Franchise Termination. In 1981 the Huangs entered into a franchise agreement with Holiday Inns, Inc, under which the Huangs agreed to adhere to the quality standards established by Holiday Inns and to comply in every respect with the Holiday Inns Standards Manual. In November of 1983, the district director of Holiday Inns made a courtesy inspection that revealed cracked windows, damaged and discolored walls, inoperative smoke detectors, and numerous other indications that the Huangs were not maintaining the established Holiday Inn quality standards in accordance with the franchise agreement. A formal inspection in February of 1984 revealed no significant improvement in quality standards, and the hotel was given an official rating of unacceptable. The Huangs, who had been given detailed reports concerning the findings of both inspections, were advised that if the noted deficiencies were not remedied within sixty days, Holiday Inns would have grounds to terminate the franchise. When an inspection in April of 1984 revealed that the deficiencies had not been cured, Holiday Inns notified the Huangs that the franchise would be terminated on July 30 unless the deficiencies were remedied by June 28. The Huangs, who in May had begun renovations on the hotel costing 55,000, requested a ninety-day extension to the June 28 deadline, which Holiday Inns refused to grant. The Huangs then petitioned the court for a preliminary injunction against Holiday Inns' termination of the franchise, claiming that Holiday Inns had acted capriciously and arbitrarily by (1) not stating precisely the nature of the deficiencies and what was required to make repairs and improvements and (2) not giving the Huangs a reason-able time in which to remedy the deficiencies. Discuss fully whether Holiday Inns should be enjoined from terminating the franchise, given these circumstances.
Quick Reply
