What is the definition of 'Assumption' in the context of the Embassy Suites franchise agreement?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
2. Assumption and Amendment.
- (a) Assumption. Lender will be deemed to have assumed the rights and obligations of Franchisee under the Franchise Agreement as of the date of the Acquisition, and will be obligated to perform all of the obligations of Franchisee under the Franchise Agreement existing at or accruing after the date of the Acquisition, including the payment of fees owed to Franchisor ("Assumption"). In connection with the Assumption, Lender must diligently cure all defaults which it could not cure before the Acquisition, within the time period determined by Franchisor based on the nature of the default and/or the condition of the Hotel at the time of Lender's Acquisition.
- (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. Franchisor will promptly prepare an amendment to the Franchise Agreement ("Amendment") to document the Assumption, and deliver the Amendment to Lender. Lender must execute and return the Amendment to Franchisor within ten (10) business days after receipt from Franchisor. Lender's failure to timely execute and deliver to Franchisor the Amendment shall be a default under the Franchise Agreement entitling Franchisor to terminate the Franchise Agreement. Any renovation requirements imposed by Franchisor in connection with the Assumption will not exceed those which Franchisor could have imposed had Franchisee remained as the Franchisee under the Franchise Agreement. In lieu of any transfer or application fee for the Assumption, Lender agrees to pay Franchisor a processing fee equal to the permitted transfer fee in the Franchise Agreement. If the Franchise Agreement does not reference a permitted transfer fee, then the processing fee will be Five Thousand Five Hundred Dollars ($5,500).
Any change to the management company for the Hotel ("Management") made by Lender or a receiver before an Assumption is subject to Franchisor's prior written approval.
Franchisor will use its business judgment in determining whether to approve the new Management.
After an Assumption, the terms of the Franchise Agreement will govern with respect to Management, provided, however, Lender shall not be bound by any requirements of the Franchise Agreement to manage the Hotel itself.
Source: Item 23 — RECEIPTS (FDD pages 97–305)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, 'Assumption' refers to the process where a lender takes over the rights and responsibilities of the franchisee under the Franchise Agreement. This typically occurs when the lender acquires possession or ownership of the hotel due to an acquisition. As of the acquisition date, the lender is considered to have assumed the Franchise Agreement.
Upon assumption, the lender is obligated to fulfill all the franchisee's duties outlined in the Franchise Agreement that are existing or accrue after the acquisition date. This includes paying any fees owed to Embassy Suites. The lender must also address any outstanding defaults that they couldn't resolve before the acquisition, within a timeframe set by Embassy Suites, based on the nature of the default and the hotel's condition.
In connection with the Assumption, the lender must provide all necessary information to Embassy Suites to confirm they are not a Sanctioned Person and submit any other requested documents regarding their ownership structure within ten business days of the request. Embassy Suites will then prepare an amendment to the Franchise Agreement to document the Assumption, which the lender must execute and return within ten business days. Failure to do so may result in a default under the Franchise Agreement, potentially leading to termination. Instead of a transfer or application fee, the lender will pay Embassy Suites a processing fee equivalent to the permitted transfer fee in the Franchise Agreement, or $5,500 if no transfer fee is referenced in the Franchise Agreement.
Any changes to the management company for the Hotel made by Lender or a receiver before an Assumption is subject to Franchisor's prior written approval. After an Assumption, the terms of the Franchise Agreement will govern with respect to Management, provided, however, Lender shall not be bound by any requirements of the Franchise Agreement to manage the Hotel itself.