Does the Sonesta Select Sonesta Essential franchise agreement grant exclusive rights to the franchisee?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
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acknowledged by each party, and in accordance with all terms, conditions, covenants, agreements, representations, and warranties contained in this Agreement, you and we agree as follows:
1. GRANT OF FRANCHISE; NO EXCLUSIVITY; RESERVATION OF RIGHTS.
A. Grant of Franchise. Subject to this Agreement's terms, we grant you a limited and nonexclusive franchise (the "Franchise") to establish and operate your Hotel under the Franchise System at the Premises, and to use the Franchise System and the Brand Standards (as defined in Section 2.A) for the applicable Designated Brand Concept in its operation, for a term beginning on the Opening Date (as defined in Section 2.E) and expiring 20 years from the Opening Date, unless sooner terminated under Section 14 of this Agreement (the "Term").
You agree to, at all times, faithfully, honestly, and diligently perform your obligations under this Agreement and to use your best efforts to promote your Hotel. You agree to use the Premises only for your Hotel, and, once it opens for business, to continuously operate your Hotel in accordance with this Agreement for the duration of the Term. You agree not to conduct the business of your Hotel at any location other than the Premises.
Source: Item 22 — CONTRACTS (FDD page 84)
What This Means (2025 FDD)
According to Sonesta Select Sonesta Essential's 2025 Franchise Disclosure Document, the franchise agreement does not grant exclusive rights or territorial protection to the franchisee. The agreement explicitly states that the franchise is limited and nonexclusive. Sonesta Select Sonesta Essential retains the right to engage in any activities they deem appropriate, including those that may compete with the franchisee's hotel. This includes the right to operate or franchise other hotels under the same or different brands, without any territorial restrictions.
This lack of exclusivity means that a Sonesta Select Sonesta Essential franchisee could potentially face competition from other Sonesta Select Sonesta Essential hotels or other brands owned or franchised by Sonesta Select Sonesta Essential in the same geographic area. This could impact the franchisee's market share and profitability.
Prospective franchisees should carefully consider the implications of this non-exclusivity and conduct thorough market research to assess the potential for competition in their desired location. It is important to understand that Sonesta Select Sonesta Essential can establish other franchised or company-owned locations at any time, which could directly compete with the franchisee's business.