Zeidel & Associates Negotiates Franchise Agreement for Co-Branded Luxury All-Inclusive Resort in Mexico

Situation

Zeidel & Associates served as co-counsel to the ownership group of a luxury adults-only all-inclusive resort in Mexico in connection with the negotiation of a franchise agreement with a major global hotel company for the conversion and operation of the property under one of the company’s brands.

Because the client’s primary counsel was not well-versed in hotel franchise matters, Zeidel & Associates was brought in as co-counsel due to its subject matter expertise, including prior negotiations with this franchisor. The client and its primary counsel were especially interested in the firm’s familiarity with the franchisor’s form agreement and the types of modifications the firm had been able to successfully accomplish in prior transactions.

The transaction presented several unique branding and competitive-positioning issues. The owner was not a traditional franchised hotel owner. It owned and operated its own hotel brand, which was intended to remain part of the hotel’s identity and trade name. As a result, the owner was, at least technically, a competitor of the franchisor, creating additional complexity under the franchise agreement’s restrictions on competing brands, ownership transfers, use of marks, cross-marketing, proprietary information, and brand standards.

The owner also operated its own membership club, which involved member benefits, preferred access, discounted stays, booking channels, revenue treatment, brand positioning, and the continued operation of a proprietary owner program alongside the franchisor’s reservation, loyalty, and brand systems.

The franchise agreement therefore required careful negotiation to balance the franchisor’s legitimate interest in protecting its system, brand standards, reservation platform, loyalty ecosystem, and intellectual property with the owner’s need to preserve its own brand identity, membership club, and broader hospitality platform.

Approach

Zeidel & Associates worked closely with co-counsel and the client to review and negotiate the franchise agreement, with a particular focus on provisions that could have restricted the owner’s ability to own, operate, protect, or continue developing its own hotel brand and membership club.

Because the owner’s brand would be incorporated into the hotel’s trade name, the negotiation required careful attention to the intellectual property provisions. The firm focused on ensuring that the agreement recognized the owner’s independent rights in its own marks, preserved the owner’s ability to protect and control those marks, and prevented the franchise arrangement from being interpreted as a transfer or limitation of the owner’s broader brand rights.

The firm also worked with co-counsel to address the treatment of the owner’s membership club. The goal was to preserve the owner’s ability to continue operating its membership club while ensuring that the club’s interaction with the franchised hotel was addressed clearly and consistently within the franchisor’s system requirements.

In addition, the negotiation required careful coordination between the owner’s commercial objectives and the franchisor’s system requirements. The goal was not to eliminate the franchisor’s standard brand protections, but to tailor them so they would apply appropriately to the franchised hotel without unduly restricting the owner’s separate brand, other properties, membership club, or broader business platform.

Throughout the negotiation, Zeidel & Associates focused on practical risk allocation, maintaining deal momentum, and supporting co-counsel in resolving issues that were important both legally and strategically. This included helping distinguish between restrictions that were appropriate for the franchised hotel and restrictions that could have unintentionally impaired the owner’s independent brand rights, membership platform, or future business activities.

Result

Zeidel & Associates helped negotiate a franchise agreement that allowed the owner to move forward with the global brand affiliation while preserving important protections for the owner’s own hotel brand and membership club.

The final agreement recognized the owner’s rights in its own marks, addressed the use of those marks as part of the hotel’s trade name, and created a more workable framework for the coexistence of the owner’s brand identity and membership platform with the franchisor’s system. The negotiation also addressed key operational and legal issues arising from the owner’s technical status as a competitor and from its operation of a proprietary membership club.

Through careful negotiation and coordination with co-counsel, Zeidel & Associates helped the client obtain the benefits of a major global franchise affiliation while protecting the owner’s existing brand equity, preserving the continued operation of its membership club, and maintaining flexibility for its broader hospitality business.