What is the Three-Party Agreement related to for Baymont Inn Suites franchisees?
Baymont_Inn_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
The undersigned duly-authorized representative of Franchisee requests that Franchisor offer and issue a Three-Party Agreement ("TPA") in favor of the "Lender" named below for the purpose of inducing Lender to loan funds (the "Loan") to Franchisee secured by Franchisee's interest in the Facility. Franchisee understands and agrees to the following conditions that apply to the offer and issuance of the TPA. If Franchisee is not currently a party to a franchise agreement with Franchisor pertaining to the Facility, the offer and issuance of the TPA by Franchisor will be subject to the execution of such a franchise agreement (the franchise agreement, including all amendments and ancillary agreements, the "Franchise Agreement"); the payment of an initial fee or affiliation fee, as applicable; and Franchisor's receipt of such other documents Franchisor deems necessary to consummate the closing of the Franchise Agreement.
Source: Item 22 — CONTRACTS (FDD pages 96–97)
What This Means (2025 FDD)
According to Baymont Inn Suites's 2025 Franchise Disclosure Document, the Three-Party Agreement (TPA) involves the franchisor (Baymont Franchise Systems, Inc.), the franchisee, and a lender. This agreement is used when a franchisee seeks financing to operate their Baymont Inn Suites location, with the lender requiring certain rights related to the Franchise Agreement as security for the loan. The TPA essentially facilitates the loan process by ensuring that all parties—Baymont Inn Suites, the franchisee, and the lender—are in agreement regarding the terms and conditions of the loan and the franchise agreement.
The TPA allows the franchisee to obtain necessary funding while giving the lender assurance that their investment is protected through the security interest in the Franchise Agreement. Baymont Inn Suites consents to the franchisee's assignment of a security interest in the Franchise Agreement to the lender, subject to the terms outlined in the TPA. This consent is crucial for the lender to proceed with the loan, as it ensures they have recourse in case the franchisee defaults. The agreement also ensures that Baymont Inn Suites is informed and can maintain some control over who has rights related to their franchise agreements.
Furthermore, the TPA includes conditions that the franchisee must meet, such as executing a franchise agreement, paying the initial fee, and providing any other necessary documents. Baymont Inn Suites also retains the right to issue a replacement three-party agreement under certain circumstances, such as when the lender appoints a third-party servicing agent or transfers the loan to a successor mortgagee. This ensures that the agreement remains relevant and enforceable even if the lender's situation changes. Baymont Inn Suites may charge an administrative fee for issuing a replacement agreement.