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

Negotiating Comfort Letters; Addressing Franchise Provisions in Hotel Lending Documents

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

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Conducted on Tuesday, September 26, 2023

Recorded event now available

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This CLE course will enable lenders' 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 continues with the hotel brand with access to the reservation and other services afforded the franchisee.

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

Before reviewing and negotiating 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 critical provisions in the franchise agreement from the perspective of a franchisee, with particular focus on the remaining term of the deal, 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 specific provisions in franchise agreements are particularly relevant to lenders and how PIP and other conditions might be reflected in the loan's reserves and other structural features. The panel will also take an in-depth look at the provisions to include in all comfort letters, which are most critical to every lender. Conduit lenders require additional provisions to address CMBS loan assignments.



  1. Comfort letters: key provisions
    1. Notice and cure: monetary and non-monetary
    2. Acquisition and assumption by a lender: option to terminate
    3. Subsequent sale/assignment by a lender after a foreclosure
    4. Subordination of franchise agreement
    5. Consent to a collateral assignment
    6. Assignment of loan by a 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 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 K
Tara K. Gorman

Womble Bond Dickinson (US)

Ms. Gorman focuses her practice on hospitality law, advising clients domestically and internationally on a broad...  |  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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