What happens if the Franchise Agreement terminates for a Baymont Inn Suites franchise?
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 consequences of terminating a Franchise Agreement depend on whether the franchisee received a Development Incentive or deferred payment of the Initial Fee. If Baymont Inn Suites provided a Development Incentive, which is essentially a loan to encourage new construction or conversions, the franchisee is required to repay the outstanding balance if the franchise terminates before the end of its term. This repayment is outlined in a Development Incentive Note, which specifies that interest accrues at 18% per annum (1.5% per month) or the highest rate allowed by law in the event of default. Failure to make timely payments may result in Baymont Inn Suites demanding immediate and full repayment of the Development Incentive. Defaulting on this note also constitutes a default under the Franchise Agreement itself.
For franchisees who deferred payment of the Initial Fee, a similar situation arises upon termination. Baymont Inn Suites may demand immediate and full payment of the Initial Fee Note if the Franchise Agreement terminates for any reason. If the franchisee fails to pay the note within 10 days of the demand, interest accrues at the lesser of 18% per annum (1.5% per month) or the highest rate allowed by law. Defaulting on the Initial Fee Note also constitutes a default under the Franchise Agreement, potentially leading to further legal and financial repercussions.
In both scenarios, Baymont Inn Suites is entitled to collect reasonable attorney's fees and all costs of collection if legal action is necessary to recover the outstanding amounts. These financial obligations underscore the importance of carefully considering the terms of the Franchise Agreement and related financing arrangements before entering into a franchise agreement with Baymont Inn Suites. Prospective franchisees should be aware that early termination can trigger immediate repayment obligations, potentially creating a significant financial burden.