When are Embassy Suites By Hilton franchise sales and change of ownership fees charged?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchise sales and change of ownership fees include application, initiation and other fees that are charged when: (i) new hotels enter our system; (ii) there is a change of ownership of a hotel; or (iii) contracts with hotels already in our system are extended. These fees are typically fixed and collected upfront and are recognized as revenue over the term of the franchise contract. We do not consider this advance consideration to include a significant financing component, since it is used to protect us from the hotel owner failing to adequately complete some or all of its obligations under the contract, including establishing and maintaining the hotel in accordance with our standards.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 97)
What This Means (2025 FDD)
According to the 2025 Embassy Suites By Hilton Franchise Disclosure Document, franchise sales and change of ownership fees are charged in specific instances related to the lifecycle of a hotel's affiliation with the franchise system. These fees, which encompass application, initiation, and other charges, are levied when new hotels join the Embassy Suites By Hilton system, when there is a change in the ownership of an existing hotel, or when contracts with current hotels are extended.
These fees are typically fixed amounts and are collected upfront by Embassy Suites By Hilton. The revenue generated from these fees is recognized over the term of the franchise contract. This approach to revenue recognition aligns the initial fee with the ongoing benefits and services that Embassy Suites By Hilton provides to the franchisee throughout the duration of their agreement.
Embassy Suites By Hilton does not consider these upfront payments as having a significant financing component. This is because the fees serve to protect Embassy Suites By Hilton from potential failures by the hotel owner to fulfill their obligations under the franchise contract. These obligations include establishing and maintaining the hotel in accordance with Embassy Suites By Hilton's standards, ensuring brand consistency and quality.
In summary, these fees are a standard part of the franchising process for Embassy Suites By Hilton, covering initial setup, ownership changes, and contract extensions. They are designed to ensure the franchisee's commitment to maintaining brand standards and to compensate Embassy Suites By Hilton for the initial costs associated with onboarding or transitioning a hotel within its system.