For an Embassy Suites franchise, what happens if there is a default under the Hotel #2 Agreement?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
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- You acknowledge and agree that any Default under the [Hotel #2] Agreement shall constitute a simultaneous Default of the Agreement, and termination of the [Hotel #2] Agreement pursuant to such Default shall constitute a valid basis for termination of the Agreement.
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, if a franchisee defaults under the Hotel #2 Agreement, it will simultaneously constitute a default of the primary franchise agreement. Consequently, Embassy Suites can terminate the primary franchise agreement based on the default of the Hotel #2 Agreement. This clause is particularly relevant when a Shared Facilities Arrangement is in place between two hotels.
This provision underscores the interconnectedness of the agreements when shared facilities are involved. It means that the performance and adherence to the terms of the Hotel #2 Agreement are as critical as those of the primary franchise agreement. A failure to meet the obligations under the Hotel #2 Agreement can trigger serious repercussions, including the termination of the Embassy Suites franchise.
Prospective franchisees need to understand the implications of this clause, especially if their operation involves shared facilities with another hotel. It is essential to carefully review the terms of both the franchise agreement and the Hotel #2 Agreement to ensure compliance and avoid potential defaults that could lead to termination. Franchisees should seek legal counsel to fully grasp their obligations and potential risks associated with this arrangement.