What is considered an 'Acquisition' in the context of the Embassy Suites By Hilton franchise agreement?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee or Lender has cured Franchisee's default during Lender's Cure Period, and Lender commences a UCC sale, foreclosure or other proceeding intended to result in an Acquisition, Lender may exercise the rights under this letter agreement under the terms and timelines outlined in this Subparagraph. If Franchisor has not issued a default notice, Lender's notice to Franchisor of Franchisee's default under the Loan will be deemed to begin Lender's Cure Period and Additional Period. Franchisor acknowledges and agrees that an Acquisition shall not be deemed a sale or lease of the Hotel under the Franchise Agreement, nor a violation of any control or transfer provisions of the Franchise Agreement, and shall not be subject to any right of first refusal or right of first offer contained in the Franchise Agreement.
- (b) Acquisition and Franchise Agreement Assumption. [DELETE FIRST SENTENCE ONLY IF ¶ 2(a) IS DELETED: If Lender does not deliver the Waiver Notice to Franchisor under Subparagraph 2(a), the Franchise Agreement will continue in full force and effect. ] If Lender acquires possession and/or ownership of the Hotel as the result of an Acquisition, Lender will be deemed to have assumed the Franchise Agreement as of the date of the Acquisition.
Lender will be obligated to perform all of the obligations of Franchisee under the Franchise Agreement existing at or accruing after the Acquisition date, including the payment of fees owed to Franchisor ("Assumption").
Lender agrees to notify Franchisor (a) contemporaneously with the commencement of any action that may result in an Acquisition; (b) contemporaneously with the filing of a petition for appointment of a receiver or any other action initiated by Lender that materially impacts possession of the Hotel; (c) promptly after an Acquisition of the date the Acquisition occurred
Source: Item 23 — RECEIPTS (FDD pages 97–304)
What This Means (2025 FDD)
According to Embassy Suites By Hilton's 2025 Franchise Disclosure Document, an Acquisition, in the context of a Mezzanine Lender Comfort Letter, refers to when a lender commences a UCC sale, foreclosure, or other proceeding intended to result in the lender acquiring possession and/or ownership of the hotel. The Franchisor acknowledges that such an Acquisition is not deemed a sale or lease of the hotel under the Franchise Agreement, nor a violation of any control or transfer provisions, and is not subject to any right of first refusal or offer contained within the Franchise Agreement. This definition is important in understanding the rights and obligations of the lender and the franchisee in the event of a loan default.
Specifically, the lender is required to notify Embassy Suites By Hilton contemporaneously with the commencement of any action that may result in an Acquisition. This includes actions such as filing a petition for the appointment of a receiver or any other action initiated by the lender that materially impacts possession of the Hotel. The lender must also notify Embassy Suites By Hilton promptly after an Acquisition occurs, indicating the date of the Acquisition.
If the lender acquires possession and/or ownership of the Hotel as a result of an Acquisition, the lender will be deemed to have assumed the Franchise Agreement as of the date of the Acquisition. This means the lender is obligated to perform all of the franchisee's obligations under the Franchise Agreement existing at or accruing after the Acquisition date, including the payment of fees owed to Embassy Suites By Hilton. The lender must also provide all information necessary for Embassy Suites By Hilton to determine that the lender meets Embassy Suites By Hilton’s then-current criteria for franchisees, within ten business days after a request from Embassy Suites By Hilton.