Does the definition of 'transfer' for Sonesta Select Sonesta Essential include involuntary assignments?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
In this Agreement, the term "transfer" includes a voluntary, involuntary, direct, or indirect assignment, sale, gift, or other disposition of any interest in:
- (1) this Agreement;
- (2) you;
- (3) your Hotel or substantially all its assets; or
- (4) your owners (if such owners are legal entities).
An assignment, sale, gift, or other disposition includes the following events:
- (a) transfer of ownership of capital stock, a partnership or membership interest, or another form of ownership interest, including by way of a public offering or pursuant to a private placement;
- (b) merger or consolidation or issuance of additional securities or other forms of ownership interest;
- (c) any sale of a security convertible to an ownership interest;
- (d) transfer of an interest in you, this Agreement, your Hotel or substantially all its assets, or your owners in a divorce, insolvency, or entity dissolution proceeding or otherwise by operation of law;
- (e) if you, one of your owners, or an owner of one of your owners dies, a transfer of an interest in you, this Agreement, your Hotel or substantially all its assets, or your owner by will, declaration of or transfer in trust, or under the laws of intestate succession; and
- (f) pledge of this Agreement (to someone other than us) or of an ownership interest in you or your owners as security, foreclosure upon your Hotel, or your transfer, surrender, or loss of the possession, control, or management of your Hotel.
Source: Item 22 — CONTRACTS (FDD page 84)
What This Means (2025 FDD)
According to the 2025 Franchise Disclosure Document, Sonesta Select Sonesta Essential's definition of "transfer" includes involuntary assignments. The agreement specifies that the term "transfer" encompasses both voluntary and involuntary assignments, sales, gifts, or other dispositions of interest. This broad definition applies to interests in the franchise agreement itself, the franchisee, the hotel or its assets, and the franchisee's owners if they are legal entities.
This definition is further clarified by listing specific events that constitute an assignment, sale, gift, or other disposition. These events include transfers of ownership interests through public offerings, private placements, mergers, consolidations, or the issuance of additional securities. Critically, the definition explicitly includes transfers of interest resulting from divorce, insolvency, entity dissolution proceedings, or other legal operations.
For a prospective Sonesta Select Sonesta Essential franchisee, this means that any change in ownership or control, whether voluntary or forced by circumstances like divorce or bankruptcy, is considered a transfer under the franchise agreement. Such transfers require the franchisor's prior written approval, which, according to the agreement, will not be unreasonably withheld or delayed. This provision protects Sonesta Select Sonesta Essential's interests by ensuring they have a say in who operates a franchised location, even in unforeseen circumstances.
This clause is fairly standard in franchising, as franchisors typically want to maintain control over who is operating under their brand. However, franchisees should be aware of the implications, especially in situations where ownership might change due to personal circumstances or business challenges. Franchisees should carefully consider these transfer restrictions and discuss any concerns with Sonesta Select Sonesta Essential before signing the franchise agreement.