This article discusses early termination rights in hotel franchise agreements under circumstances where the reputation, goodwill, or business of the hotel, the brand, and/or the franchisor could be negatively affected, and where the safety of hotel guests or staff could be in question.
Background
According to a post by the Department of Homeland Security (“DHS”) on X, in early January 2026, a Hampton Inn by Hilton in Lakeville, Minnesota allegedly and repeatedly refused service to U.S. Immigration and Customs Enforcement (ICE) agents, canceling their reservations and allegedly asking them in a Jan. 2, 2026 email to “pass on this info to your coworkers that we are not allowing any immigration agents to house on our property.” DHS posted about the incident on Jan. 5, 2026, causing immediate media and social network attention. While both Hilton (the franchisor) and Everpeak Hospitality (the franchisee, as well as the owner and manager of the hotel) that same day issued public apologies, a video was released the morning of Jan. 6, 2026 of an influencer allegedly posing as a DHS agent at the hotel and being told that the hotel still was not serving ICE agents. Following this video, Hilton quickly posted a new notice that day, stating, “We are taking immediate action to remove this hotel from our systems,” resulting in the hotel being officially removed from the Hilton system less than 24 hours after the initial posts began circulating.
The Hampton Inn Lakeville situation came on the heels of rapidly rising tensions in the Twin Cities and surrounding areas. In early December, ICE announced an immigration enforcement surge in the Twin Cities, which would be called Operation Metro Surge. Tensions between activists and ICE agents rose quickly, with multiple documented conflicts occurring between activists working to impede ICE operations and ICE agents. By mid-December, DHS announced that ICE had arrested more than 400 illegal aliens, many with criminal backgrounds.
After the Hampton Inn Lakeville incident, DHS announced on Jan. 6, 2026, that it was launching “the largest DHS operation ever” in Minnesota and planned to send approximately 2,000 ICE agents into Minnesota. There have been almost daily protests in Minneapolis since the deployment, and Minnesota Governor Tim Walz and Minneapolis Police Chief Brian O’Hara both criticized the surge and the methods of ICE agents. In addition, multiple clashes continue to take place between activists and ICE, including an activist getting shot and killed on Jan. 7, 2026, during an altercation with ICE agents. Tensions are extremely high, and the army recently put 1,500 soldiers on standby for possible deployment into Minnesota given the situation.
As part of the protests, many activists have allegedly been targeting hotels in downtown Minneapolis-St. Paul where ICE agents are staying. It has been reported that the activists have been purposefully generating loud noise at night outside such hotels in an attempt to keep ICE agents from sleeping. As of Jan. 19, at least two hotels in Minneapolis-St. Paul, including the St. Paul Downtown Doubletree by Hilton, cancelled all their current reservations and closed temporarily, citing safety and security concerns. The hotels had allegedly been getting threats from unknown individuals for lodging ICE agents and reportedly offered to help their current guests with finding alternative accommodations.
Franchisor Rights
Hotel franchisors such as Hilton, Hyatt, Accor, and Red Roof Inn generally retain considerable power in franchise agreements, especially when it comes to the public image of their companies and their respective hotel brands. The public is generally unaware that many hotels are no longer owned, or even operated by, the major hotel brands. Instead, many of these hotels are owned by third parties and, in the case of franchised hotels, operated by such third parties or other third-party management companies that specialize in operating hotels that are branded (aka “flagged”) by the different brands. This is one of the reasons that hotel franchisors implement strict brand operational standards, especially when going “off script” can negatively impact their public image.
Hotel franchise agreements almost always include termination rights in favor of the franchisor, even immediately (as we’ve seen), when the reputation, goodwill, or business of the hotel (e.g., the Hampton Inn by Hilton, Lakeville, Minnesota), the brand (e.g., Hampton Inn), and/or the franchisor (e.g., Hilton) could be negatively affected. This can typically be triggered by conduct of the hotel’s owner, its parent, the hotel’s management company, or the hotel’s employees. As explained below, the consequences for this termination can be steep and extend well beyond the detrimental impact of being shut out of the franchisor’s reservation system.
