What is a 'lender comfort letter' in the context of a Sonesta Simply Suites franchise?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
is Agreement, you do not need to notify us to obtain our approval if you want to pledge or mortgage the assets of your Hotel to a third-party bank or other commercial lending institution that is not a Competitive Business. However, you do need to notify us and obtain our consent if you want to pledge or mortgage your interest in this Agreement or any Equity Interest. As a condition to our giving our consent to a pledge or mortgage of this Agreement or any Equity Interest we may require the lender to sign a lender comfort letter that describes our requirements on foreclosure. If the lender desires to continue to operate a Brand Hotel, the lender will be required to conform to the lender comfort letter approved by us at our reasonable discretion or, if no lender comfort letter was signed, then it must meet the terms and conditions of Section 12.C. References in this Agreement to "Equity Interest" means any direct or indirect beneficial interest in the franchisee.
- (5) Public or Private Offering. Written information used to raise or secure funds can reflect upon us and the Marks. You agree to submit any written information intended to be used for that purpose to us at least twenty (20) days before the date you distribute those materials, or file them with any governmental agency, including in any registration statement, prospectus, or similar offering memorandum. Should we object to any reference to us or our affiliates or any of our business in the offering literature or prospectus, the literature or prospectus shall not be used until our objections are withdrawn.
Source: Item 22 — CONTRACTS (FDD pages 79–80)
What This Means (2025 FDD)
According to Sonesta Simply Suites's 2025 Franchise Disclosure Document, a lender comfort letter is a document that Sonesta Simply Suites may require a lender to sign if a franchisee wants to pledge or mortgage their interest in the Franchise Agreement or any Equity Interest. This letter outlines Sonesta Simply Suites's requirements in the event of a foreclosure.
If a lender forecloses on a Sonesta Simply Suites franchise and desires to continue operating it as a Sonesta Simply Suites Brand Hotel, they must adhere to the terms specified in the lender comfort letter, if one was signed. If no such letter exists, the lender must meet the conditions outlined in Section 12.C of the Franchise Agreement.
Furthermore, if a franchisee requests a lender comfort letter from Sonesta Simply Suites, the franchisee must pay an administrative fee of $2,000 per letter, in addition to any costs Sonesta Simply Suites incurs in preparing or reviewing the documentation, including reasonable attorney's fees. This fee is subject to Fee Adjustments as defined in Schedule 3.H.