When is a Lender deemed to have assumed the Embassy Suites Franchise Agreement if they acquire the hotel?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) Acquisition and Franchise Agreement Assumption. [DELETE FIRST SENTENCE ONLY IF ¶ 2(a) IS DELETED: If Lender does not deliver the Waiver Notice to Franchisor under Subparagraph 2(a), the Franchise Agreement will continue in full force and effect. ] If Lender acquires possession and/or ownership of the Hotel as the result of an Acquisition, Lender will be deemed to have assumed the Franchise Agreement as of the date of the Acquisition.
Lender will be obligated to perform all of the obligations of Franchisee under the Franchise Agreement existing at or accruing after the Acquisition date, including the payment of fees owed to Franchisor ("Assumption").
Any conditions in the transfer provisions of the Franchise Agreement that Franchisor deems relevant shall apply with respect to the Assumption, including but not limited to the obligation for Lender to submit its ownership structure, organizational documents and evidence of insurance.
Lender must, within ten (10) business days after receipt of a request from Franchisor, provide to Franchisor all information necessary for Franchisor to determine that Lender is not a Sanctioned Person (as defined below), as well as the other information reasonably requested.
If Franchisor confirms that Lender is not a Sanctioned Person, Franchisor will promptly prepare Franchisor's then-current form assumption agreement ("Assumption Agreement") to document the Assumption, and deliver the Assumption Agreement to Lender.
Lender must execute and return the Assumption Agreement to Franchisor within ten (10) business days after receipt from Franchisor.
Lender's failure to timely execute and deliver the Assumption Agreement may be deemed a default under the Franchise Agreement entitling Franchisor to terminate the Franchise Agreement.
Any renovation requirements imposed by Franchisor in connection with the Assumption will not exceed those which Franchisor could have imposed had Franchisee remained as the Franchisee under the Franchise Agreement.
In lieu of any transfer or application fee for the Assumption, Lender agrees to pay Franchisor
Source: Item 23 — RECEIPTS (FDD pages 97–305)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, if a lender acquires possession and/or ownership of the hotel due to an acquisition, the lender is considered to have assumed the Franchise Agreement. This assumption is effective as of the date of the acquisition. Following the acquisition, the lender is obligated to fulfill all of the franchisee's obligations under the Franchise Agreement. These obligations include those existing at the time of the acquisition and those that accrue after the acquisition date, such as the payment of fees owed to Embassy Suites.
Several conditions apply to this assumption. Embassy Suites may require the lender to submit its ownership structure, organizational documents, and evidence of insurance. The lender must also provide all necessary information within ten business days of Embassy Suites's request to confirm that the lender is not a Sanctioned Person. If the lender is not a Sanctioned Person, Embassy Suites will prepare its standard assumption agreement and deliver it to the lender. The lender must then execute and return this agreement within ten business days of receipt.
Failure by the lender to execute and deliver the assumption agreement on time may be considered a default under the Franchise Agreement, which could lead to termination of the agreement by Embassy Suites. Any renovation requirements imposed by Embassy Suites in connection with the assumption will not exceed what could have been imposed had the original franchisee remained in place. Instead of a transfer or application fee, the lender must pay Embassy Suites a processing fee of $5,500.
This arrangement provides clarity for lenders who may need to take over a hotel. It outlines the steps and obligations they must meet to maintain the Embassy Suites franchise. It also protects Embassy Suites's interests by ensuring that the lender meets certain requirements and obligations, thus maintaining the standards of the franchise.