Hsu's Enterprises, Inc. v. Hospitality International, Inc.

Judge Harold R. Banke.

Hsu’s Enterprises, Inc. (“Hsu”) and Hospitality International, Inc. (“Hospitality”) entered into a franchise agreement under which Hsu, as franchisee, would operate a Red Carpet Inn motel in Knoxville, Tennessee. The franchise agreement required the payment of monthly royalty fees based on the “gross room revenue” for ninety-four rooms located in two separate buildings. Several years later when motel revenues declined, Hsu wanted to convert one building into studio apartments not subject to royalty fees. Although Hsu was unsuccessful in obtaining permission from…