How are franchise deposits collected for Embassy Suites By Hilton and who controls the lockbox account?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
dicted with certainty, we expect that the ultimate resolution of all pending or threatened claims and litigation as of December 31, 2024 will not have a material adverse effect on our financial position, results of operations or cash flows.
Note 8: Related Party Transactions
We maintain intercompany balances with Hilton affiliates, which are the result of Hilton's centralized cash management system, which is not controlled by us. One of these balances relates to franchise deposits, which are collected on our behalf by Hilton affiliates and deposited into a lockbox account to which we have no access. Amounts due from Hilton affiliates related to franchise deposits, if any, are reflected as an asset and are payable to us upon demand. The amounts due from Hilton affiliates include certain receivables from related parties that are repaid through periodic settlements with simultaneous distributions of our retained earnings to Parent. We expect to continue to settle certain amounts due from Hilton affiliates, with amounts that are expected to be settled within twelve months from the date of the balance sheet recorded as current assets. These amounts are classified as other receivables due from Hilton affiliates. Amounts due from Hilton affiliates that are not expected to be repaid are reflected as a component of member's equity.
During the years ended December 31, 2024, 2023 and 2022, we settled $1.5 billion, $1.4 billion and $1.55 billion of other receivables due from Hilton affiliates, respectively, and simultaneously distributed $1.5 billion, $1.4 billion and $1.55 billion of our retained earnings to Parent, r
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 97)
What This Means (2025 FDD)
According to Embassy Suites By Hilton's 2025 Franchise Disclosure Document, franchise deposits are collected on behalf of Hilton Franchise Holding LLC by Hilton affiliates. These deposits are then placed into a lockbox account. Hilton Franchise Holding LLC does not have access to this lockbox account. The amounts due from Hilton affiliates related to franchise deposits are reflected as an asset and are payable to Hilton Franchise Holding LLC upon demand.
For a prospective Embassy Suites By Hilton franchisee, this means that while the initial franchise deposit is collected by a related entity (Hilton affiliates), the funds are secured in a lockbox inaccessible to the franchisor. This arrangement could provide some level of security for the franchisee, knowing that the funds are managed separately.
The FDD states that the amounts due from Hilton affiliates include certain receivables from related parties that are repaid through periodic settlements with simultaneous distributions of retained earnings to Parent. These settlements of other receivables due from Hilton affiliates are presented as operating activities and the distributions of retained earnings are presented as financing activities in the statements of cash flows. During the years ended December 31, 2024, 2023 and 2022, Hilton Franchise Holding LLC settled $1.5 billion, $1.4 billion and $1.55 billion of other receivables due from Hilton affiliates, respectively, and simultaneously distributed $1.5 billion, $1.4 billion and $1.55 billion of retained earnings to Parent, respectively.