Does the Incentive offered by Embassy Suites By Hilton bear interest?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
An Incentive bears no interest. However, if an Incentive becomes repayable and payment is not made in full when due, the outstanding amount is subject to interest at 1.5% per month or the highest rate allowed by law. We may reduce the amount of the Incentive that we disburse to you by any amount that you or your affiliates owe to us or our affiliates, and this will not affect the calculation of the amount repayable to us. We may grant renewals, extensions, modifications, compositions, compromises, releases or discharges of other parties without notice to any guarantor or co-maker. You may not use any portion of the Incentive to make, offer, or authorize any Improper Payment or engage in any act violating any Anti-Corruption Law. If we reasonably believe that you have used the Incentive in violation of any Anti-Corruption Law, you must cooperate with our reasonable requests for information and permit us to inspect all books and records pertaining to your Hotel.
Source: Item 10 — FINANCING (FDD pages 52–53)
What This Means (2025 FDD)
According to Embassy Suites By Hilton's 2025 Franchise Disclosure Document, the Incentive offered to franchisees does not bear interest. However, if the Incentive becomes repayable due to franchise termination or hotel transfer and payment is not made when due, the outstanding amount is subject to interest. This interest accrues at a rate of 1.5% per month or the highest rate allowed by law.
This means that while franchisees are not charged interest on the Incentive under normal circumstances, failing to repay the Incentive amount when it becomes due can result in significant additional costs. The 1.5% monthly interest rate is a substantial penalty, potentially adding up to 18% annually, which is much higher than typical loan interest rates. Franchisees should be aware of the conditions under which the Incentive becomes repayable and ensure they have a plan to meet these obligations to avoid incurring these high interest charges.
It is also important to note that Embassy Suites By Hilton may reduce the amount of the Incentive disbursed by any amount that the franchisee or their affiliates owe to them or their affiliates. This reduction does not affect the calculation of the amount repayable. Additionally, franchisees are prohibited from using any portion of the Incentive to make, offer, or authorize any Improper Payment or engage in any act violating any Anti-Corruption Law. Violation of this provision could lead to further scrutiny and potential penalties.