What fees must an Embassy Suites By Hilton customer pay upon termination of the agreement?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
[SELECT FOR PE, EY** the greater of: (a) the Hotel's Average Monthly Royalty Fees multiplied by sixty (60); or (b) $10,000 multiplied by the number of approved Guest Rooms at the Hotel.] [SELECT FOR GU the greater of: (a) the Hotel's Average Monthly Royalty Fees multiplied by sixty (60); or (b) $11,200 multiplied by the number of approved Guest Rooms at the Hotel.]
13.4.1.4 If termination occurs after the second anniversary of the Opening Date but before the final sixty (60) calendar months of the Term, you will pay us Liquidated Damages in an amount equal to the Hotel's Average Monthly Royalty Fees multiplied by sixty (60).
13.4.1.5 If there are fewer than sixty (60) months remaining in the Term on the date of termination, you will pay us Liquidated Damages in an amount equal to the Hotel's Average Monthly Royalty Fees multiplied by the number of months remaining in the Term.
13.4.2 Payment of Liquidated Damages. Payment of Liquidated Damages is due thirty (30) days following termination of this Agreement or on demand.
[SELECT FOR CI, OL:
13.4 Termination Fee on Termination
- 13.4.1 Termination Fee. You agree that if this Agreement is terminated by us under this Section 13, you will pay a termination Fee equal to:
- (a) $25,000 multiplied by the number of approved guest Rooms at the Hotel if termination occurs (i) before you begin the Hotel Work, and you or any Guarantor (or your or any Guarantor's Affiliates) directly or indirectly, enter into a franchise, license, management, lease and/or other similar agreement for or begin construction or commence construction operation of a hotel, motel, inn, or similar facility at the Hotel Site within one (1) year after termination, or (ii) after you begin the Hotel Work but before the Opening Date, unless your failure to complete the Hotel Work was the result of Force Majeure:
- (b) The greater of: (i) the Hotel's Average Monthly Royalty Fees multiplied by sixty (60); or (ii) an amount equal to $25,000 multiplied by the number of approved Guest Rooms at the Hotel, if termination occurs on or after the Opening Date but before the second anniversary of the Opening Date; or
- (c) The Hotel's Average Monthly Royalty Fees (i) multiplied by sixty (60) if termination occurs after the second anniversary of the Opening Date but before the final sixty (60) calendar months of the Term, or (ii) multiplied by the number of months remaining in the Term if there are fewer than sixty (60) months remaining in the Term on the date of termination.
You acknowledge and agree that this Termination Fee is an agreed fee and does not represent a penalty or liquidated damages. You further acknowledge and agree that this Termination Fee does not constitute or create, expressly or impliedly, any right or option for you to terminate this Agreement before the Expiration Date.
- 13.4.2. Payment of Termination Fee. You must pay the Termination Fee within (30) days after termination of this Agreement or on demand.]
- 13.5 Actual Damages Under Special Circumstances. [SELECT FOR ALL BRANDS EXCEPT CI, OL: You acknowledge that the Liquidated Damages described in Subsection 13.4 may be inadequate to compensate us for additional harm we may suffer, by reason of greater difficulty in re-entering the market, competitive damage to the System or the Network, damage to goodwill of the Marks, and other similar harm, as we reserve the right to seek actual damages in lieu of Liquidated Damages under the following circumstances: [SELECT FOR CI, OL: You agree that we may elect to seek actual damages in lieu of the Termination Fee under Section 13.4 above, in our sole and absolute discretion, under the following circumstances:
- 13.5.1 within twelve (12) months of each other, [SELECT FOR CI, DT, ES, GU, HFS, OL, PY, QQ: two (2)] [SELECT FOR EY, HGI, H2, HWS, PO, UP: five (5)] [SELECT FOR HAM, HIS, PE, RU, UAB: seven (7)] or more franchise agreements for the Brand between yourself (or any of your Affiliates) and us (or any of our Affiliates) terminate before their expiration date as a result of a breach by you or your Affiliate; or
- 13.5.2 this Agreement terminates due to an unapproved Transfer: (a) to a Competitor, or (b) to a buyer that converts the Hotel to a Competing Brand within two (2) years from the date this Agreement terminates.
