What is a 'Restricted Area' in the context of an Embassy Suites By Hilton franchise agreement?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
We may, however, agree to give franchisees certain specific territorial restrictions ("Restricted Area Provision") for an area surrounding the franchised hotel and encompassing the immediate competitive market for the hotel as may be agreed on by the parties ("Restricted Area"). If we agree to give you a Restricted Area Provision for your New Development or Conversion, it will normally be for an agreed-on time period, which is shorter than the term of the Franchise Agreement ("Restrictive Period"). We will not normally grant a Restricted Area Provision for a Change of Ownership or Re-licensing, although we will occasionally do so under certain unique circumstances. The following discussion applies where we agree to give you a Restricted Area Provision in your Franchise Agreement:
-
- Restricted Area.
The boundaries of the Restricted Area will normally depend on the relevant market in the immediate area and competitive circumstances in the relevant market at the time you sign the Franchise Agreement.
The boundaries will vary in size and shape from hotel to hotel.
Boundaries will not be delineated according to any standard formula, but may be delineated in various ways, including references to cities, metropolitan areas, counties or other political subdivisions, references to streets or highways, or references to an area encompassed within a radius of specified distance from the front door of the hotel.
-
- Restricted Area Provision.
The Restricted Area Provision will typically restrict us and our affiliates from operating, or authorizing someone else to operate, another Brand hotel during the Restrictive Period and within the Restricted Area (except as described in Paragraph 3 below).
In the Restricted Area Provision, the term 'Brand' means the name used to identify the chain of hotels operated under the same Chain Code and Standards.
It excludes any other brands or product lines containing "Embassy" in the name.
It also excludes Hilton Worldwide Holdings Inc., its affiliates, and other chains of hotels that include the word "Hilton" as part of their brand name (such as "Hilton Garden Inn," "DoubleTree by Hilton" or "Homewood Suites by Hilton").
Source: Item 12 — TERRITORY (FDD pages 67–70)
What This Means (2025 FDD)
According to the 2025 Embassy Suites By Hilton Franchise Disclosure Document, a 'Restricted Area' is a specific territorial restriction that Embassy Suites By Hilton may agree to give franchisees for an area surrounding the franchised hotel. This area encompasses the immediate competitive market for the hotel, as agreed upon by both parties. If granted, this 'Restricted Area Provision' is typically for a time period shorter than the full term of the Franchise Agreement, referred to as the 'Restrictive Period,' and is usually provided for New Development or Conversion franchises, but not normally for Change of Ownership or Re-licensing scenarios. The boundaries of a Restricted Area depend on the relevant market and competitive circumstances at the time the Franchise Agreement is signed, varying in size and shape from hotel to hotel, and are not delineated by any standard formula, but may be defined by cities, roads, or a specified distance from the hotel.
The 'Restricted Area Provision' generally restricts Embassy Suites By Hilton and its affiliates from operating or authorizing others to operate another 'Brand' hotel within the 'Restricted Area' during the 'Restrictive Period.' The term 'Brand' refers to hotels operated under the same Chain Code and Standards, excluding other brands or product lines containing "Embassy" in the name, as well as other Hilton brands like "Hilton Garden Inn" or "DoubleTree by Hilton." However, the Restricted Area Provision does not apply to hotels already open, under construction, or approved for development as of the Effective Date, hotels under brands other than the Brand, hotels that will not operate under the Brand until after the Restrictive Period, gaming-oriented hotels, shared ownership properties, or chains of four or more hotels acquired by Embassy Suites By Hilton or its affiliates.
Prospective Embassy Suites By Hilton franchisees should note that while a Restricted Area Provision offers some protection from direct competition from the same brand, it does not protect against existing hotels managed or licensed by Embassy Suites By Hilton or its affiliates, or any replacement hotels. Furthermore, the FDD explicitly states that territorial restrictions may be void or superseded by law in some states. The document also clarifies that franchisees may face competition from other franchisees, hotels owned by affiliates, or other competitive brands controlled by Embassy Suites By Hilton, and there is no mechanism for resolving conflicts that may arise. Therefore, franchisees should carefully consider the competitive landscape and the limitations of the Restricted Area Provision before investing in an Embassy Suites By Hilton franchise.