What is the relationship between the franchisee's obligations in Item 9 and the potential for development incentives offered by Embassy Suites as described in Item 10?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
alance is accelerated and becomes your immediate obligation, along with any court costs and attorneys' fees for collection.
We may, in our sole discretion, offer incentives for new hotels ("Incentives"). An Incentive is a financial contribution that we make to assist with the development or conversion of your Hotel. To receive an Incentive, you and your principals must sign a development incentive note ("Note") in the form attached as Exhibit D-2 when you sign the Franchise Agreement. An Incentive does not have to be repaid, unless the franchise terminates before the end of the Term or a transfer occurs as described below. The Incentive will be disbursed to you within 30 days after the Hotel opens with our consent, as long as: (a) there have been no material adverse changes in the business, legal, litigation, bankruptcy status or finances of you, any guarantors, or the project since we granted approval; (b) you have completed any required PIP; and (c) you have paid the Franchise Application Fee.
An Incentive is not a loan, it is a contingent liability. If your franchise terminates before the end of the Term you must pay us the then-current repayable amount of the Incentive. If you transfer your Hotel you must also pay us the then-current repayable amount of the Incentive, unless we permit the transferee to assume your obligations under the Note. In that case we may require the transferee to provide us with such additional security as we deem appropriate. The repayable amount of the Incentive decreases over time. For each year that the Hotel is open, the repayable amount is reduced by an equal annual percentage of the Term. For example, if the franchise has a 10-year Term, the repayable amount is reduced by 1/10th of the original amount annually. If the franchise has a 20-year term, the repayable amount is reduced by 1/20th of the original amount
annually. An Incentive bears no interest.
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, Item 9 outlines the franchisee's principal obligations under the Franchise Agreement, while Item 10 describes potential development incentives that Embassy Suites may offer. The table in Item 9 lists obligations such as site selection, pre-opening purchases, site development, training, and opening procedures, referencing specific sections in the Franchise Agreement and other related documents where these obligations are detailed. These obligations are critical for a franchisee to fulfill to successfully establish and operate an Embassy Suites hotel. Item 9 cross-references other items in the disclosure document that further elaborate on these obligations.
Item 10 indicates that Embassy Suites may offer financial incentives to assist with the development or conversion of a hotel. These incentives are not guaranteed and are subject to negotiation and the franchisor's discretion. To receive an incentive, the franchisee must sign a development incentive note. The incentive is disbursed within 30 days after the hotel opens, contingent upon factors such as no material adverse changes in the franchisee's business or finances, completion of any required Property Improvement Plan (PIP), and payment of the Franchise Application Fee.
The relationship between these items lies in the fact that fulfilling the obligations listed in Item 9 is often a prerequisite for receiving the development incentives described in Item 10. For instance, completing the required PIP and ensuring there are no adverse changes in the franchisee's financial status are conditions that must be met to receive the incentive. Therefore, a prospective franchisee should carefully review both items to understand their responsibilities and the potential financial support available, as well as the conditions attached to such support. The franchisee's ability to meet their obligations directly impacts their eligibility for the incentives offered by Embassy Suites.