Hotel Franchise Agreements and Comfort Letters: Legal Challenges for Real Estate Lenders

Negotiating Comfort Letters; Responding to Provisions in Franchise Agreements That Impact Hotel Loans

Recording of a 90-minute CLE webinar with Q&A

Conducted on Thursday, May 11, 2017
Recorded event now available

This CLE webinar will enable lender’s counsel to review and negotiate hotel franchise comfort letters. The panel will also review standard features of hotel franchise agreements and the provisions of most concern to lenders. Finally, the panel will discuss how early termination, PIP and other franchise conditions can be addressed in the loan documents.


The franchise comfort letter is of critical importance to real estate lenders when financing hotel properties. The lender must have assurances from the franchisor that it will be permitted to assume the franchise agreement (at its option) in the event the lender forecloses on the property, and continue with the hotel brand with access to the reservation and other services afforded the franchisee.

The comfort letter also addresses related concerns such as subordination of the franchise agreement to the loan, notice and cure rights with respect to franchisee defaults, and ability to assign the agreement to an assignee of the loan or to a subsequent property owner after foreclosure.

Prior to review and negotiation of the comfort letter, counsel must confirm that the franchise agreement would otherwise be acceptable to the lender as a successor franchisee. Lender’s counsel must be able to evaluate the key provisions in the franchise agreement from the perspective of a franchisee, with particular focus on the remaining term of the agreement, termination and liquidated damages provisions, purchase options and ROFRs, property improvement obligations, and property management and area of protection provisions.

Listen as our authoritative panel discusses why certain provisions in franchise agreements are particularly important to lenders, and how PIP and other conditions might be reflected in reserves and other structural features of the loan. The panel will also take an in-depth look at the provisions that should be included in all comfort letters, which provisions are most critical to every lender, and additional provisions required by conduit lenders to address CMBS loan assignments.


  1. Comfort letters—key provisions
    1. Notice and cure—monetary and non-monetary
    2. Acquisition and assumption by lender—option to terminate
    3. Subsequent sale/assignment by lender after foreclosure
    4. Subordination of franchise agreement
    5. Consent to collateral assignment
    6. Assignment of loan by lender—portfolio and CMBS lenders
  2. Franchise agreement—key provisions
    1. Fees, fee reductions
    2. Remaining term/ termination and liquidated damages provisions
    3. Right of first offer and right of first refusal
    4. Property management rights
    5. Area of protection
    6. Guaranty—ability to assign
    7. Property improvement plan
  3. Loan documents revisions to address PIP, termination and other franchise issues


The panel will review these and other key issues:

  • What are the critical elements of the franchise comfort letter in hotel finance?
  • What lender protection provisions should be included in the comfort letter?
  • Which provisions in the franchise agreement are most important to the lender?
  • What provisions should be included in loan documents to address early termination, PIP and other issues?

This is an encore presentation with live Q&A.


Tara K. Gorman, Partner
Perkins Coie, Washington, D.C.

Ms. Gorman represents sellers, owners and licensors in the acquisition, disposition, finance, development, management and leasing of major hospitality, resort and commercial properties. Her property deal portfolio includes domestic and international hotels, office buildings, condo-hotels, water parks, casinos, restaurants and retail stores. Additional areas of practice depth include telecommunications and finance. She counsels clients on management and licensing and branding agreements, website service, telecom licensing and lease agreements. She frequently speaks and writes on emerging real estate issues, including on brand standards in hotel management agreements and best practices in hotel sale negotiations.

Guy Maisnik, Partner
Jeffer Mangels Butler & Mitchell, Los Angeles

Mr. Maisnik has nearly three decades of commercial real estate finance with a strong expertise in hotels. He is Vice-Chair of the firm’s Global Hospitality Group and advises clients on hospitality transactions; representing lenders, opportunity funds, banks, special servicers, owners, REITs and developers in hotel transactions.

Jonathan Falik, Founder and CEO
JF Capital Advisors, New York

Mr. Falik leads the firm's hospitality business, which includes equity and debt placement, asset acquisitions and dispositions, portfolio transactions, JV structuring, asset management, management company and brand evaluation, and strategic and capital markets advisory services. Previously, he was a Senior Managing Director and the Head of Hospitality Capital Markets at BGC Real Estate Capital Markets. Simultaneously, he was the Head of Hotel Investment Sales for Newmark Grubb Knight Frank. Prior to that, he was a Managing Director and Head of the Lodging and Leisure Investment Banking group at Cantor Fitzgerald & Co. Prior to joining Cantor Fitzgerald, he was the founder and CEO of JF Capital Advisors, a lodging advisory and principal investment firm.


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