What situations trigger franchise sales and change of ownership fees for an Embassy Suites franchise?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
- Franchise sales and change of ownership fees include application, initiation and other fees that are charged when: (i) new hotels enter our system; (ii) there is a change of ownership of a hotel; or (iii) contracts with hotels already in our system are extended. These fees are typically fixed and collected upfront and are recognized as revenue over the term of the franchise contract. We do not consider this advance consideration to include a significant financing component, since it is used to protect us from the hotel owner failing to adequately complete some or all of its obligations under the contract, including establishing and maintaining the hotel in accordance with our standards.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 97)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, franchise sales and change of ownership fees are charged in specific situations. These fees, which include application, initiation, and other fees, are levied when new hotels join the Embassy Suites system, when there is a change in the ownership of an existing hotel, or when contracts with existing hotels are extended.
These fees are typically fixed amounts and are collected upfront. Embassy Suites recognizes this revenue over the term of the franchise contract. The document clarifies that these advance payments are not considered a financing component because they serve to protect Embassy Suites from the hotel owner failing to meet their contractual obligations, such as maintaining the hotel according to brand standards.
For a prospective Embassy Suites franchisee, this means that they should expect to pay these fees when they initially join the franchise system, if they later sell their hotel, or if they extend their franchise agreement. These fees contribute to the overall revenues of Embassy Suites, as shown in the financial statements, with franchise sales and change of ownership fees amounting to $49,340 in 2024, $43,294 in 2023, and $39,881 in 2022.