Travelodge Hotels, Inc. v. Durga, LLC: A Case Study on How to Document Compliance Obligations under Franchise Agreements

16 March 2023 Publication
Author(s): Peter Loh James M. Guenthner

In Travelodge Hotels, Inc. v. Durga, LLC, a hotel franchisor, Travelodge Hotels, Inc. (Travelodge), sued Durga LLC and its sole member (Durga), a hotel franchisee, in the U.S. District Court for the District of New Jersey, the principal place of business for the franchisor. Travelodge is a member brand of Wyndham Hotel Group and does not itself own or operate any hotels.

Travelodge alleged Durga violated the parties’ franchise agreement when Durga ceased operating the hotel as a Travelodge facility during the term of the agreement. In response to Travelodge’s motion for summary judgment, Durga did not dispute that a contract existed or violations of the agreement did occur. Durga, however, argued its violations actually constitued breaches of the franchise agreement. Durga claimed it entered the agreement only because of Travelodge’s alleged misrepresentation that Durga could quickly change the hotel into a different Wyndham property hotel such as a Ramada or Days Inn. Durga supposedly sought the branding change to improve the conditions at the hotel. In support, Durga pointed to testimony and emails about the conditions at the property, discussions with Travelodge about the brand change, and the parties’ supposed agreement concerning changing the property’s brand. The court agreed that the evidence created a genuine issue of material fact as to whether the franchise agreement was actually a valid contract.

Second, Durga argued that any breach on its part was excused by Travelodge’s prior breach in failing to give Durga access to its reservation system. Durga again provided testimony and emails showing the system either failed to work correctly or was not accessible at all for several months after execution of the franchise agreement. The court found this evidence also presented created a genuine issue of material fact because Travelodge failed to present evidence to the contrary.

The case is now proceeding to trial per the court’s denial of Travelodge’s motion for summary judgment.

This case demonstrates how courts will consider evidence of whether and how franchisors meet and document their compliance with their obligations under franchise agreements.

Related Services