The Georgia Court of Appeals has affirmed a trial court's ruling that upheld a liquidated damages provision in a franchise agreement between Atlanta Hospitality Investment, LLC (AHI) and Holiday Hospitality Franchising, LLC (HHF). This decision, made on May 29, 2026, affects AHI and its guarantor, Mohammad Sarower Hossain, who sought to terminate their agreement with HHF prematurely. The court's ruling clarifies the enforceability of liquidated damages provisions in franchise agreements under Georgia law.
The dispute arose when AHI and Hossain, after operating a Holiday Inn Express & Suites in Chamblee, Georgia, for less than two years, attempted to unilaterally terminate their license agreement with HHF. They acknowledged their obligations under the agreement's liquidated damages provision but sought a declaration that the agreement was unconscionable and the damages provision was unenforceable. The trial court ruled in favor of HHF, leading to the appeal by AHI and Hossain.
Background
AHI and Hossain entered into a franchise agreement with HHF in March 2017, which allowed them to develop and operate a Holiday Inn Express & Suites. The agreement included a liquidated damages provision that specified the damages to be paid in the event of premature termination. This provision was designed to estimate HHF's losses from such a termination, recognizing the difficulty in calculating actual damages.
In June 2023, AHI and Hossain informed HHF of their intention to terminate the license agreement. They requested the amount of liquidated damages owed, acknowledging their obligations under the agreement. However, HHF responded that AHI and Hossain did not have the right to terminate the license prematurely. Following this, AHI and Hossain filed a petition seeking a declaration that the license agreement was prematurely terminated and that the liquidated damages provision was unenforceable.
The Ruling
The Court of Appeals of Georgia reviewed the trial court's decision to grant summary judgment to HHF and deny AHI and Hossain's motion for summary judgment. The court noted that the trial court found the liquidated damages provision enforceable for three reasons. First, it referenced a previous ruling in Noons v. Holiday Hospitality Franchising, Inc., which upheld a similar liquidated damages provision. Second, the court found the terms of the provision to be clear and unambiguous. Third, it concluded that the provision met Georgia's three-part test for enforceability.
Judge Padgett, writing for the court, stated, "The parties recognize the difficulty of ascertaining damages to [HHF] resulting from premature termination of the License, and have provided for liquidated damages which represent their best estimate as to the damages arising from the circumstances in which they are provided." The court ultimately affirmed the trial court's ruling, awarding HHF $1,974,400.56 in liquidated damages.
Impact
This ruling reinforces the validity of liquidated damages provisions in franchise agreements, particularly in cases where the parties have clearly articulated their intentions regarding damages. It sets a precedent for future cases involving similar contractual disputes, indicating that courts will uphold such provisions if they meet the established criteria under Georgia law.
The decision is significant for both franchisors and franchisees, as it clarifies the circumstances under which liquidated damages can be enforced. This ruling may encourage more franchisors to include such provisions in their agreements, knowing that they are likely to be upheld in court if challenged.
What's Next
AHI and Hossain may seek further appeal options, but details were not available in the court filing regarding any potential next steps. As of now, the ruling stands, and no related cases were mentioned in the opinion.