What interest rate applies to underpaid amounts discovered during an audit of an Embassy Suites franchise?

According to Embassy Suites's 2025 Franchise Disclosure Document, if an audit reveals that a franchisee has underpaid any amounts due to Embassy Suites, the franchisee must pay the deficiency plus interest. The interest will be calculated from the date the payment was originally due until it is paid. The specific interest rate applied to these underpaid amounts is detailed in Section 16.15 of the Franchise Agreement.

It is important for prospective Embassy Suites franchisees to understand the implications of this audit clause. Franchisees should maintain accurate and thorough financial records to ensure correct payments and avoid potential underpayment issues. Failure to do so could result in additional interest charges on top of the original deficiency.

Furthermore, if the underpayment is found to be willful or exceeds 5% of the total amount owed for the audited period, the franchisee will also be responsible for reimbursing Embassy Suites for all inspection and audit costs. This includes expenses such as travel, lodging, meals, salaries, and other costs incurred by the auditing personnel. Therefore, franchisees should prioritize accurate financial reporting to avoid these additional financial burdens.

It is also important to note that Embassy Suites's acceptance of a deficiency payment does not waive any rights they may have due to the breach, including the right to terminate the Franchise Agreement. This underscores the importance of compliance and accurate financial reporting to maintain a good standing with the franchisor.