Is insolvency 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, insolvency is considered a non-curable default. This means that if a Delta Hotels By Marriott franchisee becomes insolvent, they do not have the opportunity to rectify the situation and avoid termination of the franchise agreement. This contrasts with curable defaults, where the franchisee is given a specific period, such as 30 days, to correct the issue.
The FDD specifies several other events that also constitute non-curable defaults, including bankruptcy, appointment of a receiver, trustee, or liquidator, and foreclosure. These events typically indicate severe financial distress or legal issues that make it impractical for Delta Hotels By Marriott to continue the franchise relationship. Additionally, actions like violating applicable laws, becoming affiliated with a competitor, or transferring the franchise without approval are also non-curable defaults.
For a prospective Delta Hotels By Marriott franchisee, understanding the distinction between curable and non-curable defaults is crucial. Non-curable defaults represent significant risks that could lead to immediate termination of the franchise agreement. Therefore, franchisees must maintain financial stability and adhere strictly to the terms of the franchise agreement to avoid these situations.
The inclusion of insolvency as a non-curable default is a standard practice in franchising, as it protects the franchisor's brand and reputation from the potential negative impacts of a financially unstable franchisee. This provision underscores the importance of thorough financial planning and risk management for anyone considering investing in a Delta Hotels By Marriott franchise.