Does Hawthorn Suites By Wyndham require security for the Initial Fee Note?
Hawthorn_Suites_By_Wyndham Franchise · 2025 FDDAnswer from 2025 FDD Document
We do not require any security for the Initial Fee Note. The Initial Fee Note may be prepaid at any time without penalty. You and your owners must sign the Initial Fee Note in substantially the form shown in Exhibit C-1. If your owners are residents of community property or certain other states, their spouses must also co-sign the Initial Fee Note. Under the Initial Fee Note, you and your guarantors, or any co-makers of the Initial Fee Note, waive traditional defenses. These defenses include presentment, demand, notice of demand, protest, notice of non-payment, notice of protest, notice of dishonor and diligence in collection. We reserve the right to modify the terms of the Initial Fee Note and/or grant extensions, novations, releases or compromises to you or any co-maker without the consent of, or affecting the liability of, any other party to the Initial Fee Note. The Initial Fee Note is not subject to setoff, offset or recoupment. If the Franchise Agreement terminates for any reason or you transfer the Facility, we may demand that you immediately pay the Initial Fee Note in full. If you fail to make any required installment payment on time, we may demand that you immediately pay the Initial Fee Note in full. If you do not pay the Initial Fee Note within 10 days after it is due, the Initial Fee Note will bear simple interest at the rate of the lesser of 18% per annum (1.5% per month) or the highest rate allowed by law. Default under the Initial Fee Note will constitute a default under the Franchise Agreement. If the Initial Fee Note is collected by or through an attorney, we will be entitled to collect reasonable attorney's fees and all costs of collection.
Source: Item 10 — FINANCING (FDD pages 58–60)
What This Means (2025 FDD)
According to Hawthorn Suites By Wyndham's 2025 Franchise Disclosure Document, the company does not require security for the Initial Fee Note. However, if the Initial Fee is deferred, the franchisee must sign an Initial Fee Note, along with their owners. If the owners reside in a community property state, their spouses must also co-sign the note.
The Initial Fee Note outlines the terms of payment, typically involving up to three equal installments over a 90-day period. While interest does not accrue initially, a significant penalty applies if payments are not made within ten days of the due date. In such cases, the note will bear simple interest at a rate of the lesser of 18% per annum (1.5% per month) or the highest rate allowed by law.
Furthermore, the Initial Fee Note includes a waiver of traditional defenses by the franchisee and guarantors. This waiver covers aspects such as presentment, demand, and notices related to payment and dishonor. Hawthorn Suites By Wyndham retains the right to modify the terms of the note or grant extensions without affecting the liability of other parties involved. Defaulting on the Initial Fee Note constitutes a default under the Franchise Agreement, potentially leading to further legal and financial repercussions, including the obligation to cover attorney's fees and collection costs if legal action becomes necessary.