Is the Development Incentive a loan for Baymont Inn Suites franchises?
Baymont_Inn_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
o collect reasonable attorney's fees and all costs of collection.
Development Incentive Financing. We may offer certain "Development Incentives" for new construction and conversion Chain Facilities. The incentives are based on various factors and are determined in our sole discretion. These factors may include the number of rooms and location of the proposed Facility, market overview, surrounding hotels, demand drivers, and a feasibility study. 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. We do not typically require any additional security for the Development Incentive Note, but reserve the right to do so in certain circumstances depending on the amount of the Development Incentive and the creditworthiness of you and your principals. The Development Incentive Note may be prepaid at any time without penalty. If the Development Incentive Note is collected by or through an attorney, we will be entitled to collect reasonable attorney's fees and all costs of collection.
To receive the Development Incentive, you and your principals, as co-makers, must sign a Development Incentive Note, which will specify the amount of the incentive, in the form attached to Exhibit C-1 when you sign and deliver to us the Franchise Agreement. If you and/or your principals are residents of community property or certain other states, your and /or their spouses must also co-sign the Development Incentive Note. In addition, you must sign an addendum to the Franchise Agreement, agreeing to make all payments due under the Franchise Agreement and ancillary agreements through electronic funds transfers through the ACH (automated clearing house) system. You must provide us with a current balance sheet, loan documents and other information we request detailing the total cost of the Facility, the amount being financed, and your equity investment in the Facility. If we offer you a Development Incentive, you may not be eligible for any reduction in Initial or Recurring Fees (see Items 5, 6 and 15).
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 is indeed structured as a loan. Baymont Inn Suites may offer this incentive to franchisees for new construction and conversion Chain Facilities, with the specific amount determined at their discretion based on factors such as the number of rooms, location, market overview, surrounding hotels, demand drivers, and a feasibility study.
The Development Incentive functions as a loan that does not require repayment as long as the franchise agreement remains in effect. Specifically, 1/20th of the original loan amount is forgiven on each anniversary of the Facility's Opening Date, aligning with the term of the Franchise Agreement, such that the entire loan is forgiven by the end of the term. However, if the franchise terminates or is transferred before the term expires, the franchisee is obligated to repay the outstanding balance of the Development Incentive.
The Development Incentive Note does not accrue interest unless a default occurs, in which case the interest rate is set at 18% per annum (1.5% per month) or the highest rate permitted by law. Baymont Inn Suites typically does not require additional security for the note but reserves the right to do so based on the incentive amount and the franchisee's creditworthiness. The note can be prepaid at any time without incurring penalties. Defaulting on the Development Incentive Note also constitutes a default under the Franchise Agreement.
Baymont Inn Suites also offers specialized Development Incentives such as the Women Own the Room (WOTR) program, which provides a target amount of $2,500 per guest room, not exceeding 50% of the franchisee's equity investment, and the Black Owners & Lodging Developers (BOLD) Support program. These programs aim to support women and black entrepreneurs, respectively, in hotel ownership, and are subject to the same terms and conditions as the standard Development Incentive.