Under what circumstances does a Sonesta Simply Suites franchisee have to repay the Incentive?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
| x. Dispute resolution | Section 17.F | Item 17 |
FINANCING
We may, in our sole discretion, offer incentives for hotels that are new to the Sonesta brand. An "Incentive" is a financial contribution that we make to assist with the development or conversion of your Hotel and will be in an amount that we determine. If an Incentive is granted to
you, the amount of the Incentive typically shall comprise, at our discretion, between $2,000 and $7,600 per Guest Room of your Hotel. To receive an Incentive, you and your principals must sign a development incentive promissory note in the form attached as Exhibit E (the "Incentive Note"), when you sign the Franchise Agreement. An Incentive does not have to be repaid unless the Franchise Agreement is terminated before its expiration date, or a transfer occurs as described below. The Incentive will be disbursed to you, unless otherwise agreed to by you and us, within 45 days after your Hotel opens as a Brand Hotel with our approval, as long as you have completed any PIP, there have been no material adverse changes to your Hotel since approval (for example, a decrease in the number of Guest Rooms or a significant delay in opening as a Brand Hotel), and subject to your and any guarantor's financial condition being satisfactory to us. For each year that your Hotel is open, the repayable amount is reduced by an equal annual percentage based on the term of the Franchise Agreement. For example, if the Franchise Agreement has a twentyyear term, the repayable amount is reduced by 1/20th of the original amount annually. If your franchise terminates before the expiration of the Franchise Agreement, you must pay us the thencurrent repayable amount of the Incentive. If you transfer your Hotel you also must pay us the then-current repayable amount of the Incentive. An Incentive bears no interest. However, if an Incentive becomes repayable and payment is not made in full when due, the outstanding amount is subject to interest at 18% per annum or the highest rate allowed by law, and we may collect court costs and attorneys' fees incurred to collect the repayable amount of the Incentive. We may negotiate these Incentives when business circumstances warrant.
We do not require security interest under the Incentive Note.
Source: Item 10 — FINANCING (FDD pages 47–48)
What This Means (2025 FDD)
According to Sonesta Simply Suites's 2025 Franchise Disclosure Document, an Incentive, which is a financial contribution from Sonesta to assist with the development or conversion of a hotel, does not have to be repaid unless certain conditions are met. The amount of the Incentive typically ranges from $2,000 to $7,600 per guest room, at Sonesta's discretion.
Specifically, a Sonesta Simply Suites franchisee must repay the Incentive if the Franchise Agreement is terminated before its expiration date. Additionally, repayment is required if the franchisee transfers their hotel to another party. The repayable amount decreases annually over the term of the Franchise Agreement. For instance, with a twenty-year agreement, the repayable amount is reduced by 1/20th each year.
The Incentive itself does not accrue interest. However, if repayment is required and not made on time, the outstanding amount is subject to an annual interest rate of 18%, or the highest rate permitted by law. In the event of non-payment, Sonesta Simply Suites may also pursue collection through legal means, with the franchisee potentially responsible for court costs and attorneys' fees.