What is the 'Loan' referenced in the Three-Party Agreement for Hawthorn Suites By Wyndham?
Hawthorn_Suites_By_Wyndham Franchise · 2025 FDDAnswer from 2025 FDD Document
The undersigned duly-authorized representative of Franchisee requests that Franchisor offer and issue a Three-Party Agreement ("TPA") in favor of the "Lender" named below for the purpose of inducing Lender to loan funds (the "Loan") to Franchisee secured by Franchisee's interest in the Facility. Franchisee understands and agrees to the following conditions that apply to the offer and issuance of the TPA. If Franchisee is not currently a party to a franchise agreement with Franchisor pertaining to the Facility, the offer and issuance of the TPA by Franchisor will be subject to the execution of such a franchise agreement (the franchise agreement, including all amendments and ancillary agreements, the "Franchise Agreement"); the payment of an initial fee or affiliation fee, as applicable; and Franchisor's receipt of such other documents Franchisor deems necessary to consummate the closing of the Franchise Agreement.
Source: Item 22 — CONTRACTS (FDD page 92)
What This Means (2025 FDD)
According to Hawthorn Suites By Wyndham's 2025 Franchise Disclosure Document, the 'Loan' referenced in the Three-Party Agreement (TPA) pertains to the funds a lender provides to a franchisee. This loan is secured by the franchisee's interest in the Hawthorn Suites By Wyndham facility. The TPA is offered by Hawthorn Suites Franchising, Inc. to induce the lender to provide funds to the franchisee, using the facility as collateral.
The Three-Party Agreement outlines the conditions under which Hawthorn Suites Franchising, Inc. consents to the franchisee's assignment of a security interest in the Franchise Agreement to the lender. This agreement clarifies the rights and responsibilities of the lender, franchisee, and franchisor, ensuring that all parties are aligned regarding the financial obligations and operational standards of the Hawthorn Suites By Wyndham franchise. The agreement ensures that the lender has certain rights related to the Franchise Agreement as part of the collateral security for its loan.
Furthermore, the issuance of the TPA by Hawthorn Suites Franchising, Inc. is contingent upon the franchisee having a franchise agreement for the facility. This includes executing the franchise agreement, paying the initial fee, and providing any other necessary documents to finalize the franchise agreement. This arrangement is typical in franchise lending, as it protects the franchisor's brand standards and ensures the franchisee is committed to the Hawthorn Suites By Wyndham system before a loan is secured against the franchise.