Who is required to deliver the Equity Pledge to MICC for a Springhill Suites By Marriott franchise?
Springhill_Suites_By_Marriott Franchise · 2025 FDDAnswer from 2025 FDD Document
- 9. MICC Documents: As a condition to MICC providing the Credit Enhancement to Lender, the following documents shall be delivered to MICC in form acceptable to MICC: (i) Reimbursement Agreement executed by Borrower and [Members / Partners]; (ii) Equity Pledge executed by the [Members / Partners]; (iii) UCC Financing Statements; (iv) Guaranty Agreement (limited to non-recourse carveout acts identified in the Guaranty Agreement)
Source: Item 17 — , "Renewal, Termination, Transfer, and Dispute Resolution," is amended by the addition of the following paragraph(s) at the conclusion of the Item: (FDD pages 285–553)
What This Means (2025 FDD)
According to the 2025 Springhill Suites By Marriott Franchise Disclosure Document, the Equity Pledge must be executed and delivered to MICC (presumably, Marriott International Credit Corporation) by the Members or Partners of the borrowing entity as a condition for MICC providing credit enhancement to the lender. This pledge secures the reimbursement obligations to MICC for any advances MICC makes to the lender under the Credit Enhancement Agreement.
This means that if a Springhill Suites By Marriott franchisee obtains financing that involves a credit enhancement from MICC, the individuals or entities that are members or partners in the franchisee's business entity must personally guarantee the reimbursement obligations by pledging their equity. This is a significant commitment, as it puts their ownership stake at risk if MICC has to cover the franchisee's defaults.
If the franchisee fails to repay advances made by MICC under the Credit Enhancement Agreement, MICC has the right to (i) receive net operating income, sale proceeds, refinance proceeds, or casualty proceeds otherwise payable to the Borrower and/or Members/Partners, and (ii) foreclose on the Member/Partner pledges, potentially leading to MICC becoming the owner of the Member/Partner interests in the Borrower. This could result in a loss of ownership and control for the franchisee's investors.
Prospective Springhill Suites By Marriott franchisees should carefully consider the implications of the Equity Pledge and the Reimbursement Agreement, particularly the potential for losing equity and control of their business. They should seek legal and financial advice to fully understand the risks and obligations involved before entering into such agreements.