Is an Acquisition deemed a sale or lease of the Hotel under the Embassy Suites Franchise Agreement?

According to the 2025 Embassy Suites Franchise Disclosure Document, an Acquisition is not deemed a sale or lease of the hotel under the Franchise Agreement. Specifically, the agreement between Embassy Suites and the lender states that the Franchisor acknowledges that an Acquisition will not be considered a sale or lease. It also clarifies that such an event does not violate any control or transfer provisions within the Franchise Agreement. This means that the acquisition is not subject to any right of first refusal or right of first offer that might otherwise be in place.

This provision is included in a Mezzanine Lender Comfort Letter, which outlines the rights and responsibilities of the lender in the event of a franchisee default. If the lender acquires the hotel through an Acquisition, they are considered to have assumed the Franchise Agreement. The lender is then obligated to fulfill all of the franchisee's obligations under the agreement, including paying any outstanding fees.

However, the franchisor retains certain rights, including the ability to terminate the Franchise Agreement if the franchisee's default damages the image or reputation of Embassy Suites or its parent company, Hilton. Termination can also occur if required by a court order or action by a bankruptcy trustee. Additionally, the franchisor can impose renovation requirements in connection with the Assumption, but these cannot exceed what could have been imposed on the original franchisee.

Overall, this arrangement provides clarity and protection for all parties involved in the event of a lender acquisition. It ensures the continuity of the Embassy Suites franchise while safeguarding the franchisor's brand and standards. Prospective franchisees should understand these provisions as they relate to financing and potential changes in ownership.