What are 'Future Costs' in the context of a Delta Hotels By Marriott agreement termination?
Delta_Hotels_By_Marriott Franchise · 2025 FDDAnswer from 2025 FDD Document
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)
According to Delta Hotels By Marriott's 2025 Franchise Disclosure Document, 'Future Costs' refer to specific expenses related to a hotel's participation in various programs. These costs are allocated or allocable to the franchisee as per Paragraph 3 and Attachment A of the agreement, including any exhibits attached. These costs are expected to be incurred by Marriott or accrued by the franchisee after an 'Event Termination,' which occurs if the agreement is terminated under Paragraph 7.b or 7.c. Marriott may not be able to recover these costs after the termination event.
In the event of such termination, Delta Hotels By Marriott is entitled to recover both 'Prior Costs' (costs incurred before the termination) and 'Future Costs' from the franchisee. The franchisee is obligated to promptly pay these costs to Marriott no later than the termination date of the agreement. The agreement specifies that this payment is not considered a penalty but rather a reasonable estimate to fairly compensate Marriott for damages resulting from the termination.
The calculation of 'Future Costs' may include costs anticipated to be allocated to the hotel for the remainder of the initial or renewal term, based on Marriott's most recent projections. This means that Delta Hotels By Marriott can estimate the costs it expected to incur for the hotel's participation in programs throughout the term of the agreement and require the franchisee to pay that amount upon termination. The franchisee's obligation to pay both 'Prior Costs' and 'Future Costs' survives the termination of the agreement, meaning Marriott can still pursue these costs even after the franchise relationship has ended.
This clause is significant for prospective Delta Hotels By Marriott franchisees because it outlines a potentially substantial financial obligation in the event of early termination. Franchisees should carefully review Paragraph 3 and Attachment A, including all exhibits, to fully understand how these costs are allocated and projected. Understanding the methodology Marriott uses to project these costs is crucial for assessing the potential financial exposure upon termination. Franchisees should also consider negotiating the terms of this clause to limit their liability for 'Future Costs' or to establish a more transparent and predictable calculation method.