Residence Inn By Marriott Franchise

Financing Details

Marriott generally does not offer direct or indirect financing for Residence Inn by Marriott hotels or guarantee franchisee loans. However, in very limited circumstances and at its sole discretion, Marriott may offer credit support, such as a contingent guaranty of a portion of a loan from a third-party lender, or provide a mezzanine loan. Decisions to offer such support depend on factors like market penetration opportunities, the hotel's size and location, economic conditions, development costs, the franchisee's commitment to system growth, and meeting Marriott's criteria. The specific terms of these financing arrangements vary and are not standardized, though sample agreements are provided for informational purposes. Additionally, Marriott offers a modular construction development incentive program, providing 'key money' of up to $150,000 or $200,000 to franchisees for new-build projects that meet specific modular construction and brand standards. This incentive is paid 60 days after the hotel's opening, with reductions for construction delays and repayment requirements if the franchise agreement is terminated early.

Litigation Summary

Marriott International, Inc. has a comprehensive legal history with several ongoing and recently concluded cases. One major area of litigation stems from a 2018 data security incident involving unauthorized access to its Starwood reservations database. This led to multiple class action lawsuits, which were consolidated into a multidistrict litigation (MDL) case. The court granted class certification for several groups of plaintiffs, but the U.S. Court of Appeals for the Fourth Circuit vacated this decision in 2023. The district court later reinstated the classes, and the Fourth Circuit granted leave to appeal again in 2024, meaning this complex case is still active. Separately, the City of Chicago filed a lawsuit against Marriott related to this same incident, which is also ongoing with a trial scheduled for late 2025. Numerous regulatory authorities in the U.S., Canada, the UK, Turkey, and Australia also initiated investigations. Marriott settled with the Federal Trade Commission and attorneys general from 49 states and the District of Columbia in 2024, agreeing to pay $52 million. The UK Information Commissioner's Office issued a penalty notice of approximately $23.8 million in 2020, which Marriott paid. An appeal against a fine from the Turkish Personal Data Protection Authority was accepted in 2023, leading to an ordered retrial. In Canada, 16 class action lawsuits were consolidated, with an appeal to the Supreme Court of Canada denied in 2023. The Australian Information Commissioner issued an enforceable undertaking in 2022, requiring ongoing security assessments until 2025. Another significant area of litigation involves destination, resort, and amenity fees. A group of U.S. attorneys general have been investigating industry-wide practices. Marriott has reached resolutions with Pennsylvania, Texas, Nebraska, and Colorado on these issues. However, a lawsuit by the District of Columbia against Marriott regarding these fees is pending, with a trial set for 2025. Marriott has also initiated litigation against franchisees. Between 2023 and 2024, Marriott filed three arbitrations or lawsuits concerning unpaid fees and breach of contract, resulting in settlements or awards in Marriott's favor, including a $1.95 million award in one case. Additional pending actions include two antitrust class action lawsuits filed in 2024 (Portillo v. CoSTAR Group, Inc. and Segal v. Amadeus IT Group, S.A.), alleging unlawful information sharing and price-fixing. Motions to dismiss are currently pending in both. Furthermore, a negligence civil suit (Hall v. Marriott) filed in 2022 resulted in a $16 million jury verdict against the franchisee, manager, and Marriott in October 2024, with an appeal currently filed. Several other cases related to data security and resort fees were concluded between 2021 and 2024 through dismissals or settlements.

Renewal Conditions

Residence Inn by Marriott does not offer renewal rights for its franchise agreements. After the initial term expires, franchisees have no inherent right or expectation to continue operating a hotel under the brand. However, Marriott may, at its sole discretion, agree to enter into a new franchise agreement with the franchisee on its then-current terms and conditions, which could include different franchise fees and duration compared to the original agreement.

Staffing Notes

Marriott requires Residence Inn by Marriott franchisees to employ suitable and qualified individuals sufficient to staff the hotel. Key management personnel, specifically the general manager and sales directors/managers, must be retained at least six to nine months prior to the hotel's opening date to participate in pre-opening training. The general manager and other managers are required to dedicate their full time to the management and operation of the hotel and supervision of employees. All hotel employees are considered solely employees of the franchisee or its management company, not Marriott. If Marriott determines that a franchisee is not qualified to operate the hotel, the franchisee will be required to hire an approved third-party management company. Additionally, if a hotel is placed in a 'Red Zone' for quality assurance, supplemental training and sales/marketing programs may be required for staff, and Marriott may conduct on-site visits at the franchisee's expense.