Sonesta ES Suites Franchise
Audited FinancialsRisk Score
Pending analysis
Investment Range
$971,701 - $19,080,007
Franchise Fee
$45,000
Total US Locations
78
Business Summary
Sonesta ES Suites operates upscale extended stay hotels, granting franchisees the rights to operate under the Sonesta ES Suites brand and its established business formats, methods, and proprietary marks. These hotels offer high-quality lodging services and are supported by a comprehensive franchise system.
Corporate History
Sonesta RL Hotels Franchising Inc. was originally formed in Washington as Vance Hotels, Inc. in 1986. It later changed its name to Red Lion Hotels Franchising, Inc. in 2005 and then to Sonesta RL Hotels Franchising Inc. in 2021. Both Sonesta RL Hotels Franchising Inc. and its parent, Red Lion Hotels Corporation (RLHC), have been active in hotel ownership and management since their respective incorporations in 1986 and 1978. Sonesta RL Hotels Franchising Inc. expanded its brand portfolio through several acquisitions, including GuestHouse International LLC in 2015, Vantage Hospitality Group, Inc. in 2016, and the Knights Inn brand in 2018. In 2021, RLHC merged with Sonesta International Hotels Corporation, becoming a wholly-owned subsidiary of Sonesta. An affiliate, Sonesta NYC LLC, acquired The James hotel brand in 2022. Sonesta RL Hotels Franchising Inc. began offering franchises under the Sonesta ES Suites Marks in September 2021.
Financial Overview
Investment Range
$971,701 - $19,080,007
Franchise Fee (Low)
$45,000
Franchise Fee (High)
$65,000
Royalty %
5%
Marketing %
3.5%
Equipment Costs (Low)
$217,350
Equipment Costs (High)
$3,519,000
Working Capital
$477,095
Audited Financials
Yes
Offers Financing
Yes
Audit Opinion
Unqualified opinion
Financial Health Notes
Red Lion Hotels Corporation's financial statements show some fluctuations in profitability, with net losses in 2022 and 2024, and negative cash flow from operating activities in 2023 and 2024. While the auditors have issued an unqualified opinion without a going concern qualification, the company does rely on its parent company, Sonesta International Hotels Corporation, for centralized cash management and has the ability to seek additional funds from Sonesta if needed. The company reported healthy working capital with current assets exceeding current liabilities in both 2023 and 2024.
Financing Details
Sonesta RL Hotels Franchising Inc. offers a development incentive program as a financial contribution to assist with hotel development or conversion. This incentive typically ranges between $5,000 and $8,500 per Guest Room. The amount does not need to be repaid unless the Franchise Agreement is terminated early or a transfer occurs. The repayable amount is reduced annually over the term of the agreement. If the incentive becomes repayable and payment is not made on time, it accrues interest at 18% per annum or the highest legal rate. The franchisor does not offer other direct or indirect financing arrangements or guarantee any franchisee obligations.
Performance Metrics
Total US Locations
78
Franchised Units
25
Corporate Units
53
Avg Square Footage
65,000
Franchising Since
2021
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
20
Litigation Summary
Sonesta RL Hotels Franchising Inc. has disclosed twenty litigation cases. Currently, there is one pending class action lawsuit filed in August 2023 against former TravelCenters of America Inc. stockholders, including Adam Portnoy (a director of Sonesta RL Hotels Franchising Inc. and its parent), and other defendants. This lawsuit alleges breaches of fiduciary duties related to a merger and failure to disclose information, seeking unspecified monetary damages. The motion to dismiss was granted in May 2024 but appealed, with oral argument anticipated in April 2025. Additionally, Sonesta RL Hotels Franchising Inc. is involved in three recent lawsuits filed in June 2024 against former franchisees and guarantors to collect unpaid amounts and liquidated damages. Eight lawsuits filed by purported RLHC stockholders in 2021 regarding a merger transaction were voluntarily dismissed in March 2021 after supplemental disclosures were made, and an agreement for a mutual release of claims and payment of attorneys' fees was reached in September 2021. Earlier litigation, concluded between 2018 and 2021, included: a lawsuit for tortious interference with franchise agreements and settlement, which was settled for $500,000; a breach of guarantee claim against a former franchisee's guarantor, dismissed without prejudice; a lawsuit for intentional and negligent misrepresentation regarding a hotel sale, settled for $250,000; trademark infringement and breach of contract lawsuits against former franchisees and guarantors, settled for $500,000; a complaint against guarantors of a former franchisee, settled for $80,000; a breach of guarantee lawsuit, settled for $150,000; a lawsuit against a former brand member for failure to pay, settled for $10,500; and a breach of contract lawsuit against a former franchisee for failure to pay, settled confidentially.
