For an Embassy Suites franchise, what constitutes a material breach of the franchise agreement regarding the hotel's opening date?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
ct, general contractor or other certified professional provides us with a certificate stating that the as-built premises comply with all Laws relating to accessibility/accommodations/facilities for those with disabilities;
- 6.4.3.2 you have complied with all the terms and conditions in this Agreement;
- 6.4.3.3 your staff has received adequate training and instruction in the manner
we require;
- 6.4.3.4 you have received authorization to open the Hotel from the relevant governmental authority for the jurisdiction in which the Hotel is located, if applicable; and
- 6.4.3.5 all fees and charges you owe to us or our Affiliates have been paid.
- 6.4.4 Opening the Hotel before the Opening Date is a material breach of this Agreement.
- 6.4.4.1 You will pay us Liquidated Damages in the amount of Five Thousand Dollars ($5,000) per day if you op
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, opening the hotel before the designated Opening Date is considered a material breach of the franchise agreement. This means that the franchisee is contractually obligated to adhere to the agreed-upon schedule and cannot commence operations prematurely.
If an Embassy Suites franchisee opens the hotel before the Opening Date, they will incur liquidated damages of $5,000 per day for each day the hotel is open before the scheduled date. These damages are intended to compensate Embassy Suites for the harm caused by the early opening, primarily relating to potential damage to the brand's reputation and standards. The franchisee is also responsible for reimbursing Embassy Suites for all costs and expenses, including legal fees, associated with enforcing their rights due to this breach.
The FDD specifies that these liquidated damages do not exclude any other legal or equitable remedies that Embassy Suites may pursue. The document emphasizes that the liquidated damages represent a reasonable estimate of the minimum compensation for the damages suffered by Embassy Suites due to the early opening. This underscores the seriousness of adhering to the Opening Date and the potential financial and legal repercussions of failing to do so.
Prospective Embassy Suites franchisees should carefully consider the implications of the Opening Date and ensure they have sufficient time and resources to meet the agreed-upon schedule. Delays can be costly, but opening early without authorization can also lead to significant financial penalties and legal issues. It is crucial to maintain open communication with Embassy Suites throughout the development process to address any potential challenges and avoid breaching the franchise agreement.