In one sentence
The brand agreement governing a hotel's flag, central to hospitality lending diligence.
The longer version
A hotel's franchise or brand agreement drives its revenue and imposes property improvement obligations. Lenders diligence the agreement, often obtain a comfort letter from the franchisor, and track PIP obligations.
Hospitality closings add franchise, comfort letter, and PIP items to the standard commercial checklist.
Common questions
- Why is the franchise agreement critical in hotel lending?
- Because the brand drives occupancy and rate. Losing the flag can sharply reduce income, so the lender reviews the agreement's term, fees and termination rights.
- What does a lender review in a hotel franchise agreement?
- The remaining term, fees, brand standards, PIP obligations, termination rights and how the franchise transfers on a sale or foreclosure.
- How do lenders protect the franchise?
- Through a comfort letter from the franchisor giving the lender notice and cure rights and a path to keep the flag after foreclosure.
Keep reading
- The due diligence checklist, built to be runChecklists as systems, not documents.
- The commercial loan closing checklistWhat goes on the list and who owns each line.
- The commercial loan closing processThe five stages from term sheet to funded.
- Commercial loan softwareWhere this sits in the lending stack.