Is notification required to pledge Sonesta Simply Suites hotel assets to a third-party bank?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding any other provision of this Agreement, you do not need to notify us to obtain our approval if you want to pledge or mortgage the assets of your Hotel to a third-party bank or other commercial lending institution that is not a Competitive Business.
However, you do need to notify us and obtain our consent if you want to pledge or mortgage your interest in this Agreement or any Equity Interest.
Source: Item 22 — CONTRACTS (FDD pages 79–80)
What This Means (2025 FDD)
According to Sonesta Simply Suites' 2025 Franchise Disclosure Document, a franchisee is not required to notify Sonesta Simply Suites or obtain their approval to pledge or mortgage the hotel's assets to a third-party bank or commercial lending institution, provided that the institution is not a Competitive Business. This offers franchisees flexibility in securing financing for their Sonesta Simply Suites hotel.
However, the franchisee is required to notify Sonesta Simply Suites and obtain their consent if they intend to pledge or mortgage their interest in the Franchise Agreement itself or any equity interest. This distinction is important because the franchisor wants to maintain control over who is involved in the franchise system and ensure that any changes in ownership or control are approved by them.
This policy is fairly standard in franchising, as franchisors typically want to be informed about changes in ownership or financial arrangements that could impact the operation of the franchise. The exception for pledging hotel assets to a non-competitive lending institution provides franchisees with a degree of autonomy in managing their finances while still protecting the franchisor's interests in the franchise agreement and equity ownership.