Under what conditions must the Development Incentive be repaid to Hawthorn Suites By Wyndham?
Hawthorn_Suites_By_Wyndham Franchise · 2025 FDDAnswer from 2025 FDD Document
llect reasonable attorney's fees and all costs of collection.
Development Incentive Financing. We may offer certain "Development Incentives" for new construction and conversion Chain Facilities. The incentives are based on various factors and are determined in our sole discretion. These factors may include the number of rooms and location of the proposed Facility, market overview, surrounding hotels, demand drivers, and a feasibility study. The Development Incentive is a loan that is not subject to repayment unless the franchise terminates before the end of the term of the Franchise Agreement for the Facility or a Transfer occurs. The Development Incentive is typically funded shortly after the Facility's Opening Date, Subsequently, at each anniversary of the Facility's Opening Date, 1/20th of the original amount of the Development Incentive is forgiven without payment (based on the Term of the Franchise Agreement) such that the Development Incentive Note is fully forgiven at the end of the Term. If the franchise terminates or is transferred before the expiration of the Term, you must repay the balance of the Development Incentive. The Development Incentive Note bears no interest except in the case of default, in which case the interest rate will be 18% per annum (1.5% per month) or the highest rate allowed by law. If you must repay the balance of the Development Incentive and fail to make any required payment on time, we may demand that you immediately pay the Development Incentive in full. Default under the Development Incentive Note will constitute a default under the Franchise Agreement. We do not typically require any additional security for the Development Incentive Note, but reserve the right to do so in certain circumstances depending on the amount of the Development Incentive and the creditworthiness of you and your principals. The Development Incentive Note may be prepaid at any time without penalty. If the Development Incentive Note is collected by or through an attorney, we will be entitled to collect reasonable attorney's fees and all costs of collection.
To receive the Development Incentive, you and your principals, as co-makers, must sign a Development Incentive Note, which will specify the amount of the incentive, in the form attached to Exhibit C-1 when
you sign and deliver to us the Franchise Agreement.
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 Development Incentive, offered for new construction and conversion of Chain Facilities, is a loan that typically does not require repayment unless specific conditions are met. The amount of the incentive is determined at Hawthorn Suites By Wyndham's sole discretion based on factors such as the number of rooms, location, market overview, surrounding hotels, demand drivers, and a feasibility study.
The primary conditions that trigger the repayment of the Development Incentive are the termination of the franchise before the end of the Franchise Agreement term or a transfer of the franchise. If either of these events occurs, the franchisee must repay the outstanding balance of the Development Incentive. However, at each anniversary of the Facility's Opening Date, 1/20th of the original Development Incentive is forgiven without payment, assuming the franchise agreement remains in effect. This forgiveness is based on the term of the Franchise Agreement, with the entire incentive being forgiven by the end of the term.
The Development Incentive Note does not bear interest unless a default occurs, in which case the interest rate will be 18% per annum (1.5% per month) or the highest rate allowed by law. Hawthorn Suites By Wyndham may demand immediate and full payment of the Development Incentive if the franchisee fails to make any required payment on time. Defaulting on the Development Incentive Note also constitutes a default under the Franchise Agreement. While Hawthorn Suites By Wyndham typically does not require additional security for the Development Incentive Note, they reserve the right to do so depending on the incentive amount and the creditworthiness of the franchisee and their principals.
If a franchisee transfers the Facility, they must repay the balance of the Development Incentive Note unless the transferee assumes the obligation to repay the incentive and provides Hawthorn Suites By Wyndham with the required security. This provides some flexibility for franchisees looking to sell their business, provided the new owner meets Hawthorn Suites By Wyndham's criteria. The Development Incentive Note can be prepaid at any time without penalty, offering franchisees the option to settle the debt early if they have the financial means.