The Downfall of Howard Johnson's: A Franchise Lesson

Howard Johnson’s was once the largest restaurant chain in the United States — more than 1,000 restaurants and 500 motor lodges by 1975, the orange roofs as familiar on American highways as the interstates themselves. The last Howard Johnson’s restaurant, in Lake George, New York, closed in 2022. In between sits a decades-long story that franchise lawyers know well: a system whose corporate owners stopped investing in the restaurant brand, while individual franchisees kept operating — and kept paying — under agreements attached to a name that was quietly being abandoned.

The hotel side survives: roughly 300 Howard Johnson hotels still operate under Wyndham’s umbrella. The restaurants — the original business — went to zero. For anyone in franchising, the question worth studying isn’t why the brand faded. It’s what happens, legally, to franchisees when a franchisor lets a system die.

The Decline, Briefly

The operational causes are the familiar ones — under-investment in aging properties, a menu frozen in the 1960s while competitors modernized, corporate owners who valued the real estate and the hotel flag over the restaurant business. But unlike a sudden bankruptcy, this was a slow fade across decades: a franchise system that stopped behaving like one while its remaining franchisees soldiered on.

The Legal Anatomy of Franchisor Neglect

A franchise agreement is a two-way contract. The franchisee’s obligations — royalties, brand standards, approved suppliers — are detailed and enforceable, and franchisors enforce them. But the franchisor also makes commitments: typically some combination of brand promotion, system development, training, and operational support. When a franchisor stops performing — stops advertising the brand, stops developing products, stops field support, lets the trademark’s value rot — franchisees face a hard legal question: what counts as abandonment, and what can you do about it?

Three realities shape the answer:

1. Franchisor obligations are often drafted soft. Where the franchisee “shall” do things, the franchisor frequently “may” — agreements give franchisors discretion over how much to spend on advertising, what support to provide, and how to develop the system. The first protection against neglect is negotiated language, or at minimum knowing how weak the franchisor’s commitments are before you sign.
2. Persistent non-performance can still be actionable. Depending on the agreement and the state, a franchisor’s material failure to perform its actual obligations can support breach-of-contract claims, claims under the implied covenant of good faith and fair dealing, or — in states with franchise relationship statutes — statutory claims. Documentation is everything: dated records of failed support requests, ad-fund opacity, and broken commitments build the case.
3. A dying system changes the exit math. When the brand no longer delivers value, the agreement’s term, renewal, transfer, and termination clauses become the most important pages in the document. Some Howard Johnson’s operators ran for years as near-independents under a licensed name — viable for them, but only because their economics worked without system support. Most franchisees in fading systems are better served negotiating an exit, a transfer, or de-identification terms than riding the brand down.

Signals of a Franchisor Losing Interest

From the outside, before you buy — and from the inside, while you operate — neglect shows up early if you watch for it: shrinking outlet counts and rising non-renewals in FDD Item 20; an advertising fund that collects but can’t show what it spends; field-support visits that stop happening; no new products, campaigns, or system initiatives for years; corporate ownership changes where the buyer’s interest is plainly in another asset (Howard Johnson’s hotels, not its restaurants); and aging trade dress the franchisor no longer requires anyone to update — because updating costs money it won’t spend on a brand it’s harvesting.

Any one of these is a question to ask. Several together are an answer.

Protecting Yourself — Before and After Signing

Before: read the franchisor’s obligations as skeptically as you read your own. What must it actually do, with what money, on what schedule? What does the FDD show about system trajectory and ad-fund spending? What do current and former franchisees (listed in Item 20) say about support?

After: keep records of what the franchisor promised versus delivered; participate in (or organize) the franchisee association, because collective pressure on a neglectful franchisor accomplishes what individual complaints don’t; and get legal advice early when support deteriorates — your options narrow as renewal dates pass and as your own compliance record develops gaps a franchisor can point to.

The Howard Johnson’s restaurants didn’t fail their customers in a year — they were let go, slowly, by owners with other priorities, while the people running the locations carried the obligations of a system that had stopped holding up its end. That’s the cautionary tale: the brand can be abandoned; your contract won’t be.

Operating in a system that’s stopped supporting you — or evaluating one that worries you? Reidel Law Firm advises franchisees on franchisor obligations, exits, and disputes. Talk to a franchise attorney →