Can Sonesta Select Sonesta Essential transfer or assign the Franchise Agreement?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
12. TRANSFER.
- A. By Us. We have the right to transfer or assign this Agreement or any of our rights, obligations, or assets under this Agreement to any person or legal entity so long as the transferee assumes all our obligations to you under this Agreement.
- B. By You. You acknowledge and agree that the rights and duties this Agreement creates are personal to you (or to your owners if you are an Entity) and that we have granted you the Franchise in reliance upon our perceptions of your (or your owners') individual or collective character, skill, aptitude, attitude, business ability, and financial capacity. Accordingly, neither this Agreement (or any interest in this Agreement), your Hotel or substantially all its assets, any direct or indirect ownership interest in you (regardless of its size), nor any ownership interest in any of your owners (if such owners are legal entities) may be transferred without our prior written approval, which consent will not be unreasonably withheld or
delayed. You further agree that you will not enter into any proposed mortgage, pledge, hypothecation, encumbrance or giving of a security interest in or which affects your Hotel, this Agreement, or your rights under this Agreement without our prior written consent. A transfer of your Hotel ownership, possession, or control, or substantially all its assets, may be made only with a transfer of this Agreement. Any transfer, or attempt to transfer, without our approval is a breach of this Agreement and has no effect. In this Agreement, the term "transfer" includes a voluntary, involuntary, direct, or indirect assignment, sale, gift, or other disposition of any interest in:
- (1) this Agreement;
- (2) you;
- (3) your Hotel or substantially all its assets; or
- (4) your owners (if such owners are legal entities).
An assignment, sale, gift, or other disposition includes the following events:
Source: Item 22 — CONTRACTS (FDD page 84)
What This Means (2025 FDD)
According to Sonesta Select Sonesta Essential's 2025 Franchise Disclosure Document, Sonesta Select Sonesta Essential has the right to transfer or assign the Franchise Agreement or any of its rights, obligations, or assets under the agreement. The only condition is that the transferee assumes all of Sonesta Select Sonesta Essential's obligations to the franchisee under the agreement.
However, the franchisee's ability to transfer the agreement is restricted. The document states that the rights and duties created by the agreement are personal to the franchisee (or their owners if the franchisee is an entity). Sonesta Select Sonesta Essential grants the franchise based on their perception of the franchisee's individual or collective character, skill, aptitude, attitude, business ability, and financial capacity. Therefore, the franchisee cannot transfer the agreement (or any interest in it), the hotel, or any direct or indirect ownership interest without Sonesta Select Sonesta Essential's prior written approval. This approval will not be unreasonably withheld or delayed.
The franchisee also cannot enter into any proposed mortgage, pledge, encumbrance, or security interest affecting the hotel, the agreement, or the franchisee's rights under the agreement without Sonesta Select Sonesta Essential's prior written consent. A transfer of hotel ownership, possession, or control can only be made with a transfer of the agreement. Any transfer or attempt to transfer without approval is a breach of the agreement and has no effect.
If the franchisee is allowed to transfer the agreement, the transferee must meet several conditions. The transferee must sign Sonesta Select Sonesta Essential's current form of franchise agreement, demonstrate that they meet Sonesta Select Sonesta Essential's standards for a new franchisee, and pay a transfer fee equal to the initial fee. The franchisee and their owners must also sign a general release of any and all claims against Sonesta Select Sonesta Essential and its affiliates. Additionally, the transferee's obligations under promissory notes, agreements, or security interests must be subordinate to the transferee's obligation to pay royalties, brand promotion fees, and other amounts due to Sonesta Select Sonesta Essential.