Extended Stay America Suites: Litigation & Risk
Lodging · FDD Items 3, 4 & 5
Elevated Risk
6 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 6
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 88 / 100
- FranchiseVerdict composite · higher is better
- Rating
- A
- A / B / C / D / F verdict grade
7(a) FOIA data · FY2020–present
SBA Loan Performance
Aggregated from public SBA 7(a) loan disclosures. Charge-off rate is the share of loans that were charged off or settled for less than the full balance.
- Total 7(a) loans
- 22
- Government-backed loans issued
- Charge-off rate
- 0.0%
- vs 16% franchise average
- 5-yr charge-off rate
- N/A
- Defaults
- 0 loans
- Loans charged off or defaulted
- Total loan volume
- $77.6M
- Avg loan size
- $3.5M
- Participating lenders
- 9
FDD Items 5, 6 & 17: What You Give Up
Contract Risk Indicators
- Mandatory arbitration
- Required
- Disputes resolved outside court, limits your legal options
- Jury trial waiver
- Waived
- You give up the right to a jury trial
- Franchisor can compete
- Yes
- Franchisor can open competing locations in or near your territory
- Right of first refusal
- No
- Franchisor can match any purchase offer when you try to sell
- Governing law
- NC
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
3 pending antitrust class actions (consolidated/related re hotel pricing algorithm); 2 enforcement actions by franchisor post-termination; 1 prior class action settled for $100,000 in 2024
What drove the 88/100 verdict
Risk Score Breakdown
- 01MEDNo Item 19 financial performance data disclosed—unable to assess actual franchisee profitability or validate ROI claims
- 02MINORWide investment range ($210K–$14.3M) suggests highly variable unit economics and unclear capital requirements
- 03HIGHMultiple active litigation matters including antitrust software claims, IP enforcement actions, and settled guest refund disputes indicate operational and legal vulnerabilities
- 04MINORUnprotected territory creates direct competition risk; franchisees may compete with other company units or future franchisees in same market
- 05MINOR5.5% royalty on gross room revenue (not net) provides no relief during downturns and compounds during high-occupancy periods
- 06MINOR12.1% YoY unit growth is modest for extended-stay sector; unclear if growth is sustainable or reflects new development vs. acquisitions
Severity inferred from FDD text. Not a regulatory or legal classification
Litigation data from FDD Items 3, 4, and 5. SBA data from public 7(a) FOIA records (FY2020–present). Not legal advice. Consult a franchise attorney before signing any franchise agreement.