Regarding the Embassy Suites agreement, are franchisees permitted to obtain financing related to the agreement from a Sanctioned Person?

According to the 2025 Embassy Suites Franchise Disclosure Document, franchisees are prohibited from obtaining financing related to the franchise agreement from Sanctioned Persons. The agreement states that franchisees must warrant and covenant that they have not and will not obtain, receive, transfer, or provide any funds, property, debt, equity, or other financing related to the agreement and the hotel or hotel site to or from a Sanctioned Person.

This provision is designed to ensure that Embassy Suites franchisees comply with all applicable laws and regulations regarding trade restrictions and anti-bribery measures. A "Sanctioned Person" typically refers to individuals or entities that are subject to trade sanctions or other restrictions imposed by governments or international organizations.

For a prospective Embassy Suites franchisee, this means that they must ensure that all sources of financing for their hotel project are free from any connection to Sanctioned Persons. This requires conducting thorough due diligence on all potential investors and lenders to verify their compliance with relevant regulations. Failure to comply with this provision could result in a breach of the franchise agreement and potential legal consequences.

This type of clause is becoming increasingly common in franchise agreements as franchisors seek to protect their brand and reputation from any association with illegal or unethical activities. Franchisees should carefully review this section of the agreement and consult with legal counsel to ensure they fully understand their obligations.