What is the impact of 'Control' on the management and policies of an entity related to an Embassy Suites franchise?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 22: CONTRACTS]
1.0 DEFINITIONS
The following capitalized terms will have the meanings set forth after each term:
- "Affiliate" means any natural person or firm, corporation, partnership, limited liability company, association, trust or other entity which, directly or indirectly, Controls, is Controlled by, or is under common Control with, the subject entity.
- "Agreement" means this Franchise Agreement, including any exhibits, attachments and addenda.
- "Anti-Corruption Laws" means all applicable anti-corruption, anti-bribery, anti-money laundering, books and records, and internal controls laws.
- "Brand" means the brand name set forth in the Addendum.
- "Chain Code" means the code that we use to identify the Brand within our Reservation Service. We may modify, remove, or replace the Chain Code for the Brand at any time in our discretion.
- "Change of Ownership Application" means the application that is submitted to us by you or the Transferee for a new franchise agreement in connection with a Change of Ownership Transfer.
- "Change of Ownership Transfer" means any proposed Transfer that results in a change of Control of Franchisee, the Hotel, or the Hotel Site and is not otherwise permitted by this Agreement, all as set out in Subsection 12.2.2.
- "Competing Brand" means a hotel brand or trade name that, in our sole business judgment, competes with the System, or any System Hotel or Network Hotel.
- "Competitor" means any individual or entity that, at any time during the Term, whether directly or through an Affiliate, owns in whole or in part, or is the licensor or franchisor of a Competing Brand, irrespective of the number of hotels owned, licensed or franchised under such Competing Brand name. A Competitor does not include an individual or entity that: (i) is a franchisee of a Competing Brand; (ii) manages a Competing Brand hotel, so long as the individual or entity is not the exclusive manager of the Competing Brand; or (iii) owns a minority interest in a Competing Brand, so long as neither that individual or entity nor any of its Affiliates is an officer, director, or employee of the Competing Brand, provides services (including as a consultant) to the Competing Brand, or exercises, or has the right to exercise, Control over the business decisions of the Competing Brand.
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, the concept of 'Control' is significant in several contexts. 'Affiliate' is defined as any entity that directly or indirectly 'Controls', is 'Controlled by', or is under common 'Control' with the subject entity. This definition is important because it determines the scope of related parties that might be subject to certain obligations or restrictions under the franchise agreement.
Furthermore, a 'Change of Ownership Transfer' is defined as any transfer that results in a change of 'Control' of the franchisee, the hotel, or the hotel site. Embassy Suites requires a Change of Ownership Application for such transfers, and the franchisor has the right to assess the proposed change and communicate with third parties about the hotel to evaluate the transfer. The franchisor's consent to a Change of Ownership Transfer is subject to conditions that must be met before the closing date.
Additionally, if the franchisee is a tenant-in-common (TIC), the franchise agreement stipulates that one of the tenants-in-common is deemed the 'Controlling Affiliate'. This affiliate bears specific responsibility under the agreement. The concept of 'Control' also appears in the context of 'Competitors', where an entity owning a minority interest in a Competing Brand is not considered a Competitor unless they exercise, or have the right to exercise, 'Control' over the business decisions of the Competing Brand. These stipulations ensure that Embassy Suites maintains standards and prevents conflicts of interest.