When are the contingency costs due for a Sonesta Select Sonesta Essential hotel?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
SELECT (Note 1) – 125 ROOMS**
| Type Of Expenditure | Amount Conversion | New Construction | Method of Payment | When Due | To Whom Payment Is To Be Made |
|---|---|---|---|---|---|
| Initial Fee (Note 2) | $65,000 | $65,000 | Lump sum | Upon your signing of the Franchise Agreement | Us |
| O |
Source: Item 7 — ESTIMATED INITIAL INVESTMENT SONESTA SELECT (Note 1) – 125 ROOMS (FDD pages 36–46)
What This Means (2025 FDD)
According to Sonesta Select Sonesta Essential's 2025 Franchise Disclosure Document, contingency costs for both conversions and new construction are due as arranged with contractors and suppliers. These costs, which cover unanticipated construction overruns and other unexpected expenses, range from $45,000 to $100,000 for conversions and $360,000 to $504,000 for new construction.
Since the payment schedule is "as arranged," franchisees will need to negotiate the payment terms directly with their contractors and suppliers. This means the timing of payments can vary significantly depending on the specific agreements made. Franchisees should carefully review and understand the payment schedules outlined in their construction contracts to manage their cash flow effectively.
Given the substantial amounts involved, especially for new construction, it is crucial for prospective Sonesta Select Sonesta Essential franchisees to budget conservatively and maintain open communication with their contractors. This will help in anticipating potential cost overruns and ensuring timely payments to avoid delays in the construction or conversion process. Proper financial planning and diligent oversight of construction expenses are essential for a successful hotel launch.