What is Sonesta Simply Suites' stated ability to obtain additional funds if needed?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
investing or financing activity in our consolidated statements of cash flows depending on the inflow or outflow activity in our consolidated statements of cash flows.
RLHC has distributed cash to Sonesta for working capital purposes and Sonesta has paid a number of vendors on behalf of RLH. The net impact of this activity for the year end December 31, 2024 and December 31, 2023 are $7.2 million and $8.8 million in payables between Sonesta and RLH, included in due to related parties in our consolidated balance sheets. As such and given our low capital expenditures, RLH has sufficient funds necessary to maintain its operations and continue to generate ca
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Sonesta Simply Suites's 2025 Franchise Disclosure Document, RLHC (Red Lion Hotels Corporation) possesses the capacity to seek additional funding from its parent company, Sonesta International Hotels Corporation, should the need arise. This is relevant because RLHC has historically received cash infusions from Sonesta for working capital, and Sonesta has directly paid certain vendors on behalf of RLHC. The net impact of these transactions resulted in $7.2 million and $8.8 million in payables between Sonesta and RLH for the years ending December 31, 2024, and December 31, 2023, respectively. These payables are included in the consolidated balance sheets as 'due to related parties'.
This arrangement suggests that Sonesta Simply Suites, as a brand under RLHC, benefits from the financial backing of its parent company. The FDD indicates that RLHC believes it has sufficient funds to maintain operations and meet obligations in the ordinary course of business, due in part to low capital expenditures. However, the explicit statement about the ability to seek additional funds from Sonesta provides an extra layer of financial security.
For a prospective Sonesta Simply Suites franchisee, this is a positive sign. It implies that the franchisor has a financial safety net in case of unforeseen circumstances. While not uncommon for franchise systems to have access to credit or capital, the direct relationship with Sonesta, a larger hotel corporation, could provide more stability than relying solely on traditional financing options. Franchisees should still conduct their own due diligence to assess the overall financial health of RLHC and Sonesta.
It is important to note that the FDD does not specify the terms or conditions under which Sonesta would provide additional funds. A potential franchisee should inquire about the process for requesting funds, any limitations on the amount or frequency of funding, and whether there are any associated costs or obligations for RLHC or its franchisees.