What is the definition of a Competitive Business in relation to pledging assets of a Sonesta Simply Suites hotel?

According to Sonesta Simply Suites's 2025 Franchise Disclosure Document, a franchisee does not need to notify Sonesta Simply Suites to obtain approval if they want to pledge or mortgage the assets of their hotel to a third-party bank or other commercial lending institution that is not a Competitive Business. However, the franchisee does need to notify Sonesta Simply Suites and obtain their consent if they want to pledge or mortgage their interest in the Franchise Agreement or any Equity Interest.

The term "Competitive Business" is defined as any entity that (i) owns in whole or in part, whether directly or indirectly, a hotel brand or trade name (whether or not licensed) that, in Sonesta Simply Suites's judgment, competes with the Brand Hotels or Network Hotels, irrespective of the number of hotels comprising the competitive hotel brand, (ii) grants franchises or licenses for the operation of any competitive hotel brand, or (iii) provides services to any entity that falls under subsection (i) or (ii).

However, an entity will not be considered a Competitive Business if such entity has an interest merely as (a) a franchisee of a competitive hotel brand; (b) a management company operating hotels on behalf of multiple brands; or (c) a passive investor that has no control over business decisions of such brand. This definition is important because it dictates when a Sonesta Simply Suites franchisee needs to seek approval from the franchisor for pledging hotel assets. It aims to prevent franchisees from forming financial relationships with competing hotel brands without the franchisor's knowledge and consent.