What conditions must be met for an Embassy Suites franchisee to receive the Incentive disbursement?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
We may, in our sole discretion, offer incentives for new hotels ("Incentives"). An Incentive is a financial contribution that we make to assist with the development or conversion of your Hotel. To receive an Incentive, you and your principals must sign a development incentive note ("Note") in the form attached as Exhibit D-2 when you sign the Franchise Agreement. An Incentive does not have to be repaid, unless the franchise terminates before the end of the Term or a transfer occurs as described below. The Incentive will be disbursed to you within 30 days after the Hotel opens with our consent, as long as: (a) there have been no material adverse changes in the business, legal, litigation, bankruptcy status or finances of you, any guarantors, or the project since we granted approval; (b) you have completed any required PIP; and (c) you have paid the Franchise Application Fee.
Source: Item 10 — FINANCING (FDD pages 52–53)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, the franchisor may offer incentives for new hotels to assist with development or conversion. To receive this incentive, the franchisee and their principals must sign a development incentive note when they sign the Franchise Agreement.
The incentive will be disbursed within 30 days after the hotel opens with Embassy Suites's consent, provided that several conditions are met. First, there must be no material adverse changes in the business, legal, litigation, bankruptcy status, or finances of the franchisee, any guarantors, or the project since the approval was granted. Second, the franchisee must have completed any required Property Improvement Plan (PIP). Finally, the franchisee must have paid the Franchise Application Fee.
It's important to note that the incentive does not have to be repaid unless the franchise terminates before the end of its term or a transfer occurs. This incentive is a contingent liability, and the repayable amount decreases over time based on the term of the franchise agreement. For example, with a 10-year term, the repayable amount is reduced by 1/10th annually, while a 20-year term sees a 1/20th annual reduction.