What is the definition of 'Equity Owner' in the context of transferring ownership in an Embassy Suites franchise?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
erwise convey, their ownership rights in us or any of our Affiliates, by operation of law or otherwise, including by public offering, to any person or legal entity without your consent.
- 12.1.2 If we assign this Agreement to a third party who expressly assumes our obligations under this Agreement, we will no longer have any performance or other obligations to you under this Agreement and your right to use any programs, rights or services provided to you by us or our Affiliates under this Agreement will terminate.
- 12.2 Your Transfer. You understand and acknowledge that the rights and duties in this Agreement are personal to you and that we are entering into this Agreement in reliance on your business skill, financial capacity, and the personal character of you and your officers, directors, partners, members, shareholders or trustees. A Transfer by you (or by an Equity Owner as of the Effective Date, or by a transferee Equity Owner we later approve) of any Equity Interest, or this Agreement, or any rights or obligations under this Agreement, is prohibited other than as expressly permitted in this Agreement. In any Transfer by you or any Equity Owner under this Subsection 12.2, the proposed Transferee may not be a Sanctioned Person or a Competitor.
- 12.2.1 Permitted Transfers. We will permit you or any Equity Owner to engage in the Permitted Transfers set forth in this Subsection 12.2.1 if the Permitted Transfer meets the listed requirements. If a Permitted Transfer under Subsection 12.2.1.2 (requiring notice and our consent) otherwise qualifies as a Permitted Transfer under Subsection 12.2.1.1 (not requiring notice or our consent), the less restrictive provisions of Subsection 12.2.1.1 will control.
- 12.2.1.1 Permitted Transfers That Do Not Require Notice or Our Consent. We will permit you or any Equity Owner to engage in the following Permitted Transfers without giving notice or obtaining our consent if the Permitted Transfer meets the listed requirements.
- 12.2.1.1.1 Publicly Traded Equity Interests. A Publicly Traded Equity Interest may be Transferred.
- 12.2.1.1.2 Privately Held Equity Interests: Less than 50% Change. An Equity Interest that is not publicly traded may be Transferred if the transferee Equity Owner will own less than fifty percent (50%) of the Equity Interests, in total, immediately after the transaction(s) as a result of the transaction(s).
- 12.2.1.1.3 Institutional Investment Funds. [IF APPLICABLE You may Transfer Equity Interests within **[**Insert Fund Entities (collectively, the "Fund Entities") and Equity Interests in you to new fund entities or new managed accounts (collectively, "Future Funds") if [Insert Name of Asset Manager] ("Asset Manager") directly or indirectly, controls the Fund Entities or Future Funds.
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
Based on the 2025 Embassy Suites Franchise Disclosure Document, the term 'Equity Owner' is used when discussing the transfer of ownership interests in the franchise. While the FDD excerpts discuss transfers involving Equity Owners, it does not explicitly define the term 'Equity Owner'. The document outlines various scenarios for transferring equity, such as to affiliates, family members, or in the event of death, and also addresses transfers that result in a change of control. These transfers have different requirements and levels of franchisor involvement.
Specifically, the FDD details 'Permitted Transfers' of equity interests, distinguishing between those that require notice and consent from Embassy Suites and those that do not. For instance, transfers of publicly traded equity interests do not require notice or consent, while transfers to affiliates or family members may be permitted under certain conditions. The document also emphasizes that any transfer, whether by the franchisee or an equity owner, is generally prohibited unless expressly permitted within the agreement.
Given the absence of a clear definition for 'Equity Owner' in the provided excerpts, prospective Embassy Suites franchisees should seek clarification from the franchisor regarding who exactly qualifies as an 'Equity Owner' within the context of their specific franchise agreement. Understanding this term is crucial, as it directly impacts the ability to transfer ownership interests and the procedures that must be followed.