Hotel Franchise Agreements

Summary

This practice note discusses the preparation and negotiation of hotel franchise agreements, both for hotels to be constructed and existing hotels. This practice note describes key issues in determining the contractual relationship between franchisor, or franchise licensing company, and franchisee, typically an independent owner of hotels. Such key issues include the rights granted by franchisor, the fees paid by franchisee, geographic area protection, ownership transfers, use of independent managers, required personal guaranties, termination rights, and liquidated damages. Franchise agreements are typically prepared and delivered by franchisor using a standard form they have developed to franchisee. The forms described in this practice note favor the franchisor but also contains suggestions for changes that are typically requested by franchisee. Forms of franchise agreements for both limited service and full-service hotels are considered.