The Practical Aspects of Terminating and Unwinding Hotel Management and Branding Relationships

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

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