Underperformance alone does not establish a termination right; the agreement’s tests, exceptions, cure provisions and notice requirements control. Have hospitality counsel map the actual contract before threatening termination or selecting a replacement.
Goodwin’s July 2026 analysis describes commonly negotiated performance tests involving both budget and market-performance measures, potentially across consecutive years, with cure rights and exceptions. Its discussion also stresses that an exception’s causal connection to the failure can matter. These are contract patterns, not universal terms. (goodwinlaw.com)
Our recommended review checklist asks:
- When does testing start, and which periods count?
- Must one test fail or both?
- Who controls the budget and competitive set?
- How often can the operator cure, and by paying what amount?
- Which owner defaults or external events excuse performance?
- What notices and dispute steps must occur by which dates?
- Are sale termination, termination without cause or negotiated buyout available?
Model the transition as a separate project: termination payment, systems migration, employee obligations, booking continuity, owner reporting and working capital.
Decision rule: compare the cash cost and execution risk of replacement with a documented improvement plan for the incumbent. A difficult contract does not prove that keeping the operator is best; it means the exit economics must be visible.