What is the range for the estimated initial investment for Contingencies for an Embassy Suites franchise?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Expenditure | Amount | Method of Payment | When due | To whom payment is to be made |
|---|---|---|---|---|
| Contingencies | $3,600,000 to | As agreed | As incurred | Suppliers |
| (Note 18) | $5,500,000 |
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- "Contingencies" means unanticipated construction cost overruns and other unanticipated expenses.
Because there are so many variables for an existing hotel, we cannot estimate these
pre-conversion contingencies for a franchisee converting an existing hotel. You should assume it will be at least 10% of construction costs.
Source: Item 7 — ESTIMATED INITIAL INVESTMENT (FDD pages 41–45)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, the estimated initial investment for contingencies ranges from $3,600,000 to $5,500,000. These funds are intended to cover unanticipated construction cost overruns and other unexpected expenses that may arise during the development or renovation of the hotel. The method of payment is agreed upon and payments are due as incurred to suppliers.
For franchisees converting an existing hotel, the FDD notes that it cannot estimate pre-conversion contingencies due to the many variables involved. However, it advises franchisees to assume that these contingencies will be at least 10% of construction costs. This highlights the importance of thorough due diligence and careful planning, especially when converting an existing property, as unforeseen issues can significantly impact the overall investment.
Prospective Embassy Suites franchisees should carefully consider these contingency estimates and ensure they have sufficient capital to address potential cost overruns. Consulting with experienced construction professionals and conducting thorough site assessments can help in better estimating these costs and mitigating risks. It is also important to factor in potential delays and market fluctuations that could affect construction expenses.