In what order are payments applied to the Embassy Suites Development Incentive Note?

According to Embassy Suites' 2025 Franchise Disclosure Document, when a franchisee makes payments on a Development Incentive Note, the payments are applied in a specific order. First, the payments cover any collection costs and expenses incurred by the note holder. Second, the payments are applied to any accrued but unpaid interest on the note. Finally, any remaining amount of the payment is applied to the principal balance of the note.

This order of payment is important for Embassy Suites franchisees to understand because it affects how quickly the principal balance of the Development Incentive Note is reduced. By prioritizing collection costs, expenses, and accrued interest, a larger portion of early payments may not directly decrease the principal. This could extend the repayment period and increase the overall cost of the incentive note for the franchisee.

The FDD also states that the franchisee has the right to prepay the note, in whole or in part, at any time without premium or penalty. However, amounts paid or prepaid cannot be re-disbursed. Prepayments of principal will be applied without notation on the note. The franchisee's obligation to pay the note is absolute and unconditional, and all payments must be made without setoff, deduction, offset, recoupment, or counterclaim.

Understanding these terms is crucial for Embassy Suites franchisees to effectively manage their financial obligations related to the Development Incentive Note. Franchisees should carefully consider the implications of the payment order and the ability to make prepayments when planning their business finances.