What is an 'Incentive' as offered by Embassy Suites?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
alance is accelerated and becomes your immediate obligation, along with any court costs and attorneys' fees for collection.
We may, in our sole discretion, offer incentives for new hotels ("Incentives"). An Incentive is a financial contribution that we make to assist with the development or conversion of your Hotel. To receive an Incentive, you and your principals must sign a development incentive note ("Note") in the form attached as Exhibit D-2 when you sign the Franchise Agreement. An Incentive does not have to be repaid, unless the franchise terminates before the end of the Term or a transfer occurs as described below. The Incentive will be disbursed to you within 30 days after the Hotel opens with our consent, as long as: (a) there have been no material adverse changes in the business, legal, litigation, bankruptcy status or finances of you, any guarantors, or the project since we granted approval; (b) you have completed any required PIP; and (c) you have paid the Franchise Application Fee.
An Incentive is not a loan, it is a contingent liability. If your franchise terminates before the end of the Term you must pay us the then-current repayable amount of the Incentive. If you transfer your Hotel you must also pay us the then-current repayable amount of the Incentive, unless we permit the transferee to assume your obligations under the Note. In that case we may require the transferee to provide us with such additional security as we deem appropriate. The repayable amount of the Incentive decreases over time. For each year that the Hotel is open, the repayable amount is reduced by an equal annual percentage of the Term. For example, if the franchise has a 10-year Term, the repayable amount is reduced by 1/10th of the original amount annually. If the franchise has a 20-year term, the repayable amount is reduced by 1/20th of the original amount
annually. An Incentive bears no interest. However, if an Incentive becomes repayable and payment is not made in full when due, the outstanding amount is subject to interest at 1.5% per month or the highest rate allowed by law. We may reduce the amount of the Incentive that we disburse to you by any amount that you or your affiliates owe to us or our affiliates, and this will not affect the calculation of the amount repayable to us. We may grant renewals, extensions, modifications, compositions, compromises, releases or discharges of other parties without notice to any guarantor or co-maker. You may not use any portion of the Incentive to make, offer, or authorize any Improper Payment or engage in any act violating any Anti-Corruption Law. If we reasonably believe that you have used the Incentive in violation of any Anti-Corruption Law, you must cooperate with our reasonable requests for information and permit us to inspect all books and records pertaining to your Hotel.
We generally do not offer any other financing or guarantee any note, lease, or other obligations. However, in unique or rare circumstances we may choose to offer other types of financing such as, for example, a mezzanine loan or a guaranty of your note, lease, or other obligations.
Source: Item 10 — FINANCING (FDD pages 52–53)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, an Incentive is a financial contribution that Embassy Suites may offer to assist with the development or conversion of a new hotel. These incentives are offered at Embassy Suites's sole discretion and may be negotiated when business circumstances warrant. To formalize the incentive, the franchisee and their principals must sign a development incentive note when signing the Franchise Agreement.
The Incentive is not a loan but a contingent liability. It does not have to be repaid unless the franchise terminates before the end of its term or the hotel is transferred. The repayable amount decreases over time, with an equal annual percentage reduction based on the term length. For instance, a franchise with a 10-year term sees a 1/10th reduction annually, while a 20-year term results in a 1/20th annual reduction. The incentive bears no interest unless it becomes repayable and is not paid when due, at which point interest accrues at 1.5% per month or the highest rate allowed by law.
The Incentive will be disbursed within 30 days after the hotel opens with Embassy Suites's consent, provided there are no material adverse changes in the business, legal, litigation, bankruptcy status, or finances of the franchisee, any guarantors, or the project since approval was granted. Additionally, any required Property Improvement Plan (PIP) must be completed, and the Franchise Application Fee must be paid. Embassy Suites may reduce the incentive amount by any amount owed to them or their affiliates by the franchisee or their affiliates.
It is important to note that these incentive programs may be modified, limited, extended, or terminated at any time without advance notice or amendment to the Disclosure Document. Furthermore, franchisees may not use any portion of the Incentive to make, offer, or authorize any Improper Payment or engage in any act violating any Anti-Corruption Law. If Embassy Suites reasonably believes that the Incentive has been used in violation of any Anti-Corruption Law, the franchisee must cooperate with requests for information and permit inspection of all relevant books and records.