Is bankruptcy a curable or non-curable default for a Delta Hotels By Marriott franchise?
Delta_Hotels_By_Marriott Franchise · 2025 FDDAnswer from 2025 FDD Document
| g. | "Cause" defined-curable defaults | Section 19.2 | You have 30 days to cure: failure to |
|---|---|---|---|
| timely start and complete | |||
| construction/conversion, | |||
| renovation/repair, or open the hotel; | |||
| failure to pay amounts due; default of | |||
| any other agreement(s) entered into | |||
| between us and you; if you or any | |||
| owner, officer, director, or employee is | |||
| convicted of a serious crime or is | |||
| engaged in conduct that may adversely | |||
| affect the hotel, the system, any | |||
| Company Brand Hotel or us, and such | |||
| person is not terminated from its | |||
| relationship with you; failure to | |||
| comply with the Standards; or any | |||
| other breach of the franchise | |||
| agreement or other agreements | |||
| between us and you that is not listed in | |||
| Section 19.1 (including, without | |||
| limitation, failure to procure and | |||
| maintain required insurance; failure to | |||
| indemnify us; or failure to comply | |||
| with condemnation/casualty | |||
| provisions). | |||
| h. | "Cause" defined-non-curable defaults | Sections 17.5.A, 19.1, and 21 | Non-curable defaults: insolvency; bankruptcy; appointment of receiver, trustee or liquidator; execution levied against you, the hotel or material real or personal property; foreclosure; becoming, or being under ownership or control of, a Restricted Person; violation of applicable law; becoming or being affiliated with a Competitor; transfers that do not comply with Section 17; dissolution or liquidation; loss of right to operate or possess the hotel or default or termination under a lease; cessation of operation as a System hotel; underreporting three or more times in 24 months; threat to public health or safety; failure to achieve performance thresholds under our quality assurance program; or disclosure of confidential information. |
Source: Item 16 — RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL (FDD pages 111–120)
What This Means (2025 FDD)
According to Delta Hotels By Marriott's 2025 Franchise Disclosure Document, bankruptcy is considered a non-curable default. This means that if a franchisee declares bankruptcy, Delta Hotels By Marriott has grounds to terminate the franchise agreement without providing an opportunity for the franchisee to rectify the situation. This policy is explicitly outlined in Section 19.1 of the franchise agreement.
This provision protects Delta Hotels By Marriott from the risks associated with a financially unstable franchisee. Bankruptcy can severely impact a hotel's operations, reputation, and ability to meet brand standards, potentially harming the overall Delta Hotels By Marriott system. By classifying bankruptcy as a non-curable default, Delta Hotels By Marriott maintains control over the brand and can act swiftly to replace a franchisee facing financial distress.
For a prospective Delta Hotels By Marriott franchisee, this underscores the importance of sound financial planning and risk management. The inability to cure a bankruptcy default highlights the significant financial risks involved in operating a franchise and the potential for immediate termination of the franchise agreement in such circumstances. Franchisees should carefully consider their financial capacity and ensure they have adequate resources to weather economic downturns or unexpected financial challenges.
It is important to note that while bankruptcy is a non-curable default, Delta Hotels By Marriott also defines several 'cause' defaults that are curable, such as failure to pay amounts due or failure to comply with standards. These curable defaults allow the franchisee a 30-day period to rectify the issue and maintain the franchise agreement.