Does the lender represent and warrant that it is not a competitor of the Embassy Suites franchisor?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Lender Estoppel and Release.
As consideration for this letter agreement relating to the Loan:
(a) Lender hereby certifies to Franchisor that Lender is not a Sanctioned Person. "Sanctioned Person" means any person, entity, or Government, including those with Control over such persons or entities, or acting on behalf of such persons or entity, who is subject to Trade Restrictions that prohibit or restrict the Parties' performance of the Parties' obligations under this agreement. "Trade Restrictions" means trade, economic or investment sanctions, export controls, anti-terrorism, nonproliferation, anti-money laundering and similar restrictions in force pursuant to laws, rules and regulations imposed under Laws to which the Parties are subject.
(b) Lender hereby represents and warrants in favor of Franchisor that Lender is not a Competitor of Franchisor.
(c) Lender hereby represents and warrants in favor of Franchisor that [IF LENDER IS A BANK] Lender does not own any Equity Interest in Franchisee [IF LENDER IS NOT A BANK] neither Lender nor any of its officers or directors own any Equity Interest in Franchisee.
Source: Item 23 — RECEIPTS (FDD pages 97–305)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, a lender providing financing to a franchisee must represent and warrant that it is not a competitor of Embassy Suites. This requirement is part of the Lender Estoppel and Release agreement, ensuring that the lender does not have conflicting interests that could negatively impact the franchise system. This representation is crucial for maintaining the integrity of the franchise and protecting Embassy Suites's brand and market position.
Specifically, the lender must certify that it is not a "Sanctioned Person," defined as any entity subject to trade restrictions that would impede their ability to fulfill obligations under the agreement. Furthermore, the lender explicitly represents and warrants that it is not a competitor of Embassy Suites. If the lender is a bank, it warrants that it does not own any equity interest in the franchisee. If the lender is not a bank, this warranty extends to its officers and directors, ensuring they also do not hold any equity interest in the franchisee.
This requirement is designed to prevent potential conflicts of interest and ensure that the lender's primary goal is to support the franchisee's success, rather than leveraging the financial relationship for competitive advantage. By including these stipulations, Embassy Suites aims to safeguard its business interests and foster a transparent and supportive relationship between the franchisee, the lender, and the franchisor. This is a fairly standard practice in franchising, as franchisors typically want to avoid having their franchisees financed by entities that could use that relationship to undermine the franchise system.