For Delta Hotels By Marriott, what is the 'Transition Accounting Period' and how does it relate to the Effective Date?

According to the 2025 Delta Hotels By Marriott Franchise Disclosure Document, the "Transition Accounting Period" relates to the calculation of franchise fees during the period when a hotel transitions to a Delta Hotels By Marriott franchise. Specifically, for calculating franchise fees based on Gross Room Sales during this transition, Delta Hotels By Marriott has the discretion to use the franchise fee percentage rate that was in place for the hotel right before the Effective Date. This Previous Rate can be applied instead of the standard franchise fees outlined in Item 11 of Exhibit A, but only if the Previous Rate is lower than the standard rate. The Effective Date is defined in the FDD as the date stated in Item 3 of Exhibit A.

This policy is beneficial for franchisees taking over existing hotels, as it potentially lowers initial franchise fee costs during the transition. By using the lower of the previous rate or the new franchise agreement rate, Delta Hotels By Marriott aims to ease the financial impact on the franchisee during this period. This could make converting an existing hotel to a Delta Hotels By Marriott franchise more attractive.

However, it's important to note that this application of the Previous Rate is at the discretion of Delta Hotels By Marriott. A prospective franchisee should confirm the specific rates and calculations that will apply during their Transition Accounting Period to fully understand the financial implications. Understanding the precise duration of the Transition Accounting Period and the conditions under which the Previous Rate applies is crucial for accurate financial planning.