A Louisiana hotelier has filed a federal class-action lawsuit against the InterContinental Hotels Group (IHG) that alleges the company and its franchising unit are illegally squeezing franchisees through abusive and exploitative tactics.
Vimal Patel, who manages Park 80 Hotels LLC and is the CEO of Q Hotel Management, filed the lawsuit in the Eastern District of Louisiana. Patel owns franchises in Louisiana communities affiliated with IHG, including Holiday Inn Express locations.
The lawsuit aims to end what it calls unlawful and abusive practices that serve to enrich the parent company at the expense of franchisees such as Patel, the complaint states.
Q Hotel Management CEO Vimal Patel
“Defendants have and continue to engage in unconscionable, fraudulent, unlawful anticompetitive and discriminatory business practices in connection with the IHG Hotel franchise system,” the complaint says.
Other hotel franchisees are filing similar lawsuits in other parts of the nation, including a complaint just filed in the U.S. District Court for the District of Connecticut.
A spokesman for IHG told the Louisiana Record that the company is looking into the allegations outlined in the litigation.
“While we don’t comment on pending litigation, we are committed to the fair treatment of all hotel owners who choose to invest in our brands,” Jacob Hawkins said in an email. “We are currently reviewing the complaints and will respond to all claims through the appropriate legal processes.”
At the core of Patel’s complaint is a mandate by IHG and Holiday Hospitality Franchising (HHF) that franchisees purchase all their hotel-related goods and services through the company’s chosen vendors and suppliers. This leads to excessive procurement costs for the franchisees, according to the complaint.
The lawsuit also criticizes the company’s property improvement plans, arguing that such directives force franchisees to regularly carry out costly renovations and remodeling.
Rather than helping local hotel owners maintain brand expectations, “IHG/HHF’s sole purpose is to maximize its kickbacks and unjustifiably run up costs on their franchisees in bad faith,” the lawsuit states.
In addition, the company and its franchise affiliate display have created hostile relationships with minority hotel owners, the complaint says.
“Quite egregiously, IHG/HHF routinely discriminates, demeans, and is both explicitly and implicitly hostile and bigoted towards (the plaintiff) and towards Indian-American and South Asian-American franchisees,” the lawsuit states.
The claims of some of the proposed class members exceed $5 million, according to the complaint, which alleges breach of contract and breach of fiduciary duty, among other counts.