- 13.6 Your Obligations on Termination or Expiration. On termination or expiration of this Agreement, you will immediately:
- 13.6.1 pay all sums due and owing to us or any of our Affiliates, including any expenses incurred by us in obtaining injunctive relief for the enforcement of this Agreement;
- 13.6.2 cease operating the Hotel as a System Hotel and cease using the System;
- 13.6.3 cease using the Marks, the Trade Name, and any confusingly similar names, marks, trade dress systems, insignia, symbols, or other rights, procedures, and methods. You will deliver all goods and materials containing the Marks to us and we will have the sole and exclusive use of any items containing the Marks. You will immediately make any specified changes to the location as we may reasonably require for this purpose, which will include removal of the signs, custom decorations, and promotional materials;
- 13.6.4 cease representing yourself as then or formerly a System Hotel or affiliated with the Brand or the Network;
- 13.6.5 return all copies of the Manual and any other Proprietary Information to us;
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to the 2025 Embassy Suites By Hilton Franchise Disclosure Document, several termination fees may be applicable upon the termination of the agreement. If the agreement is terminated by Embassy Suites By Hilton under Section 13, the franchisee must pay a termination fee. This fee is calculated based on different scenarios related to the hotel's progress and the timing of the termination. If termination occurs before hotel work begins and the franchisee enters into a similar agreement at the hotel site within one year, or after work begins but before the opening date (unless due to Force Majeure), the fee is $25,000 multiplied by the number of approved guest rooms. If termination occurs on or after the opening date but before the second anniversary, the fee is the greater of the hotel's average monthly royalty fees multiplied by 60, or $25,000 multiplied by the number of approved guest rooms. After the second anniversary but before the final 60 months of the term, the fee is the average monthly royalty fees multiplied by 60, or if fewer than 60 months remain, multiplied by the number of months remaining in the term. The franchisee acknowledges that this termination fee is an agreed fee and not a penalty or liquidated damages.
Additionally, if the Technology Service Provider (TSP) Agreement is terminated, the franchisee, referred to as the Customer, may face further financial obligations. The customer may be required to assume any remaining lease payments of HSS (Hilton Supply Management) for Network Authorized Equipment or purchase the equipment from HSS's lessor. The costs will vary depending on the equipment and termination timing, and the customer will be informed of the options and costs upon notification of termination. The customer will also be responsible for all subsequent fees and costs of Equipment Maintenance and Software Maintenance. If termination occurs before three years since HSS incurred installation or service fees for refreshing Network Authorized Equipment, the customer will reimburse HSS for the unamortized value, calculated monthly over a 36-month period.
Furthermore, if the TSP Agreement is terminated, the customer will pay HSS a termination fee to reimburse HSS or the Preferred Provider for unamortized costs, including costs of Certified Third Party Software and maintenance service start-up costs. If termination occurs within the first year after the shipment date of the Network Authorized Equipment, the termination fee is $3,600. After the first year, the termination fee varies. During the second year it is $2,600, during the third year it is $1,300, and thereafter it is $1,200. However, if the agreement is terminated after a Customer Refresh of Authorized Equipment, the termination fee depends on the period elapsed after the Start Date for each successive Customer Refresh. In this case, the termination fee is $3,800 during the first year, $2,800 during the second year, $1,400 during the third year, and $1,200 thereafter.
Upon termination of the agreement, the customer will also be responsible for all unpaid fees related to Agreement Products and Services, Software, and Authorized Equipment. They will also be responsible for all costs to HSS of all the Agreement Products and Services, Software and Authorized Equipment that exceeds what the Customer paid for same, all termination, penalty or administrative fees that would not be payable but for the termination for cause, all costs related to disabling the Agreement Products and Services, together with related intervention or administration fees, all costs and fees for any Authorized Equipment, Authorized Equipment maintenance Services, Software, Software maintenance Services, network and other Services HSS and its Affiliates, in their sole discretion, provide to Customer at Customer's request after the termination effective date, and all termination fees identified in the Customer's Order Document.
These termination fee structures are designed to protect Embassy Suites By Hilton and its suppliers from losses incurred due to early termination, particularly concerning equipment, software, and service costs. Prospective franchisees should carefully consider these potential costs and ensure they understand the conditions under which these fees may be applied. It is advisable to seek clarification from Embassy Suites By Hilton regarding specific scenarios and how they might affect the franchisee's financial obligations upon termination.