How is the repayable amount of the Incentive from Sonesta Select Sonesta Essential reduced each year?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
For each year that your Hotel is open, the repayable amount is reduced by an equal annual percentage based on the term of the Franchise Agreement. For example, if the Franchise Agreement has a twenty-year term, the repayable amount is reduced by 1/20th of the original amount annually. If your franchise terminates before the expiration of the Franchise Agreement, you must pay us the then-current repayable amount of the Incentive. If you transfer your Hotel you also must pay us the then-current repayable amount of the Incentive. An Incentive bears no interest. However, if an Incentive becomes
Source: Item 10 — FINANCING (FDD pages 51–52)
What This Means (2025 FDD)
According to Sonesta Select Sonesta Essential's 2025 Franchise Disclosure Document, the repayable amount of the incentive is reduced annually based on the term of the Franchise Agreement. For each year that the hotel is open, the repayable amount decreases by an equal annual percentage.
For instance, if the Franchise Agreement has a twenty-year term, the repayable amount is reduced by 1/20th (5%) of the original amount each year. This means that after one year, 95% of the original incentive amount would still be repayable, after two years 90% would be repayable, and so on.
However, if the franchise terminates before the Franchise Agreement expires, the franchisee must pay Sonesta Select Sonesta Essential the then-current repayable amount of the incentive. Similarly, if the franchisee transfers their hotel, they must also pay the then-current repayable amount of the incentive. The incentive does not accrue any interest.