Does a Perth Hotel’s Brand or Management Agreement Automatically Transfer to the Buyer?

A purchaser can buy a hotel building without necessarily acquiring every commercial arrangement used to operate it.

This becomes particularly important where a Perth hotel operates under a brand, franchise, third-party management agreement or other material commercial contract.

Before marketing the property, the owner should establish what happens to those agreements if control changes.

Start With the Actual Contract

Do not assume a recognised brand automatically stays with the hotel after settlement.

Review the term, renewal provisions, transfer clauses, termination rights, consent requirements and any change-of-control provisions in the relevant agreement.

Australian Government guidance on changing business ownership warns that leases, permits, licences and other arrangements may require formal transfer and that sellers can remain responsible for obligations until the required transfers are complete. business.gov.au

The same practical principle applies to important commercial agreements: read the contract rather than assuming the transaction itself transfers every right.

Franchise Arrangements Have Their Own Rules

Where the hotel arrangement legally constitutes a franchise, the Franchising Code of Conduct may also be relevant.

The ACCC states that a franchisee wishing to sell during the term of the franchise agreement must ask the franchisor for consent to transfer. The franchisor cannot unreasonably withhold that consent, although conditions and buyer-selection requirements may apply. ACCC

The ACCC also notes that franchise agreements set out matters such as term, brand rights, fees, transfer rules and termination provisions. ACCC

Not every hotel brand or management arrangement is necessarily a franchise, so the legal structure needs to be checked.

Management Agreements Need Separate Review

A third-party hotel management agreement can raise different questions.

Will the existing operator remain?

Can the owner terminate the agreement on sale?

Does a change of control require consent?

Are termination payments potentially involved?

Will the buyer acquire the property subject to the current operator?

The answers come from the relevant agreement and legal advice—not from a general industry assumption.

Identify What the Brand Actually Provides

The commercial value of a brand arrangement may involve more than signage.

Depending on the agreement, it might include reservation systems, marketing, loyalty programs, operating standards, intellectual property, technology or purchasing arrangements.

A buyer should understand which of those benefits continue and on what terms.

Likewise, the seller should not market access to a system that has not been confirmed as transferable.

Bring the Brand Into Due Diligence Early

A sophisticated buyer may like the real estate but take a different view of the existing operating arrangement.

Another buyer may specifically want the current brand to remain.

That means the agreement can influence the identity of the buyer as well as the structure of the deal.

Preparing the documents early allows the campaign to present the existing operation accurately without promising an outcome controlled by a third party.

Frequently Asked Questions

Does a hotel franchise automatically transfer to a buyer?
No. Where the arrangement is a franchise, the agreement and Franchising Code transfer process need to be considered. ACCC

Is a hotel management agreement the same as a franchise agreement?
Not necessarily. They are different commercial structures and the applicable contracts should be reviewed individually.

Considering Selling a Perth Hotel?

Norton’s Resort Brokers can help position the property and operating structure while specialist advisers review the contractual framework behind the hotel.

Steven Norton — 0488 496 277
Lawrence Norton — 0415 279 807
Nortons.re@gmail.com

Disclaimer: General information only. It is not franchising, contract, legal, valuation or financial advice. Hotel agreements differ materially and should be reviewed by appropriately qualified advisers.