Financial support: neither the franchisor nor a subsidiary of PIP offers direct or indirect financing to franchisees. The franchisor does not guarantee a franchisee`s rating, lease or commitment. At some point in the investment, ownership and operation of hotels, most hotel investors will face the prospect of entering into a licensing agreement with a hotel brand. Hotel brands continue to build on an asset light philosophy and expand the franchise model to a growing number of markets (including Europe, the Middle East, Africa and Asia) with an ever-increasing range of hotel branded products. Investors should therefore be unaware of the nuances and negotiation of franchise agreements. Although franchisors generally do not authorize the sale of a franchise agreement to a new franchisee, franchisees are able to negotiate certain assignment rights with respect to the ownership structure of the franchisee, provided that the identity of such a new franchisee (or the company or persons controlling the franchisee) is disclosed and known in advance. This allows franchisees to negotiate with the franchisor the authorized transfer of the FLA to partners in a joint venture that, on the basis of sale agreements, may occur under a joint enterprise agreement. If certain authorized transfers are not negotiated under the FLA, they may, due to the exercise of certain rights defined in a fund, partnership or joint venture contract, apply for a new franchise agreement, which could result not only in the payment of another application fee, but also, possibly, a new term of 10 to 30 years. , increased deductibles and a new PIP. The buyer`s legal counsel should be aware that franchisors and brand managers often use the transfer of a franchise agreement or management agreement during a hotel sale to compel the buyer to value the hotel according to a PIP. This is due to the fact that loan revenues are generally available to supplement upgrades that the FF-E reserve is not sufficient to cover.
As part of a franchise agreement, the franchisor`s agreement for the sale of the hotel is conditional on the buyer`s acceptance of the franchise agreement of the franchisor, then in progress, which provides for the modernization of the hotel in order to carry out all necessary renovations in order to bring the hotel in compliance with the franchisor`s brand standards. Franchisors are also particularly concerned about the identity, experience and financial resources of the franchisee. As a result, ARFs are generally not attributable to the franchisee. Except as described below, franchisors do not authorize an indeterminate right that entrusts the FLA to a successor who has not been examined and approved by the franchisor and which is very rare for the prior allocation of an „approved taker“.