For Sonesta Simply Suites, are franchisees of a competitive hotel brand considered a 'Competitive Business'?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
(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.
Source: Item 22 — CONTRACTS (FDD pages 79–80)
What This Means (2025 FDD)
According to Sonesta Simply Suites' 2025 Franchise Disclosure Document, a franchisee of a competitive hotel brand is generally not considered a 'Competitive Business.' The FDD defines 'Competitive Business' as an entity that owns a competing hotel brand, grants franchises for a competing brand, or provides services to such entities. However, it specifically excludes entities with an interest merely as a franchisee of a competitive hotel brand.
This exclusion means that a Sonesta Simply Suites franchisee is not automatically in violation of the non-compete covenants if they also own a franchise of another hotel brand. This is a significant benefit, as it allows franchisees to diversify their business interests without necessarily conflicting with their obligations to Sonesta Simply Suites.
However, it's important to note that this exception applies only if the entity's interest is merely as a franchisee. If the franchisee has a more significant role, such as owning part of the competing brand itself or providing services to it, they could be considered a 'Competitive Business' and thus be in violation of the franchise agreement. Furthermore, this exception does not apply to owners, their immediate family members, or other personnel specified by Sonesta Simply Suites.