plans
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`84.
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`As a prerequisite to becoming an HHF Franchisee, IHG/HHF charges (and
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`Plaintiff actually paid) an initial application fee of $500 per guest room (sometimes referred to as
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`a “key”) and up to $50,000 simply for the privilege of submitting an application for an HHF
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`franchise or license. This application fee applies for new development, conversion, change of
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`ownership or re-licensing.
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`85.
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`Only then does IHG/HHF determine whether it will approve the application for a
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`license, and in the case of unapproved applications, IHG/HHF retains $15,000 which is forfeited
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`by franchise/license applicants for absolutely no return benefit.
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`86.
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`If IHG/HHF does approve an application, it still has the sole discretion to revoke
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`its approval thereafter and to retain an applicant’s entire application fee and to deem it “non-
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`refundable,” again providing applicants with no benefit in return for IHG/HHF taking an amount
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`up to $50,000 and leaving applicants without recourse.
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`87.
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`IHG/HHF also maintains what it calls its “Property Improvement Plan” (the
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`“PIP”).
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`88.
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`Before any HHF franchisee submits an application for conversion, change of
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`ownership, brand change or re-licensing, franchisees, including Plaintiff and the Class Members,
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`must arrange for HHF to conduct an inspection of the subject hotel so that IHG/HHF can prepare
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`written specifications for the upgrading, construction and furnishing of the hotel in accordance
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`with HHF’s “Standards.”
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`89.
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`Under the PIP, HHF franchisees must pay a non-refundable $6,500 fee to have
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`their Hotel inspected and for preparation of a PIP report.
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`90.
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`In the case of conversion hotels, IHG/HHF will not authorize reopening unless
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`and until it has determined that all PIP requirements have been completed, including the
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`submission of plans before the start of construction in accordance with the dates specified in the
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`License Agreement.
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`91.
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`As part of PIP, IHG/HHF charges up to an additional $5,000 for each re-
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`evaluation and re-inspection it may deem necessary in the event any hotel fails its opening
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`inspection. IHG/HHF frequently uses this, and imposes further fines, as a means to enrich
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`themselves to the detriment of the franchisees.
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`92.
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`IHG/HHF neither requires nor imposes its inspections, re-inspections, re-
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`evaluations and/or written reports in good faith. To the contrary, IHG/HHF uses these inspections
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`as a pretext to generate the aforesaid fees and fines, and prepares disingenuously negative reports
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`in order to generate revenue for itself in the form of fines and unwarranted re-inspections, reports
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`and impact studies, all intended to harm the economic viability and creditworthiness of its
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`franchisees.
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`93.
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`IHG/HHF suggests to its quality inspectors to fail franchisees in quality evaluations
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`if those franchisees’ Medallia scores, customer and employee experience scores generated from
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`surveys, social media and review websites, are below expectations, although Medallia scores are
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`not to be taken into account in quality evaluations.
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`94.
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`Any objections by an IHG/HHF franchisee to this process are disregarded and
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`dismissed, and met with derision, threats, intimidation and retaliation.
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`95.
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`The license that IHG/HHF grants to Plaintiff and the Class Members to “use the
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`System only at the Hotel, but only in accordance with this License” (and during the License Term)
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`defines the System broadly and with significant open-ended discretion for HHF.
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`96.
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`This discretion allows IHG/HHF to put a stranglehold on franchisees and to
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`impose onerous costs and obligations on franchisees:
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`The System is composed of all elements which are designed to
`identify Holiday Inn, Holiday Inn Express and Holiday Inn Resort
`branded hotels to the consuming public or are designed to be
`associated with those hotels or to contribute to such identification
`or association and all elements which identify or reflect the
`quality standards and business practices of such hotels, all as
`specified in this License or as designated from time to time by
`Licensor. The System at present includes, but is not limited to,
`the service marks Holiday Inn®, Holiday Inn Express®, Holiday
`Inn Express® & Suites, Holiday Inn® & Suites and Holiday
`Inn® Resort, (as appropriate to the specific hotel operation to
`which it pertains), Holidex® and the other Marks (as defined in
`paragraph 7.B below), and intellectual property rights made
`available to licensees of the System by reason of a licens