For an Embassy Suites franchise, what are some of the reasons that the Monthly Royalty Fee might be reduced?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
directly from spa customers or any revenues from food and beverage sales of the spa.
If there is a fire or other insured casualty at your Hotel that results in a reduction of Gross Rooms Revenue or Gross Spa Revenue, the Monthly Program, and Monthly Royalty Fees will be equal to the Monthly Program, and Monthly Royalty Fees forecasted on the basis of the Gross Rooms Revenue amount and Gross Spa Revenue you agree on with your insurer(s). However, we have the right to participate with you in negotiating the value of your Gross Rooms Revenue claim with your insurer(s).
We can require you to transmit all payments required under the Franchise Agreement by wire transfer or other form of electronic funds transfer. You must bear all costs of wire transfer or other form of electronic funds transfer. We may reduce the amount of any payment or credit to you by any amount that you owe us, and this includes your and our affiliates.
Source: Item 6 — OTHER FEES (FDD pages 27–41)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, there are a few circumstances where the Monthly Royalty Fee may be reduced. If a fire or other insured casualty occurs at the hotel, resulting in a reduction of Gross Rooms Revenue or Gross Spa Revenue, the Monthly Royalty Fees will be based on the Gross Rooms Revenue and Gross Spa Revenue agreed upon with the insurer(s). Embassy Suites retains the right to participate in negotiating the value of the Gross Rooms Revenue claim with the insurer(s).
Embassy Suites also states that they occasionally reduce the Monthly Royalty Fee for multi-unit or more experienced franchisees, for franchisees with whom they have previously dealt, for Conversions, or for franchisees in other unique circumstances. In 2024, Embassy Suites agreed to modify the Monthly Royalty Fee in 6 instances.
However, the document specifies that Embassy Suites is not obligated to reduce the Monthly Royalty Fee even if a franchisee meets some or all of these criteria. This indicates that any reduction in the Monthly Royalty Fee is at the discretion of Embassy Suites and is not guaranteed, even under specific circumstances. Prospective franchisees should discuss these potential reductions and their specific eligibility with Embassy Suites during their due diligence process.