August 15, 2025|Publications
August 15, 2025 | United States District Court for the District of New Jersey | Unpublished Opinion
Executive Summary
In an unpublished decision, Judge Brian R. Martinotti of the District of New Jersey ruled in favor of franchisee Huber Hotels, LLC in a contract dispute with franchisor Travelodge Hotels, Inc. Travelodge sought liquidated damages and recurring fees after the Hubers relinquished their hotel. The Hubers argued Travelodge failed to integrate the property into its reservation system and that its representatives continually shifted opening requirements, making performance impossible. The court agreed, holding that Travelodge’s delay in performing its contractual obligations constituted a material breach that excused the Hubers from further obligations under the Franchise Agreement.
Relevant Background
Robert and Janette Huber purchased the Snow Country Inn in Hurley, Wisconsin in late 2017 to convert it into a Travelodge hotel. After receiving Travelodge’s Franchise Disclosure Document, the Hubers signed a fifteen-year Franchise Agreement in November 2017. They testified that they invested in new carpeting, furniture, fireplaces, mattresses, and other upgrades, and believed they had largely completed the required renovations by December 2017.
Travelodge initially scheduled the opening for January 29, 2018. The company later informed the Hubers that it would delay installation of the property management system until March. According to the Hubers, Travelodge representatives then introduced new requirements, including installation of a new phone system capable of direct 911 dialing, enrollment of their general manager in a week-long training course, and the purchase of artwork for the lobby. The Hubers testified that these additional items created unplanned expense and further delayed the opening.
Travelodge ultimately integrated the hotel into its reservation system in May 2018. The Hubers contended that the system listing contained errors, including an incorrect address and phone number and minimal photographs, which they believed undermined visibility to potential guests. By June 10, 2018, they reported operating costs of $30,000 per month with limited reservations. They then sold the property back to its prior owner. Travelodge terminated the Franchise Agreement and filed suit for unpaid fees, liquidated damages, and breach of contract.
Decision
New Jersey contract law excuses performance when the other party commits a material breach. The court noted that “a material breach by either party to a bilateral contract excuses the other party from rendering any further contractual performance.” Nolan ex rel. Nolan v. Lee Ho, 577 A.2d 143, 146 (N.J. 1990); see also Magnet Res., Inc. v. Summit MRI, Inc., 723 A.2d 976, 981 (N.J. Super. Ct. App. Div. 1998) (“It is black letter contract law that a material breach by either party to a bilateral contract excuses the other party from rendering any further contractual performance.”).
The court emphasized that Travelodge did not integrate the hotel into its reservation system for six months after the parties signed the Franchise Agreement. Because the reservation system represents a central feature of the franchise relationship, the court concluded that the delay undermined the purpose of the agreement. Travelodge argued that outstanding punch-list items justified the delay. The court, however, found that the Hubers presented credible evidence of their efforts to complete the required improvements, and noted testimony from a Travelodge witness that openings sometimes proceed even if not every punch-list item is finished.
The court also credited testimony that Travelodge representatives imposed inconsistent and shifting requirements. According to the Hubers, these late-stage demands—ranging from a phone system replacement to costly training—were not clearly communicated at the outset. In assessing the evidence, the court remarked: “Mr. and Mrs. Huber were individual investors working alone on a first-time hotel venture, not sophisticated hoteliers with deep pockets handling many complex and high-value portfolios, yet Travelodge seeks to hold them to a dense 500-page contract whose requirements its own actions ensured could not be timely met, and whose supposed ‘requirements’ may not, in fact, have been required.”
The court found that Travelodge materially breached the agreement and, as a result, excused the Hubers from paying recurring fees and liquidated damages. It therefore entered judgment for the defendants.
Looking Forward
Losses often provide the clearest lessons, and it is always better to learn from someone else’s setback than your own. In this case, the court focused on Travelodge’s delay in integrating the hotel into its reservation system and stressed that the Hubers were first-time investors rather than seasoned operators. The court remarked that Travelodge sought to hold them to a “dense 500-page contract”—a statement that underscores how courts may empathize with franchisees and frame their reasoning in ways sympathetic to individual operators. Applying the facts here, the court relied on the first material breach doctrine and excused the franchisee’s performance, ultimately preventing Travelodge from recovering its lost profits.
While hindsight is always 20/20, the critical question for franchisors is what could have changed the outcome. The answer often lies less in how counsel argues the case and more in the evidence available at trial. Here, the court referenced conflicting testimony but did not point to any contemporaneous documentation showing that the franchisee delayed the opening, defaulted on obligations before the reservation system issues arose, or otherwise committed the first material breach. Without such evidence, the court had the opportunity to view the franchisee sympathetically.
This decision highlights a recurring theme: franchisors must document consistently. Clear records that detail communications, expectations, and defaults not only strengthen the case in court but also reduce the likelihood of litigation in the first place. To ensure this happens, franchisors should train their representatives on how to document issues in direct but non-confrontational ways, when to elevate matters to their operations and opening teams, and when to escalate issues to legal counsel. These practices put franchisors in the strongest position to defend their brand, foreclose arguments based on empathy, and prevail when disputes arise.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
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