Does Sonesta Select Sonesta Essential require a security interest under the Incentive Note?

According to the 2025 FDD, Sonesta Select Sonesta Essential does not require a security interest under the Incentive Note. However, each direct and indirect owner with at least a 20% ownership interest must sign a Guaranty and Assumption of Obligations, which is attached as Exhibit C to the Franchise Agreement. This document ensures they personally guarantee the franchisee's obligations under the Incentive Note. This means that while Sonesta Select Sonesta Essential forgoes a security interest, they still require a personal guarantee from significant owners to ensure financial responsibility.

This arrangement provides Sonesta Select Sonesta Essential with a degree of financial security without encumbering the franchisee's assets through a security interest. The personal guarantee from owners with a substantial stake in the franchise aligns their interests with the success and financial health of the business. It also means that these individuals are personally liable for the debts of the franchise.

For a prospective franchisee, this means that if you or your owners hold a 20% or greater interest in the franchise, you will be required to sign a personal guarantee. This is a fairly standard practice in franchising, as it gives the franchisor additional assurance that the franchisee will meet their financial obligations. Franchisees should carefully review Exhibit C, the Guaranty and Assumption of Obligations, to fully understand the extent of their personal liability.