What is the 'Mortgage Letter Agreement' in the context of an Embassy Suites franchise agreement?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
| [IF THERE IS A MORTGAGE LENDER] | ||||
|---|---|---|---|---|
| Franchisor, Franchisee and ("Mortgage Lender") [SELECT: | entered into a letter | |||
| agreement dated OR are contemporaneously entering into a letter agreement ] containing | ||||
| substantially the same terms as this letter agreement with respect to the mortgage loan ("Mortgage | ||||
| Letter Agreement"). Lender agrees that any and all rights under this letter agreement are subordinate to | ||||
| any and all rights of Mortgage Lender under the Mortgage Letter Agreement as long as the Mortgage | ||||
| Letter Agreement is effective. [IF MORTGAGE LENDER IS THE MEZZANINE LENDER If, when a notice | ||||
| of default is issued, the notice address for "Lender" under more than one letter agreement is the same, | ||||
| Franchisor's obligation to provide notice to Lender at the address designated in more than one letter shall | ||||
| be satisfied by sending one notice, and multiple notices shall not be required.] | ||||
| [IF PRIOR LENDER COMFORT LETTER EXISTS: | ||||
| Reference is also made to a letter agreement dated among Franchisor [CONFIRM], | ||||
| Franchisee [CONFIRM] and Lender [CONFIRM] ("Existing Comfort Letter"). [IF WITH SAME LENDER: | ||||
| This letter agreement replaces the Existing Comfort Letter, which is null and void, and of no further force | ||||
| or effect. ] [IF MORE THAN ONE EXISTING COMFORT LETTER, MODIFY THIS AND ¶¶ 5 AND 6 | ||||
| BELOW] |
Source: Item 23 — RECEIPTS (FDD pages 97–305)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, the 'Mortgage Letter Agreement' is a letter agreement entered into by the Franchisor, Franchisee, and Mortgage Lender. This agreement contains substantially the same terms as the letter agreement related to the mortgage loan. The lender's rights under the letter agreement are subordinate to the mortgage lender's rights as long as the Mortgage Letter Agreement is effective.
For a prospective Embassy Suites franchisee, this means that if they finance their franchise through a mortgage, Embassy Suites will enter into an agreement with both the franchisee and the mortgage lender. This agreement outlines the rights and responsibilities of each party, particularly in situations where the franchisee may default on their loan. The agreement ensures that the mortgage lender's rights are prioritized over the general letter agreement, providing security for the lender's investment.
If the notice address for the lender is the same under more than one letter agreement when a default notice is issued, Embassy Suites' obligation to provide notice to the lender is satisfied by sending one notice. This streamlines the notification process in cases where a lender is involved in multiple agreements. The FDD also mentions an 'Existing Comfort Letter,' which the Mortgage Letter Agreement may replace, rendering the former null and void. This ensures that all parties operate under the most current agreement.
This agreement is crucial for clarifying the relationship between Embassy Suites, the franchisee, and the mortgage lender, especially in scenarios involving potential defaults or transfers of the franchise. Franchisees should carefully review this agreement with their legal and financial advisors to fully understand their obligations and rights, as well as those of the lender and Embassy Suites, under various circumstances.