Hotel Franchise Agreement and PIP Due Diligence in Alberta

1. Identify every brand and operating agreement

Collect the franchise or licence agreement, amendments, side letters, comfort letters, management agreement, reservation and technology agreements, guarantees, notices and related-party contracts. Identify the legal parties and property each document covers.

Do not assume the brand relationship is a single contract or that the operating company owns the rights displayed at the property.

• Franchise or licence
• Management
• Reservation and loyalty
• Technology
• Guarantees
• Side letters and notices

2. Map term, renewal, transfer and change of control

Have counsel identify remaining term, renewal conditions, transfer and change-of-control provisions, application requirements, consent discretion, fees, guarantor changes and closing deliverables.

A share sale, asset sale and real estate sale can trigger different provisions. The real estate agreement should not promise brand continuation before the responsible franchisor or licensor approves it.

3. Reconcile the complete fee stack

Schedule royalty, marketing, reservation, loyalty, technology, training, procurement, inspection, liquidated-damages and other amounts from contracts, invoices and financial records. State the revenue base and exclusions used for each calculation.

Compare seller-reported expenses to contractual amounts and actual remittances. Buyer scale or negotiated terms are scenarios until documented.

4. Establish quality and default status

Organize quality-assurance reports, guest-satisfaction records selected for diligence, notices, defaults, cure plans, waivers, inspections and correspondence. Identify open items and deadlines.

A passing score at one date does not establish current compliance or buyer approval. Preserve source date, property scope and any work completed since inspection.

5. Define the property improvement plan

Separate existing contractual capital obligations, current inspection findings, seller estimates, buyer plans and a franchisor-issued property improvement plan. Index scope by rooms, public areas, exterior, life safety, technology, signage and operating equipment.

State whether the PIP is preliminary, final, conditional on application or subject to design review. Do not imply cost, waiver or completion timing is fixed without written confirmation.

6. Build an executable cost and downtime model

Obtain appropriate contractor and consultant input for hard costs, design, permits, procurement, freight, taxes, escalation, contingency and owner costs. Model room displacement, outlet closure and operating disruption.

Distinguish PIP work from deferred maintenance, code work, property-condition findings and the buyer's repositioning plan. Avoid counting the same item twice or leaving a required item outside the capital schedule.

7. Coordinate franchise disclosure and legal advice

Alberta publishes guidance explaining that its Franchises Act and Regulation govern franchisor disclosure obligations. Hotel resales, renewals, transfers and new franchise grants can raise structure-specific questions and potential exemptions.

Independent franchise counsel should determine whether disclosure is required, what agreements form the franchise package and which deadlines or remedies apply. A brokerage summary is not a franchise disclosure document or legal opinion.

8. Test the operator and financing path

Confirm the proposed owner and operator entities, experience, key people, financial capacity, lender requirements, brand application and management plan. Brand approval does not equal financing approval, and neither guarantees closing.

Match the condition timeline to application, interview, document, design, lender and property-diligence dependencies. Set objective evidence for satisfaction or waiver where possible.

9. Align brand, licence and property closing

Coordinate franchise or licence approval with title transfer, business assets or shares, management transition, liquor and public-health requirements, tourism-levy registration, reservation systems, signage, guest deposits and public communications.

State which party bears cost and operating risk if approval is delayed, the flag changes or work must begin immediately after closing.

10. Preserve alternatives and limitations

Model continuation, reflagging and independent-operation scenarios only with supportable assumptions. Include termination costs, replacement distribution, signage, technology, renovation, ramp-up and financing implications where relevant.

This guide is educational and is not legal, franchise, tax, accounting, appraisal, engineering, construction, financing or investment advice and does not predict brand approval, PIP scope or operating performance.