When is the Development Incentive fully forgiven for a Baymont Inn Suites franchise?
Baymont_Inn_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
The Development Incentive is a loan that is not subject to repayment unless the franchise terminates before the end of the term of the Franchise Agreement for the Facility or a Transfer occurs. The Development Incentive is typically funded shortly after the Facility's Opening Date, Subsequently, at each anniversary of the Facility's Opening Date, 1/20th of the original amount of the Development Incentive is forgiven without payment (based on the Term of the Franchise Agreement) such that the Development Incentive Note is fully forgiven at the end of the Term. If the franchise terminates or is transferred before the expiration of the Term, you must repay the balance of the Development Incentive. The Development Incentive Note bears no interest except in the case of default, in which case the interest rate will be 18% per annum (1.5% per month) or the highest rate allowed by law. If you must repay the balance of the Development Incentive and fail to make any required payment on time, we may demand that you immediately pay the Development Incentive in full. Default under the Development Incentive Note will constitute a default under the Franchise Agreement.
Source: Item 10 — FINANCING (FDD pages 59–61)
What This Means (2025 FDD)
According to Baymont Inn Suites's 2025 Franchise Disclosure Document, the Development Incentive, which may be offered for new construction or conversion Chain Facilities, is fully forgiven at the end of the Franchise Agreement term. The Development Incentive functions as a loan that does not require repayment unless the franchise terminates early or is transferred.
Specifically, 1/20th of the original Development Incentive amount is forgiven on each anniversary of the Facility's Opening Date, without requiring any payment. This forgiveness is based on the term of the Franchise Agreement. Therefore, if the franchise agreement lasts for 20 years, the incentive is fully forgiven at the end of that 20-year term.
However, if the Baymont Inn Suites franchise terminates or is transferred before the term expires, the franchisee must repay the remaining balance of the Development Incentive. This condition highlights the importance of fulfilling the entire franchise term to benefit fully from the incentive. Defaulting on the Development Incentive Note also constitutes a default under the Franchise Agreement, which could have serious repercussions for the franchisee.