What kind of taxes is a Sonesta Select Sonesta Essential franchisee responsible for, and when are they due?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
| TYPE OF FEE | AMOUNT | DUE DATE | REMARKS (Note 1) |
|---|---|---|---|
| Non Compliance Fee | 1% of Gross Rooms Revenue per month of non-compliance | Upon demand | If we deliver you notice of your breach under the Franchise Agreement, you may be assessed a non-compliance fee until such default has been remediated or cured. |
| Late Payment Charge | Lesser of 1.5% per month or the maximum rate permitted by applicable law | Upon demand | You may be assessed a late payment charge if you do not make any payment when due. Our acceptance of your payment of any deficiency will not waive our right to terminate the Franchise Agreement under its terms. |
| Reactivation Fee | The lesser of 25% of past due balances or $2,000 | Prior to reactivation | If we have suspended your Hotel from the Reservation System because of a default under your Franchise Agreement, and you have cured the default, we may require you to pay this fee as a condition of reactivation. |
| Insurance | $500 per month, plus reimbursement for all premiums, costs, and expenses we incur | As billed | If you do not procure or maintain the required insurance or policy limits described in the Brand Manual, in addition to paying us a monthly fee, we may (but are not obligated to) procure and maintain insurance for you without first giving you notice, and you will be required to reimburse us. The monthly fee is subject to change. See Item 8 and Note 9. |
| Taxes | Varies | Upon demand | If any sales, use, gross receipts, or similar tax is imposed on us for the receipt of any payments you are required to make to us under the Franchise Agreement, then you also must pay this tax to us. |
Source: Item 6 — OTHER FEES (FDD pages 24–36)
What This Means (2025 FDD)
According to Sonesta Select Sonesta Essential's 2025 Franchise Disclosure Document, franchisees are responsible for paying sales, use, gross receipts, or similar taxes. These taxes are due upon demand if they are imposed on Sonesta Select Sonesta Essential for the receipt of any payments that the franchisee is required to make under the Franchise Agreement. This means that in addition to the fees outlined in the agreement, a franchisee must also cover any applicable taxes on those fees.
This condition is fairly standard in franchising, as tax obligations can vary significantly based on location and specific services provided. The 'upon demand' payment schedule means Sonesta Select Sonesta Essential will notify the franchisee when these taxes are due, giving the franchisee less control over the timing of these payments.
Prospective franchisees should factor in potential tax liabilities when assessing the overall cost of investment. It would be prudent to consult with a financial advisor to understand the specific tax implications in their area and to budget accordingly. Understanding these tax obligations is crucial for maintaining accurate financial projections and ensuring compliance with local tax laws.