For a Sonesta Simply Suites franchise, what is the definition of a 'Competitive Business' regarding providing services?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
A. Covenants Against Competition.
(1) You agree that, during the Term, neither you, any of your owners, nor any of your or your owners' immediate family members will, without our prior written consent:
b. perform services as a director, officer, manager, employee, consultant, representative, lessor, or agent for a Competitive Business, wherever located or operating; or
(2) The term "Competitive Business" means 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 our 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).
Notwithstanding the foregoing, no entity will 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.
You agree to obtain similar covenants from the personnel we specify, including officers, directors, managers, and other employees attending our training program or having access to Confidential Information.
Source: Item 22 — CONTRACTS (FDD pages 79–80)
What This Means (2025 FDD)
According to Sonesta Simply Suites' 2025 Franchise Disclosure Document, a 'Competitive Business' is defined in terms of providing services. During the term of the franchise agreement, franchisees, their owners, and their immediate family members are restricted from performing services for a Competitive Business without prior written consent from Sonesta Simply Suites. Specifically, they cannot act as a director, officer, manager, employee, consultant, representative, lessor, or agent for any such business.
The term 'Competitive Business' includes any entity that owns a hotel brand or trade name that Sonesta Simply Suites considers competitive, grants franchises or licenses for competitive hotel brands, or provides services to entities involved in competitive hotel brands. This definition is broad and hinges on Sonesta Simply Suites' judgment of what constitutes a competitive brand, irrespective of the number of hotels in that brand.
However, there are exceptions. An entity is not considered a Competitive Business if it acts merely as a franchisee of a competitive hotel brand, a management company operating hotels for multiple brands, or a passive investor without control over the brand's business decisions. This allows for some level of involvement in the hotel industry without violating the non-compete agreement. Sonesta Simply Suites also requires franchisees to obtain similar non-compete covenants from specified personnel, such as officers, directors, managers, and employees who attend training or have access to confidential information, ensuring a consistent standard of non-competition within the franchise system.