What is the franchisee's obligation regarding the cost estimate for a Delta Hotels By Marriott conversion?
Delta_Hotels_By_Marriott Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee acknowledges that Marriott may be damaged in several ways upon termination of this Agreement pursuant to Paragraph 7.b or Paragraph 7.c (an "Event Termination").
Franchisee acknowledges that certain costs and expenses related to the Hotel's participation in the Programs, as allocated to Franchisee pursuant to Paragraph 3 and Attachment A (including all of those costs allocated pursuant to Exhibits attached thereto), have already been incurred by Marriott or accrued by Franchisee prior to the date of the Event Termination ("Prior Costs").
Furthermore, certain costs and expenses related to the Hotel's participation in the Programs, as allocated or allocable to Franchisee pursuant to Paragraph 3 and Attachment A and the Exhibits thereto, to be incurred by Marriott or accrued by Franchisee, after the Event Termination ("Future Costs") may not be recoverable.
In the event of an Event Termination, Marriott shall be entitled to recover from Franchisee, and Franchisee shall be obligated to promptly pay to Marriott, no later than the date of termination of this Agreement, the Prior Costs and Future Costs, as reasonably determined by Marriott.
The parties agree that such payment is not
a penalty and represents a reasonable estimate of just and fair compensation of Marriott for the damages that it would suffer for an Event Termination The parties agree that it is reasonable for Marriott to include in the calculation of Future Costs those costs anticipated to be allocated to the Hotel (pursuant to the methodology set forth in Exhibits attached hereto) for the remainder of the Initial Term or Renewal Term (as applicable) as calculated according to Marriott's most recent projection of such costs. Franchisee's obligation to pay the Prior Costs and Future Costs shall survive termination of this Agreement.
Source: Item 6 — Obligations of Franchisee.** Franchisee agrees to the following: (FDD pages 363–513)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, a Delta Hotels By Marriott franchisee is obligated to pay certain costs to Marriott in the event of an Event Termination, which occurs if the franchise agreement is terminated under specific paragraphs. These costs include both Prior Costs, which are expenses related to the Hotel's participation in programs that Marriott has already incurred or the franchisee has accrued before the termination date, and Future Costs, which are expenses Marriott or the franchisee will incur or accrue after the Event Termination.
The franchisee's obligation includes promptly paying Marriott for these Prior Costs and Future Costs no later than the termination date of the agreement. Marriott determines these costs reasonably. The agreement specifies that this payment is not a penalty but a fair compensation estimate for the damages Marriott would suffer due to the Event Termination.
Marriott's calculation of Future Costs may include costs anticipated to be allocated to the hotel for the remainder of the Initial Term or Renewal Term, based on Marriott's most recent projections. The franchisee's responsibility to cover Prior Costs and Future Costs survives the termination of the agreement, meaning the franchisee remains liable for these payments even after the franchise agreement ends.