What is the interest rate for late payments to HSM by an Embassy Suites By Hilton franchisee?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
If we or our affiliates furnish, supply, service or equip your Hotel at your request before it opens, then you must pay or reimburse us or them for all costs incurred at your request, and related service fees. In particular, HSM seeks to negotiate with manufacturers and suppliers for the distribution of hotel furniture, furnishings, fixtures, finishes, equipment and supplies, certain food and beverage equipment supplies, and certain hotel services at a discount. We recommend you purchase these items from HSM or such third parties. You may but are not obligated to purchase specified items from HSM or such third parties, except as described in this Disclosure Document. If you choose to buy from HSM, it will invoice you for the cost of the products plus freight, sales tax and other actual costs, plus a procurement fee that ranges 4% to 10% of the project cost. HSM may offer you a payment plan. These payment plans are agreed with each franchisee individually based on the type of project, and specifically customized to the project's scope of work and overall timeline. Payment dates are also based on the project's timeline. The interest rate for late payments is 18.5% per year, compounded daily. Change orders must be paid in full, either in advance or with the next installment due.
Source: Item 5 — INITIAL FEES (FDD pages 22–27)
What This Means (2025 FDD)
According to the 2025 Embassy Suites By Hilton Franchise Disclosure Document, if a franchisee elects to purchase items from HSM (Hilton Supply Management), HSM may offer a payment plan. The interest rate for late payments on these plans is 18.5% per year, compounded daily. This applies when HSM furnishes, supplies, services, or equips the hotel at the franchisee's request before it opens.
This interest rate is a significant factor for prospective franchisees to consider when evaluating their financing options. The 18.5% annual interest, compounded daily, could substantially increase the total cost of procurement if payments are not made on time. Franchisees should carefully assess their cash flow projections and ensure they can meet the payment deadlines to avoid incurring these high-interest charges.
It is also important to note that these payment plans are agreed upon individually with each franchisee and are customized based on the project's scope, work, and timeline. Payment dates are also based on the project's timeline. Change orders must be paid in full, either in advance or with the next installment due. This level of customization suggests that franchisees may have some flexibility in negotiating the terms of the payment plan with HSM, but the interest rate for late payments remains a fixed cost that must be factored into their financial planning.