Ac Hotels By Marriott Franchise

Financing Details

AC Hotels by Marriott generally does not offer direct or indirect financing to franchisees, nor does it guarantee any loans or other obligations. However, under very limited circumstances and at its sole discretion, Marriott may offer credit support in the form of a contingent guaranty for a portion of a loan provided by a third-party lender, or it may make a mezzanine loan. The specific terms for such guarantees or loans would vary based on factors like market opportunities, hotel size and location, economic conditions, development costs, and the franchisee's commitment to the system. Marriott also offers a modular construction development incentive program for new development projects. Under this program, eligible franchisees can receive 'Key Money' of up to $200,000 to $250,000, depending on the modular construction tier, 60 days after the hotel opens. This incentive is subject to specific criteria, including the use of approved manufacturers and timely completion of the hotel. If the franchise agreement is terminated early, the unamortized portion of this incentive must be repaid.

Litigation Summary

Marriott has been involved in several legal disputes. A significant ongoing issue is the "In re Marriott International Customer Data Security Breach Litigation" (MDL No. 19-md-2879), which consolidated numerous class actions regarding unauthorized access to the Starwood reservations database, with an appeal heard in November 2024. Another active case is "City of Chicago v. Marriott International, Inc." (Case No. 8:19-cv-00654), filed in 2019, concerning alleged violations related to data security, with motions denied in 2024 and a trial set for November 2025. Marriott has also faced administrative investigations by regulatory authorities in the U.S., Canada, and Australia regarding data security incidents, with some resolutions occurring in 2022-2024. Furthermore, "District of Columbia v. Marriott International, Inc." (Case No. 2019 CA 004497 B) is an ongoing lawsuit from 2019 concerning resort fees, with renewed summary judgment motions denied in 2024 and a trial set for November 2025. Marriott is also a defendant in two putative class action lawsuits filed in 2024, "Portillo v. CoSTAR Group, Inc." and "Segal v. Amadeus IT Group, S.A.", alleging unlawful sharing of information and price-fixing under U.S. antitrust laws, with motions to dismiss currently pending. In 2022, a civil suit, "Hall v. Marriott" (Case No. 22-CVS-00374), alleging negligence resulted in a $16 million verdict against the franchisee and Marriott in October 2024, which is currently under appeal. Marriott also initiated several arbitrations and lawsuits against franchisees in 2023-2024 for unpaid fees and breaches of contract, many of which were settled or resolved in Marriott's favor.

Renewal Conditions

AC Hotels by Marriott franchise agreements are not renewable, and franchisees should not expect to be granted any right to operate a hotel under the brand after the initial term expires. Marriott may, in its sole discretion, agree to enter into a new franchise agreement with the franchisee after the term ends, but this new agreement would likely have materially different terms and conditions, including potentially different franchise fees and duration, compared to the original agreement.

Staffing Notes

AC Hotels by Marriott requires that the hotel always be managed by personnel who have successfully completed all mandatory training according to brand standards. Marriott offers various optional training programs. Franchisees are responsible for covering all tuition, supplies, travel costs, and internal overhead allocations for any training attended. There is also an annual charge, allocated among all system hotels, for the costs of developing and providing this training, along with a fee for the general manager conference, regardless of attendance. Franchisees must provide all Marriott-required training for their hotel staff. General manager brand immersions are mandatory within the first six months of hiring for all new general managers to the AC Hotels by Marriott brand. These sessions typically involve two to three days of live, cohort-style programming that covers key topics for successful on-property brand leadership. The estimated cost for participation is $2,000 per person, plus travel and living expenses. Virtual options may be offered if travel is restricted. For new-to-Marriott franchisee executives, Executive Orientation is required at least 12 months before the hotel's opening date, or within four months for an existing hotel. The current fee for this is approximately $795 per person. If Marriott determines that a franchisee is not qualified to operate an AC Hotels by Marriott hotel without additional training, they must participate in the Franchisee Introduction to Marriott (FITM) program for new-build hotels or FITM-R for existing hotels. These programs include executive-level in-person meetings and self-paced, web-based training on Marriott programs, systems, and services. The enrollment fee is $40,000 for FITM and $60,000 for FITM-R. Alternatively, if a franchisee is qualified but unfamiliar with the system, they may be required to participate in the Franchisee OnBoarding for New Development (FOND) for new-builds or the Above Property Immersion (API) program for existing hotels. These programs provide virtual, self-paced web-based training on Marriott programs, systems, and services. The enrollment fee is $20,000 for FOND or API. Franchisees participating in FITM, FOND, FITM-R, or API must undergo a non-accountable brand standard audit and, for a period of two years, participate in specific revenue management advisory, customer engagement, digital marketing, and sales programs, incurring additional costs. Failure to complete these programs may result in additional fees, the requirement to hire an approved third-party management company, or other actions. If an AC Hotels by Marriott hotel, or any other hotel operated by the franchisee, its affiliates, or management company, is placed in the "Red Zone" (a quality assurance performance zone), Marriott may require participation in an Audit Program/GSS Improvement program. This program costs $20,000 for the first 10 participants, plus $10,000 for up to 10 additional participants. Designed to take approximately nine months, it consists of additional training on brand standards, in-person meetings, webinars, and non-accountable audits for each applicable Company Brand Hotel, at the franchisee's expense. Failure to successfully complete this training may require hiring a third-party management company. If an AC Hotels by Marriott hotel fails to meet certain guest satisfaction survey and experiential audit performance thresholds, Marriott may send a brand advocate to the hotel to provide consultation and training on compliance with brand standards. The franchisee must provide the brand advocate with complimentary lodging at the hotel, meals, incidentals, and other services during each visit. For AC Hotels by Marriott hotels that have a residential or condominium component, the director of residences (residential leader) must attend a five-day residential on-boarding training session. The cost for this training is $2,000 per participant, in addition to the trainees' travel and living expenses. Franchisees may also choose to participate in regional or global residential training meetings at their own cost. Regarding hotel operations, AC Hotels by Marriott requires franchisees to either operate the hotel themselves or retain a management company approved by Marriott. A general manager, who has successfully completed Marriott's training program, must directly supervise the business on-site. The general manager and other managers are required to devote their full time to the management and operation of the hotel. Marriott evaluates a franchisee's managerial and operational experience, skills, capacity, capabilities, and philosophy to determine if they are qualified to operate the hotel according to brand standards. If a franchisee is deemed unqualified, they will be required to hire an approved management company. Even if qualified, a franchisee may choose to hire a management company with Marriott's consent. Marriott has the right to approve any new or replacement management company and review their management agreement to ensure it aligns with the franchise agreement. Marriott may also require the on-premises management company to hold at least a 10% equity interest in the franchised business. Marriott can require the replacement of the management company or the termination of the franchise agreement if the management company fails to operate the hotel in strict compliance with the franchise agreement. If the hotel includes residential, condominium, or multi-family units, the franchisee must maintain ownership and control of all components of the hotel necessary for hotel management operations, and may also be required to maintain ownership and control of other facilities or common areas of the project not legally required to be owned or controlled by the unit owners.