What happens if Embassy Suites By Hilton has not issued a default notice to the franchisee?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
If Franchisor has not issued a default notice to Franchisee or Lender has cured Franchisee's default during Lender's Cure Period and Lender commences a 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 initiate the timeline outlined under the 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.
- (c) Franchisor's Rights to Terminate Franchise Agreement.
Notwithstanding any other provision of this letter agreement, Franchisor may terminate the Franchise Agreement if any of the following occur: (i) Franchisee's default or any subsequent default, in the sole opinion of Franchisor, damages the image or reputation of Franchisor or any brand name owned and/or licensed by Hilton Worldwide Holdings Inc., a Delaware corporation, or its subsidiaries or affiliates (collectively, "Hilton"); (ii) Franchisor is required to terminate the Franchise Agreement by court order or action of any trustee in
Source: Item 23 — RECEIPTS (FDD pages 97–304)
What This Means (2025 FDD)
According to Embassy Suites By Hilton's 2025 Franchise Disclosure Document, if Embassy Suites By Hilton has not issued a default notice to the franchisee, but the lender notifies Embassy Suites By Hilton of the franchisee's default under the loan, this lender's notice will be considered the start of the Lender's Cure Period and Additional Period. This provision is part of the Mezzanine Lender Comfort Letter, which outlines the rights and responsibilities of the lender in situations where the franchisee defaults on their loan obligations.
Embassy Suites By Hilton acknowledges that an Acquisition, such as a foreclosure, will not be considered a sale or lease of the hotel under the Franchise Agreement. It also will not be a violation of any control or transfer provisions within the Franchise Agreement. This means that the lender can proceed with acquiring the hotel without being subject to the standard transfer restrictions or first refusal rights that would normally apply.
However, Embassy Suites By Hilton retains the right to terminate the Franchise Agreement under certain conditions, even with the lender's involvement. These conditions include situations where the franchisee's default damages the image or reputation of Embassy Suites By Hilton or any brand name owned by Hilton, if a court order or bankruptcy trustee requires termination, or if the Additional Period expires without a resolution satisfactory to Embassy Suites By Hilton. This ensures that Embassy Suites By Hilton can protect its brand and interests even when a lender is involved in curing a franchisee's default.