How are franchise deposits collected on behalf of Embassy Suites and where are they deposited?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
d with certainty, we expect that the ultimate resolution of all pending or threatened claims and litigation as of December 31, 2024 will not have a material adverse effect on our financial position, results of operations or cash flows.
Note 8: Related Party Transactions
We maintain intercompany balances with Hilton affiliates, which are the result of Hilton's centralized cash management system, which is not controlled by us. One of these balances relates to franchise deposits, which are collected on our behalf by Hilton affiliates and deposited into a lockbox account to which we have no access. Amounts due from Hilton affiliates related to franchise deposits, if any, are reflected as an asset and are payable to us upon demand. The amounts due from Hilton affiliates include certain receivables from related parties that are repaid through periodic settlements with simultaneous distributions of
our retained earnings to Parent. We expect to continue to settle certain amounts due from Hilton affiliates, with amounts that are expected to be settled within twelve months from the date of the balance sheet recorded as current assets. These amounts are classified as other receivables due from Hilton affiliates. Amounts due from Hilton affiliates that are not expected to be repaid are reflected as a component of member's equity.
During the years ended December 31, 2024, 2023 and 2022, we settled $1.5 billion, $1.4 billion and $1.55 billion of other receivables due from Hilton affiliates, respectively, and simultaneously distributed $1.5 billion, $1.4 billion and $1.55 billion of our retained earnings to Parent, respectively.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 97)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, franchise deposits are collected on their behalf by Hilton affiliates. These deposits are then placed into a lockbox account. Embassy Suites does not have direct access to this lockbox account. The amounts due to Embassy Suites from Hilton affiliates related to these franchise deposits are recorded as an asset and are payable to Embassy Suites upon demand.
The FDD also indicates that the amounts due from Hilton affiliates include certain receivables from related parties that are repaid through periodic settlements with simultaneous distributions of Embassy Suites' retained earnings to its Parent company. For the years 2024, 2023 and 2022, Embassy Suites settled $1.5 billion, $1.4 billion and $1.55 billion of other receivables due from Hilton affiliates, respectively, while simultaneously distributing the same amounts of its retained earnings to its Parent company.
For a prospective franchisee, this arrangement means that while initial franchise fees are collected by Hilton, Embassy Suites' parent company, the funds are tracked as assets due to Embassy Suites. The franchisee should be aware that Embassy Suites relies on its parent company for managing these funds and should consider the financial stability and relationship between Embassy Suites and its parent company. Understanding the specifics of the lockbox account and the process for Embassy Suites to access these funds could be a key due diligence question for potential franchisees.