Liquidated damages
What do I owe if I leave the brand early?
Also called: Early termination fee · Termination damages
Favours the drafting party
What it does
Sets damages as an average of the fees the hotel has been paying, multiplied by a number of months. It substitutes an agreed number for the lost future royalty the brand would otherwise have to prove.
Why it matters
It is usually the largest single number in the relationship, and it determines whether reflagging, refinancing or selling to a buyer who wants a different brand is even available to you. Owners typically compute it for the first time when they are already committed to a decision.
What to watch for
- No cap — in a twenty-year term the number can exceed anything the property can pay
- Marketing, programme, reservation and technology fees folded into the average alongside royalty
- A look-back window the brand selects, or one measured from the strongest period rather than the most recent
- The same formula applying when you terminate because the brand failed to perform
- Silence on casualty, condemnation and approved transfers
- The obligation flowing through an uncapped personal guaranty
What to ask for
- A cap expressed as a fixed number of months, not the full remaining term
- A taper, so the figure shrinks as the term runs down
- Royalty only in the average, excluding fees funding services you will no longer receive
- A stated look-back — the trailing twelve months — rather than the brand's choice
- Express carve-outs for casualty, condemnation, approved transfer, and brand default
How common is it
Documents filed with the SEC containing the exact phrase “liquidated damages”.
Too common to count. This phrase exceeds EDGAR's 10,000-document ceiling in 5 of 7 years (2019 and 2020 came in below it, at 8,174 and 8,876). A censored year sits at the maximum by definition, so a chart drawn from this would have its scale anchored to a lower bound. The figures are in the table below instead.
| Year | Documents |
|---|---|
| 2019 | 8,174 |
| 2020 | 8,876 |
| 2021 | 10,000+ |
| 2022 | 10,000+ |
| 2023 | 10,000+ |
| 2024 | 10,000+ |
| 2025 | 10,000+ |
Real filings using it
- Arena Group Holdings, Inc. (AREN) (CIK 0000894871) — 425, 2023-12-05
- Telesis Bio Inc. (TBIO) (CIK 0001850079) — SC 13D, 2024-07-18
- Telesis Bio Inc. (TBIO) (CIK 0001850079) — SC 13D, 2024-07-18
Source: SEC EDGAR full-text search (efts.sec.gov). Retrieved 2026-08-30. Counts are filed documents matching an exact phrase, not deals, and EDGAR indexes public-company filings — read these as public-company practice, not as evidence of what private mid-market agreements contain.
What usually gets agreed
A cap in the region of two to three years of average fees, with the look-back fixed rather than elective, is a common landing point. Carve-outs for casualty and brand default are more readily agreed than a reduction in the multiplier.
Related
- Personal guaranty — A principal's personal promise to answer for the operating entity's obligations.
- Transfer and consent — The brand's right to approve a sale, and everything it can require in exchange.