What are the implications of the 'No Agency Relationship' clause in the Embassy Suites franchise agreement?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
15.1 No Agency Relationship. You are an independent contractor. Neither Party is the legal representative or agent of the other Party. Neither Party has the power to obligate the other Party for any purpose. You acknowledge that: (a) we do not direct, supervise, manage, dictate, or control (or have, retain, or exercise any right to control), labor or employment matters for you or your employees; (b) we do not set (or have, retain, or exercise any right to set) any terms or conditions of employment for your employees; (c) the training we require is for the purpose of enabling you to ensure that your Hotel operates in compliance with our Standards; and (d) you have exclusive control over your daily affairs. You expressly acknowledge that the Parties have a business relationship based entirely on, and defined by, the express provisions of this Agreement and that no partnership, joint venture, agency, fiduciary, employment, or jointemployment relationship is intended or created by reason of this Agreement.
By entering into this Agreement, we make no representations regarding, and do not intend to obtain, retain, or reserve control over, the essential terms and conditions of employment of you or your employees, or your Management Company or their employees (if applicable). Franchisees are independent contractors and independent employers and we do not and will not have, retain, or exercise any authority over your employment-related policies or procedures. You are solely responsible for overseeing any and all employment-related policies and procedures for your employees in the operation of your Hotel business.
15.2 Notices Concerning Your Independent Status. All contracts for the Hotel's operations and services at the Hotel will be in your name or in the name of your Management Company. You will not enter into or sign any contracts in our name or any of our Affiliates' names or use the Marks or any acronyms or variations of the Marks. You will disclose in all dealings with the public and your employees, agents, contractors, suppliers and other third parties that: (a) you are the Hotel's owner; (b) you are an independent entity; (c) you are the employer, principal, or contracting party (as applicable); and (d) we are not responsible for your liabilities or debts in any manner whatsoever.
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, the franchise agreement explicitly states that the franchisee is an independent contractor and not an agent or legal representative of Embassy Suites. This means the franchisee does not have the power to obligate Embassy Suites for any purpose, and Embassy Suites does not control the franchisee's labor or employment matters, nor does it set the terms of employment for the franchisee's employees. The training provided by Embassy Suites is solely to ensure the hotel operates in compliance with their standards, and the franchisee has exclusive control over their daily affairs. This arrangement is a business relationship defined by the franchise agreement, and no partnership, joint venture, agency, fiduciary, employment, or joint-employment relationship is intended or created.
This clause has several important implications for a prospective Embassy Suites franchisee. Firstly, the franchisee is responsible for all employment-related policies and procedures for their employees. Embassy Suites makes no representations regarding and does not intend to control the essential terms and conditions of employment of the franchisee or their employees. Secondly, all contracts for the hotel's operations and services must be in the franchisee's name or their management company's name, and the franchisee cannot enter into any contracts in Embassy Suites's name.
Furthermore, the franchisee must disclose in all dealings with the public, employees, agents, contractors, suppliers, and other third parties that they are the hotel's owner, an independent entity, and the employer, principal, or contracting party, and that Embassy Suites is not responsible for their liabilities or debts. This clear delineation of responsibilities and liabilities protects Embassy Suites from being held liable for the franchisee's actions and ensures that the franchisee operates independently in managing their business. This type of clause is standard in franchise agreements to clearly define the relationship between the franchisor and franchisee and to protect both parties from potential liabilities.