Can an Owner pledge the Delta Hotels By Marriott Franchise Agreement as collateral?
Delta_Hotels_By_Marriott Franchise · 2025 FDDAnswer from 2025 FDD Document
Owner and each Interestholder in Owner may grant a lien or other security interest in the Hotel or the revenues of the Hotel, or pledge Ownership Interests in Owner or a Control Affiliate as collateral for the financing of the Hotel. If any Person exercises its rights under such lien, security interest or pledge, Franchisor will have the rights under Section 8.1 of this Agreement and Section 19.1 of the Franchise
Agreement. Owner will not pledge this Agreement as collateral or grant a security interest in this Agreement.
Source: Item 11 — FINANCING OF THE HOTEL (FDD pages 259–279)
What This Means (2025 FDD)
According to the 2025 Delta Hotels By Marriott Franchise Disclosure Document, an owner is not permitted to pledge the Franchise Agreement as collateral or grant a security interest in the agreement. However, the owner and any interest holders in the owner can grant a lien or other security interest in the hotel or its revenues. They can also pledge ownership interests in the owner or a control affiliate as collateral for financing the hotel.
If a person exercises their rights under such a lien, security interest, or pledge, Delta Hotels By Marriott retains specific rights as outlined in Section 8.1 of the Owner Agreement and Section 19.1 of the Franchise Agreement. This provision ensures that while owners have avenues to secure financing using the hotel's assets and ownership structure, the Franchise Agreement itself remains unencumbered and cannot be used as collateral.
This restriction protects Delta Hotels By Marriott by preventing third-party lenders from potentially gaining control over the franchise rights in the event of an owner's financial difficulties. It ensures that the brand maintains control over who operates a Delta Hotels By Marriott franchise and upholds brand standards. Prospective franchisees should be aware of this restriction and consider it when planning their financing strategy for the hotel.