Under what conditions related to bankruptcy can Embassy Suites immediately terminate the franchise agreement?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
13.2 Immediate Termination by Us. We may immediately terminate this Agreement on written notice to you and without any opportunity to cure the default if:
13.2.4 you have an order entered against you appointing a receiver for the Hotel or a substantial part of your or the Hotel's assets or you file a voluntary petition in bankruptcy or any pleading seeking any reorganization, liquidation, or dissolution under any law, or you admit or fail to contest the material allegations of any such pleading filed against you or the Hotel, and the action results in the entry of an order for relief against you under the Bankruptcy Code, the adjudication of you as insolvent, or the abatement of the claims of creditors of you or the Hotel under any law;
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, there are specific conditions related to bankruptcy that allow for immediate termination of the franchise agreement. Embassy Suites may immediately terminate the agreement with written notice and without opportunity to cure if the franchisee files a voluntary petition in bankruptcy or any pleading seeking reorganization, liquidation, or dissolution under any law. This also applies if the franchisee admits or fails to contest the material allegations of any such pleading filed against them or the Hotel.
Immediate termination is triggered if the action results in the entry of an order for relief against the franchisee under the Bankruptcy Code. It also applies if there is an adjudication of the franchisee as insolvent, or the abatement of the claims of creditors of the franchisee or the Hotel under any law. This means that if a franchisee seeks bankruptcy protection or is declared insolvent, Embassy Suites has the right to terminate the franchise agreement immediately.
This clause protects Embassy Suites from the risks associated with a franchisee's financial instability. Bankruptcy or insolvency can severely impact the operation and reputation of an Embassy Suites location, and this provision allows the franchisor to take swift action to protect its brand and system. Prospective franchisees should be aware of these conditions and ensure they have a solid financial plan to avoid such circumstances.