La Quinta by Wyndham: Litigation & Risk
Lodging · FDD Items 3, 4 & 5
Elevated Risk
13 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 13
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 75 / 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
- 327
- Government-backed loans issued
- Charge-off rate
- 1.8%
- vs 16% franchise average
- 5-yr charge-off rate
- 0.0%
- Defaults
- 3 loans
- Loans charged off or defaulted
- Total loan volume
- $1.1B
- Avg loan size
- $3.5M
- Participating lenders
- 105
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
- 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
- NJ
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
Multiple pending cases: (1) 2 suits against LQF for breach of contract/counterclaims by former franchisees; (2) 3 suits by LQF against terminated franchisees for unpaid fees; (3) 8 suits involving WHR/parent affiliates for price-fixing (hotel revenue management software antitrust class actions), resort/destination marketing fee claims, and cybersecurity/consumer fraud. Several resolved cases disclosed including FTC settlement (2015), class action resort fee settlement (2020).
What drove the 75/100 verdict
Risk Score Breakdown
- 01MINORUnit count declining 2.3% YoY indicates shrinking system despite 20-year terms and protected territory
- 02HIGHMultiple active litigations including franchisor breach of contract suits against franchisees, antitrust/price-fixing class actions, and consumer protection class actions signal systemic disputes
- 03MEDNo Item 19 (average unit volumes/profitability) disclosed — inability to validate $1.67M-$18.2M investment thesis
- 04MINORFTC settlement for cybersecurity failures raises data protection and consumer trust concerns in hospitality sector
- 05MEDMassive investment range ($1.67M-$18.2M) without disclosed average revenue/net income makes ROI analysis impossible
- 06MINORFranchisor actively suing franchisees for breach of contract suggests enforcement conflicts and potential unfavorable franchise agreement terms
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.