How is the 'Effective Date' determined for the Embassy Suites franchise agreement?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
12.2.2.1 Transferee submits a completed and signed Change of Ownership Application, pays our then-current franchise application fee, executes our then-current form of franchise agreement, and all required ancillary documents. If all conditions to our consent are fulfilled, the date of Closing will be the termination date of this Agreement, and the effective date of Transferee's franchise agreement;
12.2.2.2 you are not in default of this Agreement or any other agreements with
us or our Affiliates;
12.2.2.3 you or Transferee pay to us, on or before the date of Closing, the PIP Fee, and all amounts due to us and our Affiliates through the date of the Closing. We will estimate the amounts due to us through the date of Closing, which you and the Transferee may agree to escrow, to be disbursed to us at Closing to fulfill this obligation. You must agree to escrow the estimated amounts due to us if we agree to execute any documents pursuant to Standard Operating Procedure 50 10 5(I) (or any equivalent or successor) of the United States Small Business Administration in connection with a Closing. If our estimate of the amounts due to us exceeds the amount actually owed to us, we will refund the difference to you, generally within thirty (30) days after the date of Closing;
12.2.2.4 you conclude to our satisfaction, or provide adequate security for, any suit, action, or proceeding pending or threatened against you, us or any of our Affiliates with respect to the Hotel, which may result in liability on the part of us or any of our Affiliates;
12.2.2.5 you, Transferee and/or Equity Owner(s) of Transferee, submit to us all information related to the Transfer that we require;
12.2.2.6 Transferee meets our then-current business requirements for new
franchisees; and
12.2.2.7 Transferee agrees to indemnify, hold harmless, and defend us and our Affiliates against any inquiry, investigation, suit, action, or proceeding arising out of or in connection with any fees or costs charged to patrons or guests by you.
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, the 'Effective Date' of the franchise agreement is determined in the context of a transfer of ownership. Specifically, the date of closing, when all conditions for the transfer are met, becomes the termination date of the existing agreement and the effective date of the new franchisee's agreement.
For a transfer to occur and the effective date to be established, several conditions must be satisfied. The transferee must submit a completed application, pay the franchise application fee, and execute the current franchise agreement along with all required documents. The current franchisee must not be in default of any agreements with Embassy Suites or its affiliates and must pay all outstanding amounts, including a PIP (Property Improvement Plan) Fee, up to the closing date. Funds to cover these amounts may be placed in escrow.
Additional conditions include resolving any pending legal issues related to the hotel, providing all required information about the transfer, and ensuring the transferee meets Embassy Suites' current business requirements for new franchisees. The transferee must also agree to indemnify Embassy Suites against any claims arising from fees or costs charged to patrons or guests by the previous franchisee. These stipulations ensure a smooth transition and protect the interests of Embassy Suites during a change of ownership.