When is the Incentive from Sonesta Select Sonesta Essential typically disbursed to the franchisee?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
The Incentive will be disbursed to you, unless otherwise agreed to by you and us, within 45 days after your Hotel opens as a Brand Hotel with our approval, as long as you have completed any PIP, there have been no material adverse changes to your Hotel since approval (for example, a decrease in the number of Guest Rooms or a significant delay in opening as a Brand Hotel), and subject to your and any guarantor's financial condition being satisfactory to us.
Source: Item 10 — FINANCING (FDD pages 51–52)
What This Means (2025 FDD)
According to Sonesta Select Sonesta Essential's 2025 Franchise Disclosure Document, if Sonesta Select Sonesta Essential grants an incentive to a new franchisee, the disbursement typically occurs within 45 days after the hotel opens as a brand hotel with their approval.
However, this disbursement is contingent upon several conditions. The franchisee must have completed any required Property Improvement Plan (PIP), and there should be no material adverse changes to the hotel since approval, such as a decrease in the number of guest rooms or a significant delay in opening. Additionally, the franchisee's and any guarantor's financial condition must be satisfactory to Sonesta Select Sonesta Essential at the time of disbursement.
It's important to note that the incentive is provided in the form of a development incentive promissory note, which the franchisee must sign when they sign the Franchise Agreement. The incentive does not accrue interest and does not have to be repaid unless the Franchise Agreement is terminated before its expiration date or a transfer occurs. The repayable amount of the incentive decreases annually over the term of the Franchise Agreement. For example, with a twenty-year term, the repayable amount is reduced by 1/20th annually.