What conditions must be met for Sonesta Select Sonesta Essential to disburse the Incentive?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
solution | Section 17.F | Item 17 |
FINANCING
We may, in our sole discretion, offer incentives for hotels that are new to the Sonesta brand. An "Incentive" is a financial contribution that we make to assist with the development or conversion of your Hotel and will be in an amount that we determine. If an Incentive is granted to you, the amount of the Incentive typically shall comprise, at our discretion, between $4,000 and $7,000 per Guest Room of your Hotel if you operate a Sonesta Select-branded hotel, or between $3,000 and $8,000 per Guest Room of your Hotel if you operate a Sonesta Essential-branded hotel. To receive an Incentive, you and your principals must sign a development incentive promissory note in the form attached as Exhibit F (the "Incentive Note"), when you sign the Franchise Agreement. An Incentive does not have to be repaid unless the Franchise Agreement is terminated before its expiration date or a transfer occurs as described below. The Incentive will be disbursed to you, unless otherwise agreed to by you and us, within 45 days after your Hotel opens as a Brand Hotel with our approval, as long as you have completed any PIP, there have been no material adverse changes to your Hotel since approval (for example, a decrease in the number of Guest Rooms or a significant delay in opening as a Brand Hotel), and subject to your and any guarantor's financial condition being satisfactory to us. For each year that your Hotel is open, the repayable amount is reduced by an equal annual percentage based on the term of the Franchise Agreement. For example, if the Franchise Agreement has a twenty-year term, the repayable amount is reduced by 1/20th of the original amount annually. If your franchise terminates before the expiration of the Franchise Agreement, you must pay us the then-current repayable amount of the Incentive. If you transfer your Hotel you also must pay us the then-current repayable amount o
Source: Item 10 — FINANCING (FDD pages 51–52)
What This Means (2025 FDD)
According to the 2025 FDD, Sonesta Select Sonesta Essential may offer incentives for hotels new to their brand, which are financial contributions to assist with development or conversion. The amount of the incentive is determined by Sonesta Select Sonesta Essential. For a Sonesta Select-branded hotel, the incentive typically ranges from $4,000 to $7,000 per guest room. For a Sonesta Essential-branded hotel, it ranges from $3,000 to $8,000 per guest room.
To receive the incentive, the franchisee and their principals must sign a development incentive promissory note, referred to as the "Incentive Note," when signing the Franchise Agreement. The incentive does not have to be repaid unless the Franchise Agreement is terminated before its expiration date or a transfer occurs.
The incentive will be disbursed to the franchisee within 45 days after the hotel opens as a Brand Hotel with Sonesta Select Sonesta Essential's approval. This disbursement is contingent upon the completion of any Property Improvement Plan (PIP), the absence of material adverse changes to the hotel since approval (such as a decrease in guest rooms or a significant delay in opening), and the satisfactory financial condition of the franchisee and any guarantor. The incentive bears no interest.