Key Takeaways
- Hotel franchisors such as Hilton (which owns the Hilton, DoubleTree, Embassy Suites, Hilton Garden Inn, Hampton and other brands), Hyatt (which owns the Grand Hyatt, Andaz and other brands), Accor (which owns the Fairmont, Raffles and other brands) and Red Roof Inn (which owns the Red Roof Inn, HomeTowne Studios and other brands) generally retain considerable power in franchise agreements, especially when it comes to the public image of their companies and their respective hotel brands. The public is generally unaware that many hotels are no longer owned, or even operated by, the major hotel brands. Instead, many of these hotels are owned by third-parties and, in the case of franchised hotels, operated by such third-parties or other third-party management companies that specialize in operating hotels that are branded (a/k/a “flagged”) by the different brands. This is one of the reasons that hotel franchisors implement strict brand operational standards, especially when going ‘off script’ can negatively impact their public image.
- A hotel franchisor often has the right to terminate a franchise agreement, even immediately (as we’ve seen), if the hotel owner, its affiliates, the property manager or the hotel’s employees cause negative publicity for the hotel (i.e., specifically in the subject case, the Hampton Inn by Hilton, Lakeview, Minnesota), the hotel brand (i.e., Hampton Inn) or the franchisor (i.e., Hilton). The consequences for this termination can be steep and extend well beyond the detrimental impact of being shut out of the franchisor’s reservation system.
- Hotel owners should be very mindful, especially in the current environment, of making, taking or allowing their employees or property managers to make or take, any political or socio-economic statements or actions that could be deemed controversial or that take a side on a hot topic (i.e., immigration enforcement), and which, in any such case, could be tied back to their hotels.
Background on the Minnesota Hilton Situation
In January 2026, a Hampton Inn by Hilton in Lakeville, Minnesota, allegedly and repeatedly refused service to U.S. Immigration and Customs Enforcement (ICE) agents, canceling their reservations and allegedly asking them by email to “pass on this info to your coworkers that we are not allowing any immigration agents to house on our property.” The Department of Homeland Security (DHS) posted about the incident, causing immediate media and social network attention. While both Hilton (the franchisor), and Everpeak Hospitality (the franchisee, as well as the owner and manager of the hotel), soon posted public apologies, a video was released shortly thereafter of an influencer allegedly posing as a DHS agent at the hotel and being told that the hotel still was not serving ICE agents. Following this video, Hilton quickly posted a new notice stating, “[W]e are taking immediate action to remove this hotel from our systems,” resulting in the hotel being officially removed from the Hilton system less than 24 hours after the initial posts began circulating.
Franchisor Rights
Hotel franchise agreements almost always include termination rights in favor of the franchisor when the reputation, goodwill or business of the hotel, the brand and/or the franchisor could be negatively affected. This can typically by triggered by conduct of the hotel’s owner, its parent, the hotel’s management company or the hotel’s employees.
In our experience, many franchise agreements provide the franchisor with an immediate right of termination with notice when the reputation, goodwill or business of the hotel, the brand or the franchisor is likely to be negatively affected. Other franchise agreements may contain a cure period allowing the hotel owner time to remedy the situation. However, depending on the wording of the applicable default and cure provisions, there may be disagreement as to whether a particular default can be cured. For example, in the Hilton Minnesota case, what would remedy any alleged reputational damage to Hilton arising from the hotel owner’s refusal to rent rooms to ICE? While the conduct causing the negative effect can be stopped, a franchisor could argue that the damage may have already been done and is irreparable.
Though the franchisor may have a termination right in these cases, some franchise agreements allow the franchisor to elect interim remedies instead of termination, such as suspending the hotel from the reservation service temporarily.
It should be noted that even if the franchise agreement does not contain an express right of the franchisor to terminate the franchise agreement where the reputation, goodwill or business of the hotel, the brand or the franchisor could be negatively affected, there are other provisions that the franchisor may try to rely on in order to terminate the franchise agreement. For instance, the franchisor may have a termination right if there is a threat to public health or safety from the operation of the hotel that could result in an adverse effect on the hotel, brand or franchisor. Alternatively, the franchisor may have a termination right if certain conduct occurs that violates the standards or regulations of the brand or franchisor. The brands have voluminous brand standards manuals, and hotel owners should ensure that they, their operators and their employees are very familiar with them.
Consequences of Termination
If the franchisor exercises its termination rights, the hotel owner will generally be required to immediately stop operating as part of that franchisor’s hotel system and to remove all of the franchisor’s marks, trade dress, distinctive features and designs commonly associated with the brand or franchisor. In addition, since the above-described circumstances would constitute a termination for default, the hotel owner may be required to pay liquidated damages or make other financial restitution to the franchisor. While calculations of liquidation damages vary based on the particular franchisor and the franchise agreement, it is not atypical to see liquidated damages provided for in an amount equal to five years’ worth of anticipated royalty fees or more. Finally, depending on the nature of the default and the franchise agreement specifics, a franchisor may argue that a default with respect to one hotel and franchise agreement constitutes a default under any other agreements between the parties or their respective affiliates. For example, assume we have a hotel owner who takes a very public and positioned stand on gun rights, hanging posters of the position they support in front of their franchised hotel and excluding as guests all those who support the other side. That same hotel owner is a franchisee of multiple properties with the same franchisor, but it has not taken the same actions at its other properties. Assuming in this case that it has the right to do so, if the franchisor exercises its right to terminate with respect to the first property due to the negative publicity and related effects caused by the actions of the hotel owner, should it then be allowed to terminate agreements prospectively relating to the other properties that have not become wrapped up in the controversy, or should the franchisor be obligated to wait unless and until the hotel owner takes similar actions at the other properties?
Current Environment
To be fair to franchisors, generally speaking, franchisors are in the business of expanding their brands and do not want to terminate their franchise agreements without good cause, as these agreements are typically mutually beneficial. It is, in our experience, rare for a franchisor to prematurely terminate a franchise agreement for anything other than financial default.
Regardless of the foregoing, maintaining a positive and consistent public image has become exceedingly important and tenuous in the current “cancel culture” environment. This latest situation with Hilton comes on the heels of the 2023 boycott of a beer brand (triggered by its social media partnership with a transgender influencer), which ended that brand’s reign as the number one beer in the U.S. and cost that company billions in lost sales, as well as the 2025 boycott of a restaurant brand (sparked by a change to their logo), which caused the company’s stock price to plummet before it quickly reversed its changes. In the Hilton Minnesota case, once DHS broke news of the cancellations, there was immediate backlash on social media, with some calling for boycotts and some influencers comparing the Hilton/ICE situation to the foregoing situations. Again, as noted above, Hilton neither owns nor operates the hotel, but this did not matter in the court of public opinion.
Conclusions and Recommendations
Hotel franchisors generally retain considerable power in franchise agreements, especially when it comes to the public image of the hotel brand and franchisor. Hotel owners need to be careful, especially in the current environment, about making or allowing their employees or property managers to make any controversial statements that can be associated with the hotel. In particular, hotel owners should think hard about denying or canceling any reservations, group bookings or events due to political affiliations or stances, and they should ensure that any such denial or cancellation would be permitted under the franchisor’s or brand’s standards and the hotel owner’s franchise agreement.
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