What obligations does the lender have under the Embassy Suites By Hilton Franchise Agreement after an Acquisition?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
yed or enjoined. If Franchisor has not issued a default notice to Re: Hotel Name – Facility No. _____
Mezzanine Lender Comfort Letter
Page 3
Franchisee or Lender has cured Franchisee's default during Lender's Cure Period, and Lender commences a UCC sale, 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 begin 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 bankruptcy or debtor in possession of the Hotel; or (iii) the Additional Period expires without other arrangements satisfactory to Franchisor in its sole discretion having been entered into between Franchisor and Lender.
- (d) Expiration of Franchise Agreement. Nothing in this letter agreement will extend the Franchise Agreement beyond its stated expiration date.
- (e) Receiver Appointment. If a receiver is appointed to operate the Hotel at the
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 a lender acquires possession and/or ownership of a hotel as a result of an acquisition, the lender is considered to have assumed the Franchise Agreement from the date of the acquisition. This means the lender is obligated to fulfill all of the franchisee's obligations under the Franchise Agreement that exist or accrue after the acquisition date. These obligations include paying fees owed to Embassy Suites By Hilton.
Embassy Suites By Hilton requires the lender to submit its ownership structure, organizational documents, and evidence of insurance, consistent with the transfer provisions in the Franchise Agreement. Within ten business days of a request from Embassy Suites By Hilton, the lender must provide all necessary information for Embassy Suites By Hilton to determine if the lender is a Sanctioned Person. If the lender is not a Sanctioned Person, Embassy Suites By Hilton will prepare its current form assumption agreement and deliver it to the lender, who must then execute and return the agreement within ten business days. Failure to do so may result in a default under the Franchise Agreement, potentially leading to termination.
Any renovation requirements that Embassy Suites By Hilton imposes on the lender in connection with the assumption cannot exceed what Embassy Suites By Hilton could have required if the original franchisee had remained in place. Instead of a transfer or application fee, the lender must pay Embassy Suites By Hilton a processing fee equal to the permitted transfer fee outlined in the Franchise Agreement. If the Franchise Agreement does not specify a transfer fee, the processing fee is $5,500. Additionally, the lender must cure all defaults that it could not cure before the acquisition, within a timeframe determined by Embassy Suites By Hilton, based on the nature of the default and/or the condition of the hotel at the time of the lender's acquisition.