When must a lender notify the Embassy Suites franchisor of actions that may result in an Acquisition?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
- Notice to Franchisor. Lender agrees to notify Franchisor (a) contemporaneously with commencement of any action that may result in an Acquisition, (b) contemporaneously with the filing of a petition for appointment of a receiver or any other action initiated by Lender that materially impacts possession of the Hotel, (c) promptly after an Acquisition of the date the Acquisition occurred, or (d) promptly after Lender no longer has a security interest in the Hotel or the Loan is paid in full, but Lender's failure to give notice under this Subparagraph 3(d) will not affect the automatic termination of this letter agreement under Paragraph 13 [NO ESTOPPEL] 14 [ESTOPPEL].
Lender further agrees to promptly provide to Franchisor a copy of any order appointing a receiver, or any other judicial or administrative order from an action initiated by Lender that materially impacts possession of the Hotel.
Source: Item 23 — RECEIPTS (FDD pages 97–305)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, a lender must notify Embassy Suites contemporaneously with the commencement of any action that may result in an Acquisition. An Acquisition, in this context, refers to the lender acquiring possession and/or ownership of the hotel due to the franchisee's default. This notification requirement is part of the Mezzanine Lender Comfort Letter, which outlines the relationship and obligations between the lender and Embassy Suites in the event of franchisee financial distress. The lender must also notify Embassy Suites contemporaneously with the filing of a petition for appointment of a receiver or any other action initiated by the lender that materially impacts possession of the Hotel.
In addition to the initial notification, the lender is also obligated to inform Embassy Suites promptly after an Acquisition has occurred, specifying the date of the Acquisition. Furthermore, the lender must notify Embassy Suites promptly after the lender no longer has a security interest in the Hotel or the loan is paid in full. However, failure to provide this last notice does not affect the automatic termination of the letter agreement. The lender must also promptly provide Embassy Suites with a copy of any order appointing a receiver, or any other judicial or administrative order from an action initiated by the lender that materially impacts possession of the Hotel.
This notification process ensures that Embassy Suites is kept informed of any actions that could affect the ownership and operation of the franchised hotel. This allows Embassy Suites to protect its brand and ensure the hotel continues to meet its standards, even during periods of financial instability or ownership transition. For a prospective Embassy Suites franchisee, this highlights the importance of maintaining a strong financial position and adhering to the franchise agreement to avoid situations where the lender needs to take action that could lead to an Acquisition.