Can Embassy Suites reduce any payment or credit to a franchisee by any amount owed?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
We can require you to transmit all payments required under the Franchise Agreement by wire transfer or other form of electronic funds transfer. You must bear all costs of wire transfer or other form of electronic funds transfer. We may reduce the amount of any payment or credit to you by any amount that you owe us, and this includes your and our affiliates. We occasionally reduce the Monthly Royalty Fee for multi-unit or more experienced franchisees, for franchisees with whom we have previously dealt, for Conversions, or for franchisees in other unique circumstances. However, we do not always do so and may choose not to reduce your Monthly Royalty Fee, even if you possess some or all of these characteristics. We agreed to modify the Monthly Royalty Fee in 6 instances during 2024.
Source: Item 6 — OTHER FEES (FDD pages 27–41)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, Embassy Suites has the right to offset any payments or credits due to a franchisee by any amount the franchisee owes to them or their affiliates. This means that if an Embassy Suites franchisee has outstanding debts to the franchisor or its related companies, Embassy Suites can deduct those debts from any payments or credits that would otherwise be provided to the franchisee.
This provision in the franchise agreement is fairly standard in the franchise industry. It protects Embassy Suites' financial interests by allowing them to recover outstanding debts without having to pursue separate legal action. For a prospective franchisee, this highlights the importance of maintaining good financial standing with Embassy Suites and its affiliates to avoid potential offsets.
It is important for franchisees to understand the full scope of potential debts that could be subject to offset. This includes not only obvious items like unpaid royalties or fees, but also any other financial obligations arising from the franchise agreement or related transactions with Embassy Suites' affiliates. Franchisees should maintain clear and accurate records of all payments and transactions to ensure they can reconcile any offsets that may occur.
While this clause protects Embassy Suites, it also places a responsibility on the franchisor to provide clear accounting and communication regarding any amounts owed by the franchisee. Franchisees should ensure they have a process for regularly reviewing their account statements and resolving any discrepancies promptly to avoid surprises when payments or credits are offset.