Hampton by Hilton: Litigation & Risk
Lodging · FDD Items 3, 4 & 5
Moderate: Review
5 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 5
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 83 / 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
- 195
- Government-backed loans issued
- Charge-off rate
- 3.3%
- vs 16% franchise average
- 5-yr charge-off rate
- 0.0%
- Defaults
- 4 loans
- Loans charged off or defaulted
- Total loan volume
- $544.6M
- Avg loan size
- $2.8M
- Participating lenders
- 98
FDD Items 5, 6 & 17: What You Give Up
Contract Risk Indicators
- Mandatory arbitration
- Not required
- You retain the right to sue in court
- Jury trial waiver
- Not waived
- 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
- NY
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
5 pending actions including franchisee breach of contract suit (Bow Hospitality), 3 antitrust class actions related to hotel room rate pricing algorithms (Extended Stay Hotel Antitrust/IDeaS, Hanson Dai/SAS, Ryan Segal/Amadeus), and 1 Sherman Act class action involving STR data sharing (Portillo/CoStar). Multiple concluded actions also disclosed including state AG settlements re: mandatory guest fee disclosures (Texas $2.1M, Nebraska $300K).
What drove the 83/100 verdict
Risk Score Breakdown
- 01MINORStagnant unit growth (0.9% YoY) suggests market saturation or franchisee struggles in mature brand
- 02MEDNo disclosed average revenue or net income (missing Item 19) prevents ROI validation and suggests weak unit economics
- 03MINORHigh capital requirement ($17-29M) combined with 6% royalty on gross rooms revenue creates significant fixed obligations
- 04HIGHMultiple active litigation disclosures including antitrust class actions, deceptive trade practice settlements, and contract disputes indicate systemic legal/operational issues
- 05MINORUnprotected territory enables brand cannibalization and direct competition from other Hampton franchisees within market radius
- 06MINOR22-year franchise term is longer than industry standard (typically 10-15 years), reducing flexibility and increasing long-term risk exposure
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.