In our experience, many franchise agreements provide the franchisor with an immediate right of termination with notice when the reputation, goodwill, or business of the hotel, the brand, or the franchisor is likely to be negatively affected. Other franchise agreements may contain a cure period allowing the hotel owner time to remedy the situation. However, depending on the wording of the applicable default and cure provisions, there may be disagreement as to whether a particular default can be cured. For example, in the Hampton Inn Lakeville case, what would remedy any alleged reputational damage to Hilton arising from the hotel owner’s refusal to rent rooms to ICE? While the conduct causing the negative effect can be stopped, a franchisor could argue that the damage may have already been done and is irreparable.
Though the franchisor may have a termination right in these cases, some franchise agreements allow the franchisor to elect interim remedies instead of termination, such as suspending the hotel from the reservation service temporarily.
It should be noted that even if the franchise agreement does not contain an express right of the franchisor to terminate the franchise agreement where the reputation, goodwill, or business of the hotel, the brand, or the franchisor could be negatively affected, there are other provisions that the franchisor may try to rely on in order to terminate the franchise agreement.
For instance, the franchisor may have a termination right if there is a threat to public health or safety from the operation of the hotel that could result in an adverse effect on the hotel, brand, or franchisor. Alternatively, the franchisor may have a termination right if certain conduct occurs that violates the standards or regulations of the brand or franchisor. The brands have voluminous brand standards manuals, and hotel owners should ensure that they, their operators, and their employees are very familiar with them.
Consequences of Termination
If the franchisor exercises its termination rights, the hotel owner will generally be required to immediately stop operating as part of that franchisor’s hotel system and to remove all the franchisor’s marks, trade dress, distinctive features, and designs commonly associated with the brand or franchisor. In addition, since the above-described circumstances would constitute a termination for default, the hotel owner may be required to pay liquidated damages or make other financial restitution to the franchisor. While calculations of liquidation damages vary based on the particular franchisor and the franchise agreement, it is not atypical to see liquidated damages provided for in an amount equal to five years’ worth of anticipated royalty fees or more.
Finally, depending on the nature of the default and the franchise agreement specifics, a franchisor may argue that a default with respect to one hotel and franchise agreement constitutes a default under any other agreements between the parties or their respective affiliates. For example, assume we have a hotel owner who takes a very public and positioned stand on gun rights, hanging posters of the position they support in front of their franchised hotel and excluding as guests all those who support the other side. That same hotel owner is a franchisee of multiple properties with the same franchisor, but it has not taken the same actions at its other properties.
Assuming in this case that it has the right to do so, if the franchisor exercises its right to terminate with respect to the first property due to the negative publicity and related effects caused by the actions of the hotel owner, should it then be allowed to terminate agreements prospectively relating to the other properties that have not become wrapped up in the controversy? Or should the franchisor be obligated to wait unless and until the hotel owner takes similar actions at the other properties?
Franchisees’ Safety Obligations
Most franchise agreements provide that the hotel owner, and not the franchisor, is solely responsible for the safety and security of the hotel’s employees and guests. Though hotel owners may be responsible for safety, this is also a key concern for franchisors. Hotel franchise agreements often include termination rights in favor of the franchisor when there is an imminent threat or danger to public health or safety resulting from the operation of the hotel. The exact language of these provisions varies, with some such termination rights being permitted only when such action is likely to result in substantial liability or an adverse effect on the hotel, the brand, and/or the franchisor.
While safety is important to both the hotel owner and the franchisor, a determination on how to proceed with respect to safety must also be balanced with the requirement that the hotel be continuously operated. While not all franchise agreements contain this requirement, it is not uncommon to see this either in the franchise agreement or in other related agreements with the franchisor.
