What conditions must be met for a Sonesta Simply Suites franchisee to receive the Incentive disbursement?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
To receive an Incentive, you and your principals must sign a development incentive promissory note in the form attached as Exhibit E (the "Incentive Note"), when you sign the Franchise Agreement. An Incentive does not have to be repaid unless the Franchise Agreement is terminated before its expiration date, or a transfer occurs as described below. 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. 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 twentyyear 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 thencurrent 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 repayable and payment is not made in full when due, the outstanding amount is subject to interest at 18% per annum or the highest rate allowed by law, and we may collect court costs and attorneys' fees incurred to collect the repayable amount of the Incentive.
Source: Item 10 — FINANCING (FDD pages 47–48)
What This Means (2025 FDD)
According to the 2025 Sonesta Simply Suites Franchise Disclosure Document, the disbursement of an incentive is contingent upon several conditions. First, the franchisee and their principals must sign a development incentive promissory note, using the form attached as Exhibit E, when they sign the Franchise Agreement. The incentive will be disbursed within 45 days after the hotel opens as a Sonesta Simply Suites branded hotel, provided that Sonesta Simply Suites approves the opening.
Additionally, to receive the incentive, the franchisee must have completed any Property Improvement Plan (PIP) requirements. There must 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 as a Sonesta Simply Suites branded hotel. Finally, the franchisee's and any guarantor's financial condition must be satisfactory to Sonesta Simply Suites at the time of disbursement.
It's important to note that the incentive does not have to be repaid unless the Franchise Agreement is terminated before its expiration date, or a transfer occurs. The repayable amount is reduced annually based on the term of the Franchise Agreement. For instance, with a twenty-year term, the repayable amount decreases by 1/20th each year. If the franchise terminates early or the hotel is transferred, the franchisee must pay the then-current repayable amount. This incentive is non-interest bearing unless it becomes repayable and is not paid when due, in which case it is subject to an 18% annual interest rate or the highest rate allowed by law, along with potential court costs and attorneys' fees for collection.