What happens if the agreement for a Sonesta Select Sonesta Essential hotel is terminated for any reason?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Termination of Existing Franchise Agreement.
Franchisee Parties agree that the Existing Franchise Agreement is terminated as of the Closing Date and shall thereafter be of no further force or effect except as provided in this Agreement.
Notwithstanding the foregoing, Assignor Parties acknowledge that (a) the termination does not affect any obligations under the Existing Franchise Agreement that arose or accrued prior to the Closing Date, and (b) the termination does not affect or release Assignor Parties from, and Assignor Parties hereby agree to comply with, any obligations under the Existing Franchise Agreement that, either expressly or by their nature are intended to survive termination of the Existing Franchise Agreement, including, for example, the post-termination obligations (except those obligations pertaining to the de-imaging of the Hotel) and indemnification obligations with respect to claims arising from or based on events which occurred prior to termination.
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- New Franchise Agreement.
Assignee shall, concurrently with the execution of this Agreement, execute our current form of franchise agreement and related agreements (to reflect that the agreement is executed in connection with a transfer of the rights under the Existing Franchise Agreement) (the "New Franchise Agreement"), and Assignee Owner[s] shall execute the Guaranty and Assumption of Obligations attached thereto.
The New Franchise Agreement will govern Assignee's ownership and operation of the Hotel from and after the Closing Date.
If the Transfer is not consummated on or prior to the Outside Date, and we terminate this Agreement and withdraw our consent to the Transfer, then Assignee acknowledges and agrees that the New Franchise Agreement becomes null and void.
Source: Item 23 — RECEIPTS (FDD pages 84–261)
What This Means (2025 FDD)
The 2025 Franchise Disclosure Document for Sonesta Select Sonesta Essential hotels provides information regarding termination in the context of a transfer of an existing franchise agreement. Specifically, if an existing franchise agreement is terminated as part of a transfer to a new franchisee, the original franchisee remains responsible for obligations that arose before the termination date. These obligations include post-termination duties (excluding de-imaging the hotel) and indemnification obligations related to events prior to termination. This means that even after the agreement is terminated, the franchisee may still be liable for certain responsibilities.
In the event of a transfer, Sonesta Select Sonesta Essential requires the new franchisee (Assignee) to execute the current form of the franchise agreement. If the transfer is not completed by the agreed-upon date, and Sonesta Select Sonesta Essential terminates the transfer agreement, the new franchise agreement becomes void. This protects Sonesta Select Sonesta Essential by ensuring that a new franchise agreement only takes effect if the transfer actually occurs.
Additionally, the FDD includes lists of franchised Sonesta Essential-brand and Sonesta Select-brand hotels that were terminated, canceled, not renewed, or otherwise ceased to do business under the franchise agreement during fiscal year 2024. It also lists franchisees who have not communicated with the franchisor in the 10 weeks prior to the issuance date of the disclosure document. This information is included as Exhibit K-2, providing transparency regarding franchise terminations and non-communication within the Sonesta Select Sonesta Essential system. However, the document does not detail the specific procedures or financial implications for the franchisee upon termination outside of a transfer scenario.