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

Negotiating Comfort Letters; Addressing Franchise Provisions in Hotel Loan Documents

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

Conducted on Thursday, April 12, 2018

Recorded event now available

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Program Materials

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 critically important 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) if 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, 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?


Falik, Jonathan
Jonathan Falik

Founder and CEO
JF Capital Advisors

Mr. Falik leads the firm's hospitality business, which includes equity and debt placement, asset acquisitions and...  |  Read More

Gorman, Tara
Tara K. Gorman

Perkins Coie

Ms. Gorman represents sellers, owners and licensors in the acquisition, disposition, finance, development, management...  |  Read More

Maisnik, Guy
Guy Maisnik

Jeffer Mangels Butler & Mitchell

Guy Maisnik has over three decades of commercial real estate transactions with a strong expertise in hotels and...  |  Read More

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