For how long after the term of the agreement does Embassy Suites have the right to audit Operational Information?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
10.3 Audit.
- 10.3.1 We may require you to have the Gross Rooms Revenue, fees or other monies due to us computed and certified as accurate by a certified public accountant. During the Term, and for two (2) years thereafter, we and our authorized agents have the right to verify Operational Information required under this Agreement by requesting, receiving, inspecting and auditing, at all reasonable times, any and all records referred to above wherever the records may be located (or elsewhere if we request).
- 10.3.2 If any inspection or audit reveals that you understated or underpaid any payment due to us, you will promptly pay to us the deficiency, plus interest from the date each payment was due until paid at the interest rate set forth in Section 16.15 of this Agreement.
- 10.3.3 If the audit or inspection reveals that the underpayment is willful, or is for five percent (5%) or more of the total amount owed for the period being inspected, you will also reimburse us for all inspection and audit costs, including reasonable travel, lodging, meals, salaries and other expenses of the inspecting or auditing personnel. Our acceptance of your payment of any deficiency will not waive any rights we may have as a result of your breach, including our right to terminate this Agreement. If the audit discloses an overpayment, we will credit this overpayment against your future payments due under this Agreement, without interest, or, if no future payments are due under this Agreement, we will promptly pay you the amount of the overpayment without interest.
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, Embassy Suites retains the right to audit a franchisee's operational information for a period of two years following the termination of the franchise agreement. This audit can be conducted by Embassy Suites or its authorized agents. The audit involves verifying the operational information required under the agreement. This is done through requesting, receiving, inspecting, and auditing records at reasonable times, regardless of where the records are located.
If an audit reveals that the franchisee has underpaid any amounts due to Embassy Suites, the franchisee is responsible for promptly paying the deficiency along with interest calculated from the original due date until the payment is made. The interest rate is specified in Section 16.15 of the agreement.
Furthermore, if the underpayment is found to be willful or exceeds five percent of the total amount owed for the audited period, the franchisee must also cover all costs associated with the inspection and audit. These costs include travel, lodging, meals, salaries, and other expenses incurred by the auditing personnel. It is 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 agreement. Conversely, if an audit reveals an overpayment, Embassy Suites will credit the overpayment against future payments or promptly reimburse the franchisee without interest if no future payments are due.