What is a 'Restricted Area' for an Embassy Suites franchise?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
licable implied covenant of good faith and fair dealing, or divided loyalty. "Other Businesses" means any business activity we or our affiliates engage in, other than the licensing of your Hotel.
We may, however, agree to give franchisees certain specific territorial restrictions ("Restricted Area Provision") for an area surrounding the franchised hotel and encompassing the immediate competitive market for the hotel as may be agreed on by the parties ("Restricted Area"). If we agree to give you a Restricted Area Provision for your New Development or Conversion, it will normally be for an agreed-on time period, which is shorter than the term of the Franchise Agreement ("Restrictive Period"). We will not normally grant a Restricted Area Provision for a Change of Ownership or Re-licensing, although we will occasionally do so under certain unique circumstances. The following discussion applies where we agree to give you a Restricted Area Provision in your Franchise Agreement:
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- Restricted Area. The boundaries of the Restricted Area will normally depend on the relevant market in the immediate area and competitive circumstances in the relevant market at the time you sign the Franchise Agreement. The boundaries will vary in size and shape from hotel to hotel. Boundaries will not be delineated according to any standard formula, but may be delineated in various ways, including references to cities, metropolitan areas, counties or other political subdivisions, references to streets or highways, or references to an area encompassed within a radius of specified distance from the front door of the hotel.
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- Restricted Area Provision. The Restricted Area Provision will typically restrict us and our affiliates from operating, or authorizing someone else to operate, another Brand hotel during the Restrictive Period and within the Restricted Area (except as described in Paragraph 3 below). In the Restricted Area Provision, the term 'Brand' means the name used to identify the chain of hotels operated under the same Chain Code and Standards. It excludes any other brands or product lines containing "Embassy" in the name. It also excludes Hilton Worldwide Holdings Inc., its affiliates, and other chains of hotels that include the word "Hilton" as part of their brand name (such as "Hilton Garden Inn," "DoubleTree by Hilton" or "Homewood Suites by Hilton").
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- Exclusions from the Restricted Area Provision: The Restricted Area Provision will generally not apply to: (a) any hotel or motel that is currently open or under construction or has been approved for development or opening as a Brand hotel as of the Effective Date, or any hotel located or to be located within the Restricted Area that replaces such hotel under the Brand; (b) hotels or motels under brands other than the Brand; (c) hotels or motels that will not begin operating under the Brand until after the expiration of the Restrictive Period; (d) gaming-oriented hotels or facilities using the Brand; (e) shared ownership properties (commonly known as "vacation ownership" or "time share ownership" or similar real estate properties) under the Brand; and (f) any hotels, motels, or inns that are part of a chain or group of four (4) or more hotels, motels, or inns that we or our Affiliates, as a result of a single transaction or group of related transactions, own, operate, acquire, lease, manage, franchise, license, or join through a merger, acquisition or marketing agreement (or otherwise), whether under their existing name or the Brand name or any other name.
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- Restrictive Period. The Restrictive Period will normally be for an agreed-on time period. Generally, this period will be shorter than the term of the Franchise Agreement, usually
tied to a specified number of years from the date your Franchise Application was approved. In some cases, the Restrictive Period may reduce in geographic scope after an agreed-on time period. The continuation of the Restrictive Period will not depend on your achieving any particular sales volume or market penetration. An increase in population in the Restricted Area will not affect it and there are no other circumstances when your Restricted Area may be altered. Historically, we have extended the Restrictive Period for the full term of the Franchise Agreement; however, we do not intend to do so in the future. Those restrictions as to entities other than us may lapse if the Brand is no longer affiliated with Hilton Worldwide.
IMPORTANT NOTES: A Restricted Area Provision will not give you protection from previously existing hotels which are managed or licensed by us or an affiliate or our or their predecessors, or any hotel site for which we or an affiliate or its predecessor have approved an application and/or signed a franchise agreement, management agreement, lease or license agreement for a System Hotel to be developed. In addition, a Restricted Area Provision will not give you protection from any replacement hotel that replaces or will replace another such existing hotel or hotel site. SOME STATE AND/OR OTHER LAWS PROVIDE THAT TERRITORIAL AND/OR AREA RESTRICTIONS ARE VOID, VOIDABLE AND/OR SUPERSEDED BY LAW.
There may currently be franchised or company-owned Network Hotels situated in or near your area. We, Hilton Worldwide, and our affiliates or subsidiaries may establish new franchised, company-owned, or company-managed Network Hotels in or near your area.
You may compete with any Network Hotels in and near your area. There is no mechanism for resolving any conflicts that may arise between your Hotel and Network Hotels. Any resolution of conflicts regarding location, customers, support or services will be entirely within the business judgment of Hilton Worldwide and us.
Source: Item 12 — TERRITORY (FDD pages 67–70)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, a 'Restricted Area' is a specific territorial restriction that Embassy Suites may agree to give franchisees for an area surrounding the franchised hotel. This area encompasses the immediate competitive market for the hotel, as agreed upon by both parties. The grant of a Restricted Area Provision is more common for New Development or Conversion franchises, and less common for Change of Ownership or Re-licensing scenarios, although it may occur under unique circumstances. The Restricted Area Provision is typically granted for an agreed-on time period, which is shorter than the full term of the Franchise Agreement.
The boundaries of a Restricted Area depend on the market and competitive conditions at the time the Franchise Agreement is signed. These boundaries vary in size and shape from hotel to hotel and are not determined by a standard formula. Instead, they may be defined by references to cities, metropolitan areas, counties, streets, highways, or a specified radius from the hotel's front door. The Restricted Area Provision generally restricts Embassy Suites and its affiliates from operating or authorizing another party to operate another Brand hotel within the Restricted Area during the Restrictive Period. The term 'Brand' refers to the chain of hotels operated under the same Chain Code and Standards, excluding other brands or product lines containing "Embassy" in the name, as well as other Hilton brands such as "Hilton Garden Inn" or "DoubleTree by Hilton."
However, the Restricted Area Provision has several exclusions. It typically does not apply to hotels already open, under construction, or approved for development as a Brand hotel as of the Franchise Agreement's effective date, or any replacement hotels within the Restricted Area. It also excludes hotels under brands other than the Brand, hotels that will not operate under the Brand until after the Restrictive Period, gaming-oriented hotels using the Brand, shared ownership properties under the Brand, and chains of four or more hotels that Embassy Suites or its affiliates acquire. Furthermore, the FDD states that the continuation of the Restrictive Period will not depend on achieving any particular sales volume or market penetration, and an increase in population in the Restricted Area will not affect it.
Prospective franchisees should note that a Restricted Area Provision does not protect against previously existing hotels managed or licensed by Embassy Suites or its affiliates, or any hotel site for which an application has been approved. Additionally, the FDD explicitly states that some state laws may void or supersede territorial restrictions. Given these limitations and exclusions, it is crucial for potential franchisees to carefully review the terms of any Restricted Area Provision offered and to understand the existing and potential competitive landscape in their area. They should also seek legal counsel to understand the enforceability of territorial restrictions in their specific jurisdiction.