What does Sonesta Simply Suites define as an 'Entity' in the agreement?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
References to "owner" mean any person holding a direct or indirect ownership interest (whether of record or beneficially) or voting rights in you (or a transferee of this Agreement and your Hotel or an ownership interest in you), including any person who has a direct or indirect interest in you (or a transferee), this Agreement, the Franchise, or your Hotel and any person who has any other legal or equitable interest, or the power to vest in himself or herself any legal or equitable interest, in their revenue, profits, rights, or assets. "Person" means any natural person, corporation, limited liability company, general or limited partnership, unincorporated association, cooperative, or other legal or functional entity.
Source: Item 22 — CONTRACTS (FDD pages 79–80)
What This Means (2025 FDD)
According to Sonesta Simply Suites' 2025 Franchise Disclosure Document, an "Entity" is defined broadly within the franchise agreement. The agreement specifies that if the franchisee is an Entity, Exhibit A must accurately describe all owners and their interests as of the effective date. Furthermore, any direct or indirect owner with a 20% or more ownership interest must execute a personal guaranty, binding them to the agreement's provisions.
For Sonesta Simply Suites, if the franchisee is an Entity, one owner must be identified as the Principal on Exhibit A. This Principal must be a natural person with at least 25% ownership and voting power, possessing the authority of a chief executive officer. The Principal and the Management Company, if applicable, are authorized to deal with Sonesta Simply Suites on behalf of the franchisee, and Sonesta Simply Suites can rely solely on their decisions.
The definition of "Person" includes various legal structures such as natural persons, corporations, limited liability companies, partnerships, unincorporated associations, cooperatives, or other legal or functional entities. This broad definition ensures that the obligations and liabilities to Sonesta Simply Suites will be joint and several if the franchise and hotel are owned by two or more persons, whether as partners or joint venturers. This comprehensive approach allows Sonesta Simply Suites to have clear lines of communication and responsibility, regardless of the franchisee's organizational structure.
Prospective franchisees should carefully review Exhibit A and Exhibit C to understand the full implications of these requirements, especially concerning personal guarantees and the designation of a Principal. Understanding these definitions and obligations is crucial for ensuring compliance and managing the franchise effectively.