Under what conditions might Embassy Suites require a Guaranty from a third party?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
After a review of the financial information submitted with your Application and the proposed ownership of the Hotel and real property, we determine guaranty requirements. Each required guarantor, who may include the spouse of an owner of the Hotel or the franchisee, must sign a Guaranty, by which the guarantor assumes and agrees to discharge certain of the Franchisee's obligations under the Franchise Agreement. In addition, we may require you to provide a Guaranty from a third party acceptable to us as a condition to our issuing a lender comfort letter for a loan related to the Hotel or as a condition to our consent to certain kinds of loans you or your principals may obtain. Such loans may include those in which the Hotel loan will be cross-collateralized and/or cross-defaulted with loans to other hotels or loans secured by the Hotel that are not for the direct benefit of the Hotel. If we send you a written notice of default, we may also require you to provide a Guaranty from a third party acceptable to us covering all of your obligations under the Franchise Agreement. A copy of the Guaranty is attached as Exhibit E.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 74–75)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, there are several circumstances under which a third-party guaranty may be required. Initially, Embassy Suites assesses the financial information provided in the franchise application and the proposed ownership structure of the hotel and real property to determine if a guaranty is needed. This evaluation dictates whether a guarantor, potentially including the spouse of an owner or the franchisee, must sign a Guaranty, committing them to fulfill specific obligations of the franchisee under the Franchise Agreement.
Furthermore, Embassy Suites may require a third-party guaranty as a prerequisite for issuing a lender comfort letter for loans related to the hotel. This condition can also apply to certain types of loans obtained by the franchisee or its principals, particularly those involving cross-collateralization or cross-default arrangements with other hotels or loans not directly benefiting the Embassy Suites hotel.
Finally, if Embassy Suites sends a written notice of default to the franchisee, they reserve the right to demand a third-party guaranty that covers all of the franchisee's obligations outlined in the Franchise Agreement. A copy of the Guaranty agreement is included as Exhibit E in the FDD. This ensures that Embassy Suites has additional security to cover the franchisee's responsibilities in case of a default situation.