In the Embassy Suites agreement, does the lender certify to the franchisor that they are not a Sanctioned Person?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Lender Estoppel and Release.
As consideration for this letter agreement relating to the Loan:
(a) Lender hereby certifies to Franchisor that Lender is not a Sanctioned Person. "Sanctioned Person" means any person, entity, or Government, including those with Control over such persons or entities, or acting on behalf of such persons or entity, who is subject to Trade Restrictions that prohibit or restrict the Parties' performance of the Parties' obligations under this agreement. "Trade Restrictions" means trade, economic or investment sanctions, export controls, anti-terrorism, nonproliferation, anti-money laundering and similar restrictions in force pursuant to laws, rules and regulations imposed under Laws to which the Parties are subject.
(b) Lender hereby represents and warrants in favor of Franchisor that Lender is not a Competitor of Franchisor.
(c) Lender hereby represents and warrants in favor of Franchisor that [IF LENDER IS A BANK] Lender does not own any Equity Interest in Franchisee [IF LENDER IS NOT A BANK] neither Lender nor any of its officers or directors own any Equity Interest in Franchisee.
(b) Amendment. Lender must, within ten (10) business days after Franchisor's request, provide Franchisor all information necessary for Franchisor to determine that Lender is not a Sanctioned Person (as defined below), and deliver any other documents regarding Lender's ownership structure that Franchisor reasonably requests.
Lender must, within ten (10) business days after receipt of a request from Franchisor, provide to Franchisor all information necessary for Franchisor to determine that Lender is not a Sanctioned Person (as defined below), as well as the other information reasonably requested.
If Franchisor confirms that Lender is not a Sanctioned Person, Franchisor will promptly prepare Franchisor's then-current form assumption agreement ("Assumption Agreement") to document the Assumption, and deliver the Assumption Agreement to Lender.
Source: Item 23 — RECEIPTS (FDD pages 97–305)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, in certain situations, a lender does certify to Embassy Suites that they are not a Sanctioned Person. Specifically, if a lender acquires possession and/or ownership of the hotel due to an acquisition, the lender must provide Embassy Suites with all necessary information to determine that the lender is not a Sanctioned Person. This information must be provided within ten business days of Embassy Suites' request.
The FDD defines "Sanctioned Person" as any person, entity, or Government, including those with Control over such persons or entities, or acting on behalf of such persons or entity, who is subject to Trade Restrictions that prohibit or restrict the Parties' performance of the Parties' obligations under this agreement. "Trade Restrictions" means trade, economic or investment sanctions, export controls, anti-terrorism, nonproliferation, anti-money laundering and similar restrictions in force pursuant to laws, rules and regulations imposed under Laws to which the Parties are subject.
Furthermore, if the lender assumes the rights and obligations of the franchisee, Embassy Suites requires the lender to provide all information necessary to determine they are not a Sanctioned Person. This is also required within ten business days of Embassy Suites' request. If Embassy Suites confirms that the lender is not a Sanctioned Person, Embassy Suites will prepare an assumption agreement to document the assumption, which the lender must execute and return within ten business days. Failure to do so may be considered a default under the Franchise Agreement, potentially leading to termination.
In addition, as consideration for a letter agreement relating to the loan, the lender certifies to Embassy Suites that the lender is not a Sanctioned Person. This certification is part of a broader "Lender Estoppel and Release" agreement, which also includes representations and warranties that the lender is not a competitor of Embassy Suites and does not own equity interest in the franchisee under certain conditions.