What does 'Franchisor's knowledge' mean in the context of the Embassy Suites franchisor estoppel?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
Subject to the acknowledgement by Lender that Franchisor does not own or operate the Hotel, Franchisor hereby certifies to Lender that, to Franchisor's knowledge as of the date indicated on the first page of this letter agreement, (a) the Franchise Agreement is in full force and effect, and (b) no Default currently exists under the Franchise Agreement. "Franchisor's knowledge" means the actual knowledge of applicable and reasonably obvious Hotel operational matters regularly reviewed by company employees who have given their attention to such matters in the ordinary course of business and does not include any investigation by those employees or others of other matters or beyond their usual and customary reviews of the Hotel, nor does it include constructive notice of matters or information located in public or Hotel records.
Source: Item 23 — RECEIPTS (FDD pages 97–305)
What This Means (2025 FDD)
According to Embassy Suites' 2025 Franchise Disclosure Document, the term "Franchisor's knowledge" within the franchisor estoppel context refers to the actual knowledge that Embassy Suites employees possess regarding reasonably obvious hotel operational matters. These employees are those who regularly review such matters in their ordinary course of business.
This definition specifically excludes any obligation for these employees, or others within Embassy Suites, to conduct investigations beyond their usual reviews or to consider constructive notice of information available in public or hotel records. In essence, Embassy Suites is only certifying what its relevant employees are actually aware of through their routine duties, not what they could know through additional inquiry.
For a prospective Embassy Suites franchisee, this means that the franchisor's certification to a lender regarding the franchise agreement's status and any existing defaults is limited to the knowledge gained through normal operational reviews. It does not extend to information that might be uncovered through a deeper investigation. This is important for franchisees to understand, as it clarifies the scope of the franchisor's representations to lenders and the level of due diligence being represented.