Does Embassy Suites receive payments from suppliers based on franchisee purchases?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
ide services to your spa. Neither we nor any affiliate currently derive any revenue from these sources.
HSM has various discount agreements with manufacturers and suppliers, under which it receives rebates and allowances based on the total volume of sales purchased from the manufacturer. These fees include sales to franchisees by the manufacturers and in some cases, through suppliers. HSM also receives certain volume and national account marketing allowances from manufacturers in connection with the sale to franchisees of certain items, such as coffee, soft drinks, cleaning compounds, and paper products.
In addition, for two of our brands, LivSmart Studios by Hilton and Tru by Hilton, HSM is an optional approved procurement agency and may receive fees for providing procurement services. For one of our other brands, Spark by Hilton, HSM is the required procurement service provider.For the fiscal year ended December 31, 2024, HSM had revenues of $19,614,010 in rebates and allowances on purchases made by franchisees of all of our brands.
For the fiscal year ended December 31, 2024, HSM had revenues from sales of goods, services and/or supplies to franchisees of all of our brands of $8,763,692. In addition, HSM receives cash discounts for early payment on orders it places with manufacturers and suppliers to fill purchase orders placed with it by franchisees of all of our brands.
HSM negotiates pricing and purchasing terms with manufacturers and suppliers for the benefit of our System. HSM may receive an administrative fee from manufacturers and suppliers that is between 0.5% and 7% of the purchases made by our franchisees (depending on the specific item). For the fiscal year ended December 31, 2024, HSM had revenues of $38,697,912 in administrative fees on purchases made by franchisees of all of our brands.
If you want to use a product, or a particular brand or model, that has not been specified as having met our standards, or if you want to purchase from an unapproved supplier an item that must be purchased from an approved supplier, then you can submit a written request for us to approve the product or supplier. We may require certain information or samples which you must provide at your expense. We will review all of the pertinent information.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 45–50)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, Hilton and its affiliates, including HSM, do receive payments from suppliers based on franchisee purchases. HSM negotiates with third-party manufacturers and suppliers for various hotel-related items and services. HSM may receive administrative fees from manufacturers and suppliers, ranging from 0.5% to 7% of franchisee purchases, depending on the item. For the fiscal year ended December 31, 2024, HSM's revenue from these administrative fees totaled $38,697,912. HSM also had revenues of $19,614,010 in rebates and allowances on purchases made by franchisees of all of Hilton's brands for the fiscal year ended December 31, 2024.
HSM also receives rebates and allowances based on the total volume of sales purchased from the manufacturer, which includes sales to franchisees. Additionally, HSM receives volume and national account marketing allowances from manufacturers for specific items like coffee, soft drinks, cleaning compounds, and paper products sold to franchisees. HSM negotiates pricing and purchasing terms with manufacturers and suppliers for the benefit of the Hilton system.
Furthermore, Hilton and its other affiliates had revenues of $1,101,161,898 from sales of goods, services, computer systems, and/or supplies to franchisees of Hilton's subsidiaries for the fiscal year ended December 31, 2024. This figure excludes royalty and program fees, pass-through commissions, and the HSM amounts. These arrangements allow Embassy Suites and its affiliates to benefit financially from franchisee purchasing activities, which could influence the selection of suppliers and products offered to franchisees.