Does the definition of 'transfer' in the Sonesta Simply Suites agreement include involuntary assignments?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
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:
- (a) transfer of ownership of capital stock, a partnership or membership interest, or another form of ownership interest, including by way of a public offering or pursuant to a private placement;
- (b) merger or consolidation or issuance of additional securities or other forms of ownership interest;
- (c) any sale of a security convertible to an ownership interest;
- (d) transfer of an interest in you, this Agreement, your Hotel or substantially all its assets, or your owners in a divorce, insolvency, or entity dissolution proceeding or otherwise by operation of law;
- (e) if you, one of your owners, or an owner of one of your owners dies, a transfer of an interest in you, this Agreement, your Hotel or substantially all its assets, or your owner by will, declaration of or transfer in trust, or under the laws of intestate succession; and
- (f) pledge of this Agreement (to someone other than us) or of an ownership interest in you or your owners as security, foreclosure upon your Hotel, or your transfer, surrender, or loss of the possession, control, or management of your Hotel.
Source: Item 22 — CONTRACTS (FDD pages 79–80)
What This Means (2025 FDD)
According to Sonesta Simply Suites' 2025 Franchise Disclosure Document, the term "transfer" within the franchise agreement encompasses both voluntary and involuntary assignments. This definition is broad, covering any direct or indirect assignment, sale, gift, or other disposition of interest in the agreement, the franchisee, the hotel, or the franchisee's owners.
Specifically, the definition includes events such as the transfer of ownership interests (e.g., capital stock, partnership, or membership interest), mergers or consolidations, sales of convertible securities, and transfers occurring due to divorce, insolvency, entity dissolution, or by operation of law. It also extends to transfers resulting from death, including those by will, trust, or intestate succession. Furthermore, pledging the agreement or ownership interests as security, foreclosure on the hotel, or loss of possession, control, or management of the hotel are considered transfers.
This comprehensive definition means that a Sonesta Simply Suites franchisee needs to obtain prior written approval from Sonesta Simply Suites for virtually any change in ownership or control of the franchise, the hotel, or the business entities that own the franchise. Failure to obtain this approval constitutes a breach of the agreement and renders the transfer ineffective. This requirement allows Sonesta Simply Suites to maintain control over who operates its franchises and ensures that any new operators meet its standards.
For a prospective franchisee, this strict transfer policy highlights the importance of carefully considering the long-term implications of the franchise agreement. It is crucial to understand the conditions under which a transfer may occur and the process for obtaining franchisor approval. Franchisees should also be aware of the potential consequences of unauthorized transfers, which could include termination of the franchise agreement.