What costs are included in HSM's invoice to an Embassy Suites By Hilton franchisee?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
If we or our affiliates furnish, supply, service or equip your Hotel at your request before it opens, then you must pay or reimburse us or them for all costs incurred at your request, and related service fees. In particular, HSM seeks to negotiate with manufacturers and suppliers for the distribution of hotel furniture, furnishings, fixtures, finishes, equipment and supplies, certain food and beverage equipment supplies, and certain hotel services at a discount. We recommend you purchase these items from HSM or such third parties. You may but are not obligated to purchase specified items from HSM or such third parties, except as described in this Disclosure Document. If you choose to buy from HSM, it will invoice you for the cost of the products plus freight, sales tax and other actual costs, plus a procurement fee that ranges 4% to 10% of the project cost. HSM may offer you a payment plan. These payment plans are agreed with each franchisee individually based on the type of project, and specifically customized to the project's scope of work and overall timeline. Payment dates are also based on the project's timeline. The interest rate for late payments is 18.5% per year, compounded daily. Change orders must be paid in full, either in advance or with the next installment due.
Source: Item 5 — INITIAL FEES (FDD pages 22–27)
What This Means (2025 FDD)
According to Embassy Suites By Hilton's 2025 Franchise Disclosure Document, if a franchisee chooses to buy from HSM (presumably Hilton Supply Management), the invoice will include the cost of the products, freight, sales tax, other actual costs, and a procurement fee. The procurement fee ranges from 4% to 10% of the project cost. HSM may offer payment plans that are agreed upon individually with each franchisee, based on the project type and customized to the project's scope and timeline. Payment dates are also based on the project's timeline.
It's important to note that late payments are subject to an interest rate of 18.5% per year, compounded daily. Additionally, change orders must be paid in full, either in advance or with the next installment due. This highlights the importance of careful planning and adherence to the agreed-upon payment schedule to avoid incurring additional costs.
While purchasing from HSM is not always mandatory, it is recommended by Embassy Suites By Hilton, as HSM seeks to negotiate discounts with manufacturers and suppliers for various hotel items. This could potentially offer cost savings to the franchisee, but the franchisee should carefully evaluate the costs and benefits of purchasing from HSM versus other suppliers.