What is the definition of 'Acquisition' in the context of the Embassy Suites franchise agreement?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee or Lender has cured Franchisee's default during Lender's Cure Period, and Lender commences a UCC sale, foreclosure or other proceeding intended to result in an Acquisition, Lender may exercise the rights under this letter agreement under the terms and timelines outlined in this Subparagraph. If Franchisor has not issued a default notice, Lender's notice to Franchisor of Franchisee's default under the Loan will be deemed to begin Lender's Cure Period and Additional Period. Franchisor acknowledges and agrees that an Acquisition shall not be deemed a sale or lease of the Hotel under the Franchise Agreement, nor a violation of any control or transfer provisions of the Franchise Agreement, and shall not be subject to any right of first refusal or right of first offer contained in the Franchise Agreement.
- (c) Franchisor's Rights to Terminate Franchise Agreement.
Notwithstanding any other provision of this letter agreement, Franchisor may terminate the Franchise Agreement if any of the following occur: (i) Franchisee's default or any subsequent default, in the sole opinion of Franchisor, damages the image or reputation of Franchisor or any brand name owned and/or licensed by Hilton Worldwide Holdings Inc., a Delaware corporation, or its subsidiaries or affiliates (collectively, "Hilton"); (ii) Franchisor is required to terminate the Franchise Agreement by court order or action of any trustee in
Source: Item 23 — RECEIPTS (FDD pages 97–305)
What This Means (2025 FDD)
According to Embassy Suites' 2025 Franchise Disclosure Document, an 'Acquisition' occurs when a lender gains possession and/or ownership of the hotel due to certain proceedings. Specifically, the FDD states that if a lender commences a UCC sale, foreclosure, or other proceeding intended to result in an Acquisition, the lender may then exercise rights under the Mezzanine Lender Comfort Letter.
Embassy Suites acknowledges that such an Acquisition is not considered a sale or lease of the hotel under the Franchise Agreement. It also does not violate any control or transfer provisions within the agreement. Furthermore, an Acquisition is not subject to any right of first refusal or right of first offer that may be included in the Franchise Agreement.
However, the franchisor retains certain rights even in the event of an Acquisition. Embassy Suites can terminate the Franchise Agreement if the franchisee's default damages the image or reputation of Hilton or its brands. Termination is also possible if a court order or action by a bankruptcy trustee requires it. Additionally, if the lender does not reach a satisfactory arrangement with Embassy Suites after a specified period, the agreement can be terminated. It is important to note that the Franchise Agreement will not be extended beyond its original expiration date due to the Acquisition.