Can a Sonesta Simply Suites franchisee perform services as an employee for a Competitive Business?
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:
a. have any direct or indirect interest as an owner whether of record or beneficially in a Competitive Business (defined below), wherever located or operating (except that equity ownership of less than five percent (5%) of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange will not be deemed to violate this subparagraph);
b. perform services as a director, officer, manager, employee, consultant, representative, lessor, or agent for a Competitive Business, wherever located or operating; or
c. directly or indirectly, appropriate, use or duplicate the Franchise System or Brand Standards, or any portion thereof, for use in any other business or endeavor.
(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.
We have the right to regulate the form of agreement that you use and to be a third-party beneficiary of that agreement with independent enforcement rights.
Source: Item 22 — CONTRACTS (FDD pages 79–80)
What This Means (2025 FDD)
According to Sonesta Simply Suites's 2025 Franchise Disclosure Document, franchisees are restricted from engaging in certain competitive activities during the term of their franchise agreement. Specifically, a franchisee, their owners, and their immediate family members are prohibited from performing services as a director, officer, manager, employee, consultant, representative, lessor, or agent for a Competitive Business without prior written consent from Sonesta Simply Suites. This restriction applies regardless of where the Competitive Business is located or operating.
The term "Competitive Business" is defined broadly to include any entity that owns a competing hotel brand or trade name, grants franchises or licenses for a competitive hotel brand, or provides services to such entities. However, an entity is not considered a Competitive Business if it merely acts as a franchisee of a competitive hotel brand, a management company operating hotels for multiple brands, or a passive investor without control over business decisions.
This non-compete clause has significant implications for prospective Sonesta Simply Suites franchisees. It restricts their ability to be involved in any competing hotel business during the term of the franchise agreement, which could limit their income opportunities or career options. Franchisees must also ensure that their owners and immediate family members comply with these restrictions. Furthermore, Sonesta Simply Suites 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. This ensures that key personnel are also bound by the non-compete obligations, protecting Sonesta Simply Suites's interests and confidential information.