Bankruptcy History
Sonesta RL Hotels Franchising Inc. has no bankruptcy history to report.
Agreement Terms
Initial Term
20 years
Renewal Term
20 years
Renewal Conditions
To renew, Sonesta ES Suites franchisees must provide timely notice of their election to renew, have substantially complied with the Franchise Agreement (not receiving four or more default notices) and be in full compliance with all Brand Standards on both the notice date and the new agreement's commencement date. They must maintain possession of their hotel premises and remodel it as needed to meet current Brand Standards. If required, they might need to transition their hotel to a different brand concept offered by Sonesta RL Hotels Franchising Inc. or an affiliate. Franchisees must also correct any deficiencies identified by the franchisor, sign the then-current form of franchise agreement (which may have different terms), pay a renewal fee equal to the initial fee, and have their owners sign a general release.
Training & Support Program
Franchisor Assistance
Sonesta RL Hotels Franchising Inc. provides extensive support to its franchisees. Before opening, the franchisor conducts an initial inspection and develops a Property Improvement Plan (PIP) for conversions, reviews and approves hotel plans and designs, and inspects the hotel during or after construction to ensure Brand Standards compliance. It also provides onboarding services and initial brand training to a designated Hotel Representative, covering brand programs, marketing, sales, loyalty, and brand culture. Franchisees receive a Brand Manual with mandatory specifications and access to a project manager or onboarding specialist. During operation, Sonesta RL Hotels Franchising Inc. offers ongoing and optional training programs, convenes a Brand Conference at least every 24 months, and may periodically advise franchisees on hotel operations. It administers the Sonesta Travel Pass loyalty program, provides access to IT and franchise services help desks, and offers access to its Third-Party Distribution Program. The franchisor also updates the Brand Manual, indemnifies franchisees for authorized Mark usage, operates the Central Reservation System, and provides the opportunity to participate in its Revenue Management for Hire program. Brand promotion programs and a franchise system website are also maintained.
Initial Training Hours
33
Training Location
Virtual or on-site
Ongoing Support
After opening, Sonesta ES Suites franchisees receive ongoing training programs, both virtually and in-person, for which fees apply. They are required to attend a Brand Conference at least every 24 months for networking and educational seminars. Sonesta RL Hotels Franchising Inc. may periodically advise franchisees on hotel operations, administers the Sonesta Travel Pass loyalty program (in which participation is mandatory), and provides access to IT and franchise services help desks. Franchisees can also access the Third-Party Distribution Program and utilize the Central Reservation System. The franchisor updates the Brand Manual regularly and offers participation in its Revenue Management for Hire program. Additionally, Sonesta RL Hotels Franchising Inc. administers brand promotion programs and maintains a franchise system website.
Franchise Requirements
Ideal Candidate Profile
Sonesta ES Suites seeks franchisees who meet current educational, managerial, and business standards. Ideal candidates should possess good moral character, a strong business reputation, and a good credit rating. They must also have the aptitude and ability to operate a Sonesta ES Suites hotel and sufficient equity capital to fund its operation. While personal participation in daily operations is recommended, it is not required. If the franchisee is a legal entity, a designated Principal with at least a 25% ownership interest and voting power, holding the authority of a chief executive officer, must be identified. If the franchisee does not personally manage the hotel, they must hire an approved management company.
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Commercial
Owner Participation
Absentee Allowed
Territory Type
Non-Exclusive
Territory Size Requirements
Sonesta ES Suites grants franchisees a non-exclusive license to operate Sonesta ES Suites hotels at a specified location. Franchisees will not receive an exclusive territory and may face competition from other franchisees, company-owned outlets, or other distribution channels or competitive brands controlled by Sonesta. In special circumstances, Sonesta ES Suites may, in its sole judgment, grant a Sonesta ES Suites hotel an exclusive or protected area where another Sonesta ES Suites franchise will not be granted. However, there are no specific, measurable criteria provided for defining the size of a standard territory.
Staffing Notes
Sonesta ES Suites franchisees are solely responsible for all employment decisions, including hiring, firing, training, compensation, and working conditions for their employees, agents, and independent contractors. The franchisor specifies that all personnel are the franchisee's employees, not Sonesta RL Hotels Franchising Inc.'s. The Brand Standards may dictate staffing levels, employee qualifications, training, and uniforms. Franchisees must also participate in the franchisor's revenue management for hire program for the first year, or, if they opt out afterward, hire a dedicated Hotel Revenue Manager with at least four years of verifiable experience in a relevant role in similar hotels, meeting specific proficiency and training requirements.