What happens if the Sonesta Simply Suites Agreement is terminated for any reason regarding the Note?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
fter it becomes due, the outstanding principal balance shall bear simple interest at a rate equal to the lesser of eighteen (18%) percent per annum or the highest rate allowed by applicable law. All payments owed under this Note shall be payable in US$ by ACH to the account designated by Holder, or by such other payment method as Holder may designate in writing.
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- Acceleration. This Note shall be accelerated on the occurrence of any of the following events (each, an "Acceleration Event"): (i) any representation or warranty made in connection with this Note, your application, the Agreement, or in any report or other information later submitted to the Holder that is, in the Holder's opinion, false, misleading or incorrect in any material respect; (ii) termination of the Agreement for any reason; (iii) any breach of the Agreement or this Note, whether Maker is notified of or cures such breach; (iv) transfer of any interest in the Agreement whereby the transferee does not assume Maker's obligation under this Note in a form acceptable to Holder upon transfer; (v) Maker loses ownership or possession of the Premises, or otherwise loses the right to conduct the franchised business at the Hotel; (vi) any ownership interest of the Maker is transferred or conveyed, whether directly or indirectly, or an owner of the Maker enters into an agreement or understanding for such a transfer or conveyance; (vii) if any proceedings for the appointment of a receiver or other custodian or seeking marshaling or composition of or for Maker's business or assets is filed in any court, or otherwise commenced in accordance with applicable law, and is not dismissed within forty-five (45) days; or (viii) any of the events described in this Section 3 occur with respect to any affiliate of the Maker that is a party to an agreement with the Holder. Should an Acceleration Event occur, the unamortized Principal shall become immediately due and payable without further notice and, if applicable, Maker will have no obligation to make any additional Disbursement. Maker may prepay this Note at any time without penalty.
Source: Item 23 — RECEIPTS (FDD pages 80–246)
What This Means (2025 FDD)
According to the 2025 Sonesta Simply Suites FDD, the termination of the Franchise Agreement for any reason constitutes an 'Acceleration Event' concerning the Note. If such an event occurs, the unamortized principal amount becomes immediately due and payable without any further notice.
This means that if the franchise agreement is terminated, Sonesta Simply Suites has the right to demand immediate payment of the outstanding balance on any promissory note or loan agreement the franchisee has with them. This could place a significant financial burden on the franchisee, especially if the termination occurs unexpectedly. The franchisee will no longer receive any additional disbursements, which could impact their ability to operate the business.
Furthermore, if the accelerated Note is not paid within ten days of becoming due, the outstanding principal balance will accrue simple interest at a rate of either 18% per annum or the highest rate allowed by applicable law, whichever is lower. This could substantially increase the amount owed and create additional financial strain. It is important for prospective franchisees to fully understand the conditions under which the Agreement can be terminated and the implications for the Note.