Under the Embassy Suites franchise agreement, from what date does the franchisee's obligation to indemnify the Indemnified Parties begin?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
14.1.8 any inquiry, investigation, suit, action, or proceeding arising out of or in connection with any fees or costs charged to patrons or guests by you, and if you acquired the Hotel in a Change of Ownership Transfer, by the previous owner (your transferor) before you acquired ownership of the Hotel.
14.2 You do not have to indemnify an Indemnified Party to the extent damages otherwise covered under this Section 14 are adjudged by a final, non-appealable judgment of a court of competent jurisdiction to have been solely the result of the gross negligence or willful misconduct of that Indemnified Party, and not any of the acts, errors, omissions, negligence or misconduct of you or anyone related to you or the Hotel.
You may not rely on this exception to your indemnity obligation if the claims were asserted against us or any other Indemnified Party on the basis of theories of imputed or secondary liability, such as vicarious liability, agency, or apparent agency, or our failure to compel you to comply with the provisions of this Agreement, including compliance with Standards, Laws or other requirements.
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to Embassy Suites's 2025 Franchise Disclosure Document, the franchisee's obligation to indemnify the Indemnified Parties extends to any inquiry, investigation, suit, action, or proceeding arising out of or in connection with any fees or costs charged to patrons or guests. This obligation includes actions by the previous owner (the transferor) before the franchisee acquired ownership of the hotel, if the hotel was acquired through a Change of Ownership Transfer.
This means that as an Embassy Suites franchisee, you could be held responsible for legal and financial issues stemming from the prior owner's actions related to fees and costs charged to guests. This could include disputes over billing, undisclosed fees, or other financial improprieties that occurred before you took ownership.
However, the franchisee is not required to indemnify an Indemnified Party if damages are the sole result of the gross negligence or willful misconduct of that Indemnified Party, as determined by a final, non-appealable judgment. This exception does not apply if claims are asserted against Embassy Suites or other Indemnified Parties based on theories of imputed or secondary liability, such as vicarious liability, agency, or apparent agency, or their failure to compel compliance with the agreement.
In practical terms, a prospective Embassy Suites franchisee should conduct thorough due diligence on the hotel's past operations, especially regarding fee and cost structures, before finalizing a Change of Ownership Transfer. Understanding the previous owner's practices and any potential liabilities is crucial to avoid unexpected indemnification obligations.