Articles Posted in Hotel Franchise & License Agreements

Published on:

9 November 2012

Representations and warranties in the documentation of a hotel purchase and sale agreement (or agreement for purchase and sale of any type of hospitality property): What is the value of the seller’s representations and warranties? When does it matter?.

Hotels, restaurants, resorts, vacation ownership projects, spas, golf courses and other similar hospitality properties are different than most real estate. They involve operating businesses that are integrally intertwined with special purpose real estate.

So the documentation to buy or sell such a property (and business) needs to be different than that used for other commercial real estate. One of the areas that is most apparent is in the seller’s representation and warranties.

The article below is by hotel and timeshare lawyer David Sudeck, a senior member of JMBM’s Global Hospitality Group®, and someone very experienced in the purchase and sale of hotels, restaurants, resorts, vacation ownership projects, spas, golf courses and other similar hospitality properties. In a recent article, David wrote about representations and warranties in a purchase and sale agreement — what they are, what areas they cover, and what you want to get in a typical deal.

In this article, he writes about the value of these representations and warranties, hurdles to enforcing them and common terms used today.

This article is one of a series of insights that will be published initially as articles on the Hotel Law Blog at www.HotelLawyer.com and then they will be assembled into the HOW TO BUY A HOTEL handbook for our “We wrote the book™” series, much like the HMA Handbook and the Lenders Handbook for Troubled Hotels (see Resource Center at HotelLawyer.com for free copies).

CONTINUE READING →

Published on:

4 November 2012

Hotel Lawyer with some tips on buying a hotel or other hospitality property.

Hotels, restaurants, resorts, vacation ownership projects, spas, golf courses and other similar hospitality properties are different than most real estate. They involve operating businesses that are integrally intertwined with special purpose real estate.

So the documentation to buy or sell such a property (and business) needs to be different than that used for other commercial real estate. One of the areas that is most apparent is in the seller’s representation and warranties.

The article below is by hotel and timeshare lawyer David Sudeck, a senior member of JMBM’s Global Hospitality Group®, and someone very experienced in the purchase and sale of hotels, restaurants, resorts, vacation ownership projects, spas, golf courses and other similar hospitality properties. In this article he talks about representations and warranties — what they are, what areas they cover, and what you want to get in a typical deal.

This article is one of a series of insights that will be published initially as articles on the Hotel Law Blog at www.HotelLawyer.com and then they will be assembled into the HOW TO BUY A HOTEL handbook for our “We wrote the book™” series, much like the HMA Handbook and the Lenders Handbook for Troubled Hotels (see Resource Center at HotelLawyer.com for free copies).

CONTINUE READING →

Published on:

18 July 2012

There is nothing more important to the value and financial success of your hotel than selecting the right operator, and getting a management agreement with reasonable terms.

At a recent meeting in Los Angeles, my partner and Hotel Lawyer Robert E. Braun of JMBM’s Global Hospitality Group® moderated a panel of hotel industry leaders on some of the key issues owners should consider in selecting a new hotel operator.

The panelists included Patrick Bajdek of Carlson Rezidor Hotel Group, Craig Mance, from Hilton Hotels, Rich Musgrove from HotelAVE, Larry Somma of Hyatt Hotels, and Sam Winterbottom from Grubb & Ellis.

Below, Bob gives his top 5 takeaways from the panel. . .

CONTINUE READING →

Published on:

12 September 2011

Hotel Lawyer with some tips on Hotel Franchise Agreements and the 5 biggest mistakes a hotel owner can make

Hotels need brands, and brands need hotels. For many years, hotel brands have been growing in importance for the success of hotels in the United States and abroad. The trend toward branding is quite a phenomenon. According to numbers we have seen, In the early 1990s, approximately 40% of the hotels in the U.S. were branded and the balance were independent. Now the number is probably closer to 80% or more of the hotels are branded or brand-affiliated.

The branding is often accomplished by a franchise or license agreement from a company owning the brand. Other times it is accomplished by a branded hotel management company entering into a management agreement with the owner of the hotel, providing both the brand and management for the property.

Although we have spent a lot of time on Hotel Law Blog discussing hotel management agreements, today we are going to focus on the franchise or license agreement arrangements. With more than 20 years’ experience working with more than 1,000 hotel management and franchise agreements, we have some perspectives that may be worth considering.

Hotel owners keep falling into the same traps
One of these perspectives of our hotel lawyers is that many sophisticated hotel investors and owners seem to fall into a handful of traps that would be easy to avoid. And this same handful of traps catches the unwary time and again.

So this article focuses on hotel franchise agreements and outlines the 5 biggest mistakes an owner can make when seeking a hotel franchise arrangement. If this sounds all too familiar, you have probably learned these lessons the hard (and expensive) way. If you haven’t stumbled on these yet, you won’t want to miss the warning flags and the traps they portend.

CONTINUE READING →

Published on:

8 September 2011

Hotel Lawyer on changing brand standards.

Hotels need brands, and brands need hotels.

Like all relationships, the relationship between branded hotel operators or franchise companies (the brand) and hotel owners needs ground rules. As long as both parties agree to the rules and follow them, who can complain?

