What specific action regarding defaults must the Lender diligently undertake in connection with the Assumption of an Embassy Suites franchise?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
to Franchisor under Subparagraph 2(a), the Franchise Agreement will continue in full force and effect. ] If Lender acquires possession and/or ownership of the Hotel as the result of an Acquisition, Lender will be deemed to have assumed the Franchise Agreement as of the date of the Acquisition. Lender will be obligated to perform all of the obligations of Franchisee under the Franchise Agreement existing at or accruing after the Acquisition date, including the payment of fees owed to Franchisor ("Assumption"). Any conditions in the transfer provisions of the Franchise Agreement that Franchisor deems relevant shall apply with respect to the Assumption, including but not limited to the obligation for Lender to submit its ownership structure, organizational documents and evidence of insurance. Lender must, within ten (10) business days after receipt of a request from Franchisor, provide to Franchisor all information necessary for Franchisor to determine that Lender is not a Sanctioned Person (as defined below), as well as the other information reasonably requested. If Franchisor confirms that Lender is not a Sanctioned Person, Franchisor will promptly prepare Franchisor's then-current form assumption agreement ("Assumption Agreement") to document the Assumption, and deliver the Assumption Agreement to Lender. Lender must execute and return the Assumption Agreement to Franchisor within ten (10) business days after receipt from Franchisor. Lender's failure to timely execute and deliver the Assumption Agreement may be deemed a default under the Franchise Agreement entitling Franchisor to terminate the Franchise Agreement. Any renovation requirements imposed by Franchisor in connection with the Assumption will not exceed those which Franchisor could have imposed had Franchisee remained as the Franchisee under the Franchise Agreement.
Source: Item 23 — RECEIPTS (FDD pages 97–305)
What This Means (2025 FDD)
According to Embassy Suites' 2025 Franchise Disclosure Document, in connection with the Assumption of a franchise, the Lender must diligently cure all defaults that it could not cure before the Acquisition. The time period for curing these defaults will be determined by Embassy Suites, based on the nature of the default and/or the condition of the hotel at the time of the Lender's Acquisition. However, this requirement excludes "personal and non-curable defaults," which are defined as defaults that occurred before the Lender's Acquisition, are non-curable, are purely personal to the Franchisee (such as failure to provide adequate notice or maintain company status), and are unrelated to the operation of the hotel.
Furthermore, the Lender is required to provide Embassy Suites with all necessary information to determine that the Lender is not a Sanctioned Person within ten business days of receiving a request from Embassy Suites. The Lender must also deliver any other documents regarding the Lender's ownership structure that Embassy Suites reasonably requests. If Embassy Suites confirms that the Lender is not a Sanctioned Person, Embassy Suites will prepare an assumption agreement to document the Assumption and deliver it to the Lender. The Lender must then execute and return this agreement to Embassy Suites within ten business days of receipt.
Failure by the Lender to timely execute and deliver the assumption agreement to Embassy Suites may be considered a default under the Franchise Agreement, which could entitle Embassy Suites to terminate the agreement. This highlights the importance of the Lender's prompt and diligent action in addressing defaults and fulfilling the required obligations to maintain the franchise agreement in good standing. Additionally, any renovation requirements imposed by Embassy Suites in connection with the Assumption will not exceed those which Embassy Suites could have imposed had the Franchisee remained as the Franchisee under the Franchise Agreement.