MainStay Suites: Litigation & Risk
Lodging · FDD Items 3, 4 & 5
Moderate: Review
3 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 3
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 76 / 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
- 9
- Government-backed loans issued
- Charge-off rate
- N/A
- vs 16% franchise average
- 5-yr charge-off rate
- N/A
- Defaults
- N/A
- Loans charged off or defaulted
- Total loan volume
- $15.7M
- Avg loan size
- $1.7M
- 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
- Maryland
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
Section I discloses 3 pending matters: (1) Norma Knuth v. Radisson (Saskatchewan class action re undisclosed destination marketing fees, $403M demand); (2) Jai Sai Baba LLC v. Choice (E.D. Pa.; ~90 franchisees alleging RICO/Sherman Act/Civil Rights/state franchise law violations, stayed pending individual arbitration); (3) T&T Management v. Choice (M.D. Fla.; breach/data misappropriation re a Country Inn hotel). Section II lists many franchisor-initiated AAA arbitrations and court actions to recover royalties and liquidated damages.
What drove the 76/100 verdict
Risk Score Breakdown
- 01HIGHAggressive litigation pattern: 71 royalty recovery actions in one fiscal year suggests systemic collection issues or franchisee financial distress
- 02MEDHigh investment threshold ($8.7M–$15.8M) with undisclosed net income creates opacity on actual profitability and ROI
- 03MEDModest unit growth (9.6% YoY) with 126 units is underwhelming for a branded economy hotel chain; limited scale advantages
- 04MINORSignificant post-termination IP enforcement actions (12 cases) indicate compliance/brand protection problems among departed franchisees
- 05MEDRevenue-to-investment ratio concern: $2.1M average revenue against $8.7M–$15.8M investment suggests 5–8 year payback at best, before accounting for undisclosed expenses
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.