What is the purpose of the Reimbursement Agreement required by MICC for Delta Hotels By Marriott franchisees?
Delta_Hotels_By_Marriott Franchise · 2025 FDDAnswer from 2025 FDD Document
By execution of this Commitment, Borrower and [Members / Partners] acknowledge that MICC is deemed to have earned the right to reimbursement for the fees, costs and expenses incurred by MICC in connection with the transaction described herein.
Borrower and [Members / Partners] agrees that in the event the Loan and/or the Credit Enhancement transactions contemplated herein are not consummated for any reason whatsoever, or this Commitment is terminated for any reason whatsoever, Borrower and/ or [Members / Partners] shall nevertheless pay or reimburse MICC, on demand, for all such fees, costs and expenses.
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, the Reimbursement Agreement with MICC (presumably referring to Marriott International Corporate Credit) serves to ensure MICC is compensated for its expenses related to the loan and credit enhancement provided to the franchisee. Specifically, the franchisee acknowledges that MICC has earned the right to be reimbursed for all fees, costs, and expenses incurred during the transaction. This agreement is in place regardless of whether the loan and credit enhancement are ultimately finalized or if the commitment is terminated.
This means that even if the deal falls through for any reason, the prospective Delta Hotels By Marriott franchisee is still responsible for covering MICC's incurred fees, costs, and expenses. These can include legal fees, consulting fees, and other costs associated with the underwriting and due diligence process. The agreement protects MICC's financial interests by ensuring they are not left bearing the costs of a transaction that does not come to fruition.
For a prospective Delta Hotels By Marriott franchisee, this highlights the importance of carefully evaluating the terms of the loan and credit enhancement, as well as the likelihood of the deal closing. Franchisees should conduct thorough due diligence and seek professional advice to fully understand the potential financial obligations under the Reimbursement Agreement, even if the project does not proceed. This is a fairly standard practice in franchise financing, as lenders and credit enhancers need to protect themselves from incurring losses on deals that are not completed.