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Yes, Hotel Franchise Agreements CAN Be Negotiated

Attorney Ormend G. Yeilding writes that, contrary to what many prospective franchisees may think, hotel brand franchise agreements are negotiable. But timing is key.

A few of the items that are often negotiated between the franchisor and prospective franchisee are franchise fees, guarantor, interest transfers, right of first refusal, area of protection and key money, Yeilding writes.

There is a widespread assumption that brand franchise agreements are not negotiable. This assumption is so prevalent that many real estate investors will devote substantial effort to negotiating the terms of a hotel purchase agreement, management agreement and loan agreements, while accepting the brand’s first draft of the franchise agreement with a shrug.

…A better way to frame the question is not “what” provisions are negotiable, but rather “when” a franchise agreement is negotiable. A brand needs a compelling reason to change its form agreement. If a franchisee is in a position to walk away from a deal unless certain changes are made, or, even better, has the option to go with another brand offering better terms for the same hotel, then the brand is often willing to work with the franchisee. But if a franchisee waits to negotiate the franchise until a week before the closing deadline (after the deposit is non-refundable), the best the franchisee can usually do is accept the franchise agreement with a shrug. — Ormend G. Yeilding, Esq.: Lowndes, Drosdick, Doster, Kantor & Reed, PA

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