Now, what happens if the ground rules change? In most relationships, both parties would agree to change the rules — or they would separate and go their own ways.

And what if one of the ground rules is that only one party can change the rules at any time? And the other party would have to follow them, no matter what? This is what can happen to hotel owners that agree, often for very good reasons, that a brand can change its standards for the hotel.

Sometimes the change in brand standards is not so good for the owner… one day you’re turning a profit and the next day you’re in the hole, paying for expensive changes required by the “new brand standards,” with no return on investment in sight.

The management or franchise agreement sets the ground rules and allocates risk between the hotel operator and the hotel owner. Negotiating the agreement, which will include “brand standards”, is one of the most important things hotel owners will ever do for their hotel investment.

Here is some advice from my partner, Robert Braun, co-author with me of the HMA Handbook.

CONTINUE READING →

Published on:

16 August 2011

Hotel Lawyer with what it all means: Family Suites Resorts v. Viacom International d/b/a MTV Networks — a suit over branding

I was recently interviewed by Jason Freed of HotelNewsNow (a division of Smith Travel Research) about three high profile lawsuits in the hospitality industry.

In the third and final lawsuit we discussed, Family Suites Resorts v. Viacom International d/b/a MTV Networks, we discussed the Family Suites lawsuit. Family suites operates a Nickelodeon-themed hotel, and claims its licensing rights were breached when Viacom entered into an agreement with Marriott to franchise the Nickelodeon brand.

According to the complaint, Family Suites Resorts spent $168 million on its Nickelodeon-themed property — money it would not have spent if guests could get the Nickelodeon hotel experience elsewhere. So what happened?

An industry built on intellectual property.

As Jason quotes me as saying in the article: “This is an industry that relies on intellectual property–that’s what brands are.” See, The 5 questions every owner should ask before selecting a hotel brand.

CONTINUE READING →

Published on:

06 October 2010

Terminology

Contracts between hotel owners and managers (or operators) controlling the management of a hotel go by various names. They are called hotel management agreements, HMAs, hotel management contracts or hotel operating agreements. For convenient reference, this article will generally use the term “Hotel Management Agreement” or “HMA.” However all these terms can be used interchangeably and mean the same thing, just as with hotel operator or hotel manager.

Whatever they are called, Hotel Management Agreements allocate risk between the hotel manager and the hotel owner. They are critical in determining the profitability and value of a hotel.

Hotel Lawyer with a big tip on how to get a great hotel operator and a fair hotel management agreement — Why Hotel Owners Need HMA PRO™
For more than 20 years, hotel lawyers at JMBM’s Global Hospitality Group® have helped hotel owners find the best hotel operators for their properties and get fair hotel management agreements. Our clients get better results because of our experience gained in negotiating, re-negotiating, litigating, arbitrating and advising on more than 1,000 hotel management agreements and more than $60 billion of hotel transactions.

Our experience has has taught us that the traditional Request for Proposal or RFP process used to get hotel operators is too passive and ineffective. By its very nature, a “mere” RFP suggests that the owner should just wait for whatever an operator might propose, and that is simply not in the best interest of either the owner or the prospective operator.
HMA PRO™ is JMBM’s ultimate refinement of the old standby RFP. We started with the typical hotel industry RFP process still used by knowledgeable hotel consultants today, but we made some critical changes that have produced stunning results for our clients, greatly enhancing the value of the owner’s hotel.
Here’s how it works . . .

CONTINUE READING →

Published on:

5 September 2008

Hotel brand proliferation offers more choices — and challenges — for hotel owners. What are the 5 questions every owner should ask before selecting a hotel brand?

With the battle scars earned as the hotel lawyer and advisor on several hundred hotel management agreements, my partner, Bob Braun, is one of the senior members of JMBM’s Global Hospitality Group®. While we have a very “deep bench” of hospitality lawyers experienced in dealing with hotel operators, Bob is one of the real veterans who has seen it all.

Bob and I work together frequently, and we often present practical guidance on many aspects of hotel management agreements at industry conferences and here on the Blog. In fact, an entire section of the Blog is devoted to Hotel Management Agreements. (Just go to www.HotelLawBlog.com and click on the “TOPICS” tab at the top, and then select “Hotel Management Agreements.” Alternatively, you can point your browser to http://hotellaw.jmbm.com/management_and_franchise_agree/).

Many of our rich library of resources focus on getting the right hotel operator, and how to get a fair management agreement, but today Bob gives us 5 Questions that every hotel owner needs to ask BEFORE even getting to the hotel management agreement.

Here is Bob Braun’s article. . .

CONTINUE READING →

Published on:

Author of www.HotelLawBlog.com
12 December 2006
Hospitality Lawyer on the power of hotel brands. A rose by any other name may smell as sweet. But does a Trump by any other name sell out as fast? Does a Four Seasons by any other name get a $3.7 billion bid from Bill Gates and the Prince?

What’s a brand? It is not always so easy to determine. Yesterday, I talked about how Donald Trump is more than “just” a very successful developer. He has developed a powerful BRAND with legs.” But are all brands the same? Should they be? What makes a successful brand — for an owner or developer?

CONTINUE READING →