What document must Embassy Suites franchisees sign to receive an Incentive?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
alance is accelerated and becomes your immediate obligation, along with any court costs and attorneys' fees for collection.
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.
An Incentive is not a loan, it is a contingent liability. If your franchise terminates before the end of the Term you must pay us the then-current repayable amount of the Incentive. If you transfer your Hotel you must also pay us the then-current repayable amount of the Incentive, unless we permit the transferee to assume your obligations under the Note. In that case we may require the transferee to provide us with such additional security as we deem appropriate. The repayable amount of the Incentive decreases over time. For each year that the Hotel is open, the repayable amount is reduced by an equal annual percentage of the Term. For example, if the franchise has a 10-year Term, the repayable amount is reduced by 1/10th of the original amount annually. If the franchise has a 20-year term, the repayable amount is reduced by 1/20th of the original amount
annually. An Incentive bears no interest. However, if an Incentive becomes repayable and payment is not made in full when due, the outstanding amount is subject to interest at 1.5% per month or the highest rate allowed by law. We may reduce the amount of the Incentive that we disburse to you by any amount that you or your affiliates owe to us or our affiliates, and this will not affect the calculation of the amount repayable to us. We may grant renewals, extensions, modifications, compositions, compromises, releases or discharges of other parties without notice to any guarantor or co-maker. You may not use any portion of the Incentive to make, offer, or authorize any Improper Payment or engage in any act violating any Anti-Corruption Law. If we reasonably believe that you have used the Incentive in violation of any Anti-Corruption Law, you must cooperate with our reasonable requests for information and permit us to inspect all books and records pertaining to your Hotel.
We generally do not offer any other financing or guarantee any note, lease, or other obligations.
Source: Item 10 — FINANCING (FDD pages 52–53)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, to receive a development incentive, franchisees and their principals must sign a development incentive note, referred to as the "Note." This Note is in the form attached as Exhibit D-2 to the Franchise Agreement. The incentive is a financial contribution from Embassy Suites to assist with the development or conversion of the hotel. The incentive will be disbursed within 30 days after the hotel opens with Embassy Suites's consent, provided certain conditions are met. These conditions include no material adverse changes in the business, legal, litigation, bankruptcy status, or finances of the franchisee, any guarantors, or the project since approval was granted, completion of any required Property Improvement Plan (PIP), and payment of the Franchise Application Fee.
The Note outlines the terms under which the incentive must be repaid. Specifically, the incentive does not have to be repaid unless the franchise terminates before the end of its term or a transfer of the hotel occurs. The repayable amount of the incentive decreases over time, with an equal annual percentage reduction based on the term of the franchise. For instance, if the franchise term is 10 years, the repayable amount is reduced by 1/10th annually, while a 20-year term results in a 1/20th annual reduction. The incentive itself does not bear interest. However, if repayment is required and not made when due, the outstanding amount is subject to interest at a rate of 1.5% per month, or the highest rate allowed by law.
Embassy Suites may reduce the incentive disbursed by any amount the franchisee or their affiliates owe to Embassy Suites or its affiliates, without affecting the repayable amount calculation. Franchisees are prohibited from using any portion of the incentive for Improper Payments or any act violating Anti-Corruption Laws. If Embassy Suites reasonably believes the incentive has been used in violation of these laws, the franchisee must cooperate with requests for information and allow inspection of all relevant books and records.