In any event, it seems unlikely, in our view, that a franchisor would declare a default if the hotel was being closed temporarily clearly for safety reasons. For instance, it seems clear that the DoubleTree in Minneapolis-St. Paul closed to protect the safety of its employees and guests, and that this closure would likely be temporary (i.e., until the civil unrest subsides).
In this case, the protests were located close to the hotel, activists had purposefully been targeting hotels housing ICE agents, and the hotel had been receiving threats. In closing the hotel, the operator specifically cited safety concerns and, further, offered to help the affected guests find alternative accommodations. If the franchisor were to call a default in this case, it could lead to negative publicity for the hotel brand and franchisor (and potential damages claims).
Current Environment
To be fair to franchisors, generally speaking, franchisors are in the business of expanding their brands and do not want to terminate their franchise agreements without good cause, as these agreements are typically mutually beneficial. It is, in our experience, rare for a franchisor to prematurely terminate a franchise agreement for anything other than financial default. Regardless of the foregoing, maintaining a positive and consistent public image has become exceedingly important and tenuous in the current “cancel culture” environment.
This latest situation with Hilton comes on the heels of the 2023 boycott of a beer brand (triggered by its social media partnership with a transgender influencer), which ended that brand’s reign as the number one beer in the United States and cost that company billions in lost sales, as well as the 2025 boycott of a restaurant brand (sparked by a change to their logo), which caused the company’s stock price to plummet before it quickly reversed its changes. In the Hampton Inn Lakeville case, once DHS broke news of the cancellations, there was immediate backlash on social media, with some calling for boycotts and some influencers comparing the Hilton/ICE situation to the foregoing situations. Again, as noted above, Hilton neither owns nor operates the hotel, but this did not matter in the court of public opinion.
The situation with the DoubleTree in Minneapolis-St. Paul can be differentiated from the situation with the Hampton Inn Lakeville. For one, the DoubleTree closed its hotel, rather than prohibiting certain guests (i.e., ICE agents only) like the Hampton Inn. In addition, the DoubleTree cited its reason for closing as the safety and security of its guests and employees, whereas the Hampton Inn management seems to have stopped accommodating ICE agents with no further explanation. Further, the DoubleTree is located in downtown Minneapolis-St. Paul and is near the most violent protests.
It may even have been targeted for the nightly noise disruptions by protesters, particularly as it was allegedly receiving threats due to the ICE agents being housed there. The Hampton Inn Lakeville is at least 25 minutes away from downtown Minneapolis-St. Paul. Given all the foregoing, the DoubleTree’s actions seem motivated by its concern for its employees and guests, whereas the Hampton Inn’s actions appear politically motivated.
As you can see, while both hotels that we specifically discuss in this article are independently owned and operated and franchised by Hilton, we have different reactions from Hilton based on the differing fact patterns (i.e., what appear to be safety vs. politically motivated actions).
Conclusions and Recommendations
Hotel franchisors generally retain considerable power in franchise agreements, especially when it comes to the public image of the hotel brand and franchisor. Hotel owners should be mindful, especially in the current environment, of making, taking, or allowing their employees or property managers to make or take any political or socio-economic statements or actions that could be deemed controversial or that take a side on a hot topic (i.e., immigration enforcement), and which, in any such case, could be tied back to their hotels.
In particular, hotel owners should think hard about denying or canceling any reservations, group bookings, or events due to political affiliations or stances. Hotel owners should ensure that any such denial or cancellation would be permitted under the franchisor’s or brand’s standards and the hotel owner’s franchise agreement, especially if the denial is targeted at one particular group. That said, owners also must be mindful of, and be aware that they are responsible for, their guests’ safety and well-being.
Accordingly, owners may be able to justify modification to, or even be required to modify, their operations in consideration of and in response to threats to the same. It would be far more difficult for a franchisor to justify terminating an agreement when an owner can support its decision for doing so based on protecting its (and the franchisor’s) guests.
