Americas Best Value Inn Franchise

Financing Details

Sonesta RL Hotels Franchising Inc. offers two main financing programs for Americas Best Value Inn franchisees. First, the franchisor may allow franchisees to pay up to 75% of the Initial Fee in installments, with the full amount due by the hotel's Opening Date. No interest is charged on this financing unless the franchisee defaults, at which point an interest rate of 1.5% per month or the highest legal rate will apply. Second, for new hotels joining the Americas Best Value Inn brand, the franchisor might provide a "Development Incentive." This incentive is a financial contribution, typically ranging from $500 to $2,500 per guest room, designed to help with the hotel's development or conversion. Franchisees must sign a promissory note for this incentive, but it generally doesn't need to be repaid unless the franchise agreement ends early or the hotel is transferred. The repayable amount of this incentive decreases by an equal annual percentage each year the hotel remains open. If the incentive becomes repayable and isn't paid on time, it will also accrue interest at 1.5% per month or the highest legal rate. Beyond these two specific programs, Sonesta RL Hotels Franchising Inc. and its affiliates do not directly offer or guarantee any other financing arrangements to franchisees.

Litigation Summary

Americas Best Value Inn (SRLHF, or its parent RLHC) has been involved in several litigation cases. Currently, there is one pending class action lawsuit filed in August 2023 against directors of its parent company, including a Sonesta RL Hotels Franchising Inc. director, alleging breach of fiduciary duties related to a merger. Additionally, Sonesta RL Hotels Franchising Inc. filed three active lawsuits in June 2024 against former franchisees and their guarantors to collect unpaid amounts and liquidated damages. In 2021, eight separate lawsuits related to a merger involving its parent company, Red Lion Hotels Corporation, were filed by stockholders alleging proxy statement deficiencies. These cases were voluntarily dismissed after Red Lion Hotels Corporation provided supplemental disclosures, with a settlement of $240,000 paid to plaintiffs' attorneys. Other concluded litigation, mostly from 2016-2021, includes several cases where Sonesta RL Hotels Franchising Inc. or its parent sued former franchisees or guarantors for breach of contract, trademark infringement, and non-payment, often resulting in settlements ranging from $10,500 to $500,000. These cases included counterclaims from franchisees alleging breach of contract or misrepresentation by the franchisor. One notable case in 2018-2021 involved a competitor, Radisson Hotels International, Inc., suing Red Lion Hotels Corporation and Sonesta RL Hotels Franchising Inc. for tortious interference, which was settled with a $500,000 payment by Red Lion Hotels Corporation and Sonesta RL Hotels Franchising Inc.

Renewal Conditions

To extend their Americas Best Value Inn franchise agreement, franchisees and the franchisor must not have provided at least 90 days' prior written notice of intent not to renew. Americas Best Value Inn franchisees must be in good standing, meaning they are not in default of their Franchise Agreement or any other agreements with the franchisor, its affiliates, or suppliers. They must complete all required maintenance, refurbishment, renovation, and upgrades to their hotel to meet the then-current Brand Standards for new franchisees and any Property Improvement Plan (PIP) issued by the franchisor, with all such work completed at least 60 days before the scheduled expiration date. Franchisees must also have the legal right to occupy the premises for the entire duration of the successor term. Additionally, Americas Best Value Inn franchisees must not have received four or more default notices from the franchisor during the current term and must pay a renewal fee of $5,000. As a condition of renewal, the franchisor may also require Americas Best Value Inn franchisees to sign the then-current form of franchise agreement, which may contain materially different terms, and a general release of claims.

Staffing Notes

Americas Best Value Inn hotels must be managed by a general manager on a full-time basis, whether employed by the franchisee or a franchisor-approved Management Company. If the franchisee does not personally manage the hotel, they must employ an on-premises general manager who is sufficiently skilled and experienced to operate the Americas Best Value Inn hotel. The general manager is not required to have an ownership interest in the franchisee entity. The franchisee may engage an approved Management Company, but the Management Company is not required to have an equity interest in the franchisee. If a Management Company is hired, it must execute a Management Company Joinder to the Franchise Agreement, agreeing to be bound by its terms and jointly and severally liable with the franchisee for most obligations, except for actual payments due to third parties, franchisor affiliates, or under the Franchise Agreement. The Management Company must have the authority to act on behalf of the franchisee in all matters under the Franchise Agreement, and the franchisor will rely solely on its decisions. The franchisee remains responsible for the management, direction, and control of their Americas Best Value Inn hotel at all times. One Hotel Representative (general manager or owner with equivalent authority) must complete the franchisor's initial brand training program prior to opening or within 90 days of activating the Americas Best Value Inn hotel in the system. If a trained Hotel Representative leaves, a new one must complete the training. The franchisor may require franchisees, their Hotel Representatives, and/or experienced employees to attend ongoing training courses and the Brand Conference.