What is the termination fee for Embassy Suites if the agreement is terminated during the first year?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
ermination. HSS may terminate the above Equipment License on the Network Authorized Equipment and all other obligations of HSS under this TSP Agreement at HSS's option: (a) Immediately without notice in event of breach of Customer's obligations or conditions set forth in Sections 2 and 3 above, or (b) at any time, with or without cause, upon not less than ninety (90) days advance written notice to Customer. Any default by Customer under this TSP Agreement will constitute a default by Customer under the HITS Agreement, and, in such event, HSS may exercise any of its rights provided under the HITS Agreement. Any default by Customer under the HITS Agreement will constitute a default and breach of condition by Customer under this TSP Agre
Source: Item 23 — RECEIPTS (FDD pages 97–305)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, if the TSP Agreement is terminated during the first year following the shipment date of the Network Authorized Equipment to the Customer's Hotel (referred to as the "Start Date"), the termination fee will be $3,600.00. This fee is designed to reimburse the Preferred Provider and/or HSS (presumably Hospitality Support Services) for unamortized or otherwise uncovered costs, including expenses related to Certified Third Party Software and the initial setup and maintenance services provided by the Preferred Provider under the HITS Agreement.
This termination fee applies specifically if the agreement is terminated or if the customer's use of the Preferred Provider is terminated within that first year. The FDD specifies that this fee is intended to cover costs incurred by HSS and the Preferred Provider in starting up and providing maintenance services.
For a prospective Embassy Suites franchisee, this means that terminating the TSP Agreement early can result in a significant fee. It is important to carefully consider the terms of the agreement and the potential costs of early termination. Franchisees should evaluate their long-term plans and financial stability before entering into the agreement to avoid potential termination fees.
It's also worth noting that the termination fee structure changes in subsequent years, decreasing to $2,600 during the second year, $1,300 during the third year, and $1,200 thereafter. This tiered structure suggests that the initial year incurs the highest costs for HSS and the Preferred Provider, which are then gradually amortized over time.