What is excluded from the definition of 'Gross Rooms Revenue' for a Sonesta Select Sonesta Essential hotel?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
D. Definition of "Gross Rooms Revenue." As used in this Agreement, the term "Gross Rooms Revenue" means all revenue attributable to or payable for rental of Guest Rooms at your Hotel, whether from cash, check, credit and debit card, barter exchange, trade credit, or other credit transactions, whether or not collected, including guaranteed no-show revenue, revenue calculated on reservations cancelled outside of your Hotel's cancellation policy or outside of the reservation channel in which it was made, any proceeds actually received from any business interruption or similar insurance applicable to the loss of revenue due to the non-availability of Guest Rooms, and any miscellaneous fees charged to all guests regardless of the accounting treatment of such fees, net of chargebacks from credit card issuers.
Excluded from Gross Rooms Revenue are separate charges to guests for food and beverage (including room service); vending machine receipts; actual telephone charges for calls made from a guest room; key forfeitures and entertainment (including Internet fees and commissions); allowances for any Guest Room rebates and overcharges; gratuities to employees or service charges levied in lieu of such gratuities, which are payable to employees; and applicable federal, state and local sales, occupancy and use taxes collected from guests.
Source: Item 22 — CONTRACTS (FDD page 84)
What This Means (2025 FDD)
According to Sonesta Select Sonesta Essential's 2025 Franchise Disclosure Document, the definition of Gross Rooms Revenue excludes several specific charges and fees. Understanding these exclusions is important because the royalty fee, which is 5% of Gross Rooms Revenue, is calculated based on this definition.
Specifically, the following are excluded from Gross Rooms Revenue: separate charges to guests for food and beverage (including room service), vending machine receipts, actual telephone charges for calls made from a guest room, key forfeitures and entertainment (including Internet fees and commissions), allowances for any Guest Room rebates and overcharges, gratuities to employees or service charges levied in lieu of such gratuities which are payable to employees, and applicable federal, state and local sales, occupancy and use taxes collected from guests.
For a prospective Sonesta Select Sonesta Essential franchisee, this means that while revenue from room rentals is the primary driver for royalty calculations, other revenue streams generated at the hotel are not subject to the 5% royalty fee. This can impact the overall profitability of the franchise, as these excluded revenues can contribute to the franchisee's income without increasing royalty payments. Franchisees should carefully track these exclusions to accurately calculate and report Gross Rooms Revenue and ensure compliance with the franchise agreement.