Under what circumstances might Embassy Suites reduce the Monthly Royalty Fee?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
If there is a fire or other insured casualty at your Hotel that results in a reduction of Gross Rooms Revenue or Gross Spa Revenue, the Monthly Program, and Monthly Royalty Fees will be equal to the Monthly Program, and Monthly Royalty Fees forecasted on the basis of the Gross Rooms Revenue amount and Gross Spa Revenue you agree on with your insurer(s). However, we have the right to participate with you in negotiating the value of your Gross Rooms Revenue claim with your insurer(s).
We can require you to transmit all payments required under the Franchise Agreement by wire transfer or other form of electronic funds transfer. You must bear all costs of wire transfer or other form of electronic funds transfer. We may reduce the amount of any payment or credit to you by any amount that you owe us, and this includes your and our affiliates. We occasionally reduce the Monthly Royalty Fee for multi-unit or more experienced franchisees, for franchisees with whom we have previously dealt, for Conversions, or for franchisees in other unique circumstances. However, we do not always do so and may choose not to reduce your Monthly Royalty Fee, even if you possess some or all of these characteristics. We agreed to modify the Monthly Royalty Fee in 6 instances during 2024.
Source: Item 6 — OTHER FEES (FDD pages 27–41)
What This Means (2025 FDD)
According to Embassy Suites' 2025 Franchise Disclosure Document, there are a few specific scenarios where the Monthly Royalty Fee may be reduced. If a fire or other insured casualty occurs at the hotel, leading to a reduction in Gross Rooms Revenue or Gross Spa Revenue, the Monthly Royalty Fees will be based on the Gross Rooms Revenue and Gross Spa Revenue agreed upon with the insurer(s). Embassy Suites retains the right to participate in negotiating the value of the Gross Rooms Revenue claim with the insurer(s).
Embassy Suites also states that they occasionally reduce the Monthly Royalty Fee for multi-unit or more experienced franchisees, for franchisees with whom they have previously dealt, for Conversions, or for franchisees in other unique circumstances. However, the document emphasizes that such reductions are not guaranteed. Embassy Suites may choose not to reduce the Monthly Royalty Fee even if a franchisee meets some or all of these criteria. In 2024, Embassy Suites agreed to modify the Monthly Royalty Fee in 6 instances.
It's important to note that these reductions are not guaranteed and are subject to Embassy Suites' discretion. A prospective franchisee should not rely on the possibility of a reduced Monthly Royalty Fee when making their investment decision. Instead, they should carefully consider the standard fee structure and factor that into their financial projections. It would be prudent for potential franchisees to discuss the possibility of a reduced Monthly Royalty Fee with Embassy Suites during the due diligence process to understand the likelihood of receiving such a reduction based on their specific circumstances.