The Practical Aspects of Terminating and Unwinding Hotel Management and Branding Relationships
2014 Hospitality Law Conference
10 February 2014
- Initiation of Conversion to Franchise or Complete Termination
- Assess the situation (who is doing what to whom and why):
- Is termination by contractual right, mutual agreement, court order or other?
- Conversion to franchise or de-flag?
- Continued operation or shut down after termination?
- What is the nature of relationship:
- Is this a friendly or hostile transaction?
- Who is driving the decision?
- Will third parties such as a lender, asset manager or receiver be involved in the process?
- Always strive for professional resolution.
- Review management agreement to fully understand each party’s rights.
- Determine whether to enter into termination agreement or rely on existing provisions of management agreement.
- What obligations will/should survive?
- Focus on indemnification provisions.
- Assess the situation (who is doing what to whom and why):
- Conversion/De-Flag Working Team
- Determine business lead and other parties’ players (who is decision maker for each party).
- Discipline contacts – above property (legal, HR, sales, operations and finance) and on-property (executive team).
- Develop “critical-path” checklist for each discipline.
- Employees of the Hotel
- Notification timeline (why do the employees “always seem to know”).
- Sharing of employee information with new manager/employer; be careful of personal information.
- Coordination of employee communications.
- Hire, termination, transition, severance issues.
- Allocation, if any, of relocation costs.
- Non-solicitation issues.
- Collective bargaining agreements — notice requirements, pension liabilities.
- WARN Act notices and state equivalent notice requirements.
- Escrows, reserves, indemnities.
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