What are 'Prior Costs' in the context of a Delta Hotels By Marriott agreement termination?
Delta_Hotels_By_Marriott Franchise · 2025 FDDAnswer from 2025 FDD Document
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)
According to the 2025 Delta Hotels By Marriott Franchise Disclosure Document, 'Prior Costs' refer to specific expenses related to the hotel's participation in various programs that Marriott has already incurred or the franchisee has accrued before the termination date of the agreement. This becomes relevant if the agreement is terminated due to an 'Event Termination,' as defined in the document, under Paragraphs 7.b or 7.c. These costs are allocated to the franchisee as per Paragraph 3 and Attachment A of the agreement, including any exhibits attached to them.
Delta Hotels By Marriott specifies that upon such termination, Marriott is entitled to recover these Prior Costs from the franchisee. The franchisee is then obligated to promptly pay these costs to Marriott, no later than the termination date. This obligation is designed to compensate Marriott for damages suffered due to the early termination of the agreement.
The agreement emphasizes that the payment of Prior Costs (and Future Costs) is not considered a penalty but rather a reasonable estimate of fair compensation to Marriott for the damages resulting from the termination. Furthermore, the franchisee's responsibility to cover these Prior Costs survives the termination of the agreement, meaning the franchisee remains liable for these expenses even after the agreement has ended.