Sonesta Select Franchise

Financing Details

Sonesta RL Hotels Franchising Inc. offers a development incentive program for new Sonesta-branded hotels, providing a financial contribution between $4,000 and $7,000 per guest room for Sonesta Select hotels, or $3,000 and $8,000 per guest room for Sonesta Essential hotels. This incentive is structured as a promissory note that typically does not require repayment, but the repayable amount is reduced annually over the franchise agreement term. If the franchise agreement terminates early or the hotel is transferred, the remaining incentive amount must be repaid. The incentive bears no interest unless it becomes due and is not paid, at which point an 18% annual interest rate applies. Aside from this program, Sonesta RL Hotels Franchising Inc. does not directly or indirectly offer other financing or guarantees for franchisees.

Litigation Summary

Sonesta RL Hotels Franchising Inc. has been involved in several litigation cases. Currently, there is one pending putative class action lawsuit (Special Situations Fund III QP, L.P, et al., v. Adam D. Portnoy, et al.) filed in August 2023 against its director Adam Portnoy and other defendants, alleging breach of fiduciary duties related to a merger. Additionally, Sonesta RL Hotels Franchising Inc. initiated three new collection lawsuits against former franchisees/guarantors in June 2024 for unpaid amounts and liquidated damages. In past years, Sonesta RL Hotels Franchising Inc. was involved in eight lawsuits filed in early 2021 by stockholders concerning a merger, which were dismissed after supplemental disclosures and a $240,000 settlement for attorneys' fees. Other concluded litigations include a tortious interference claim by a competitor settled for $500,000, and several breach of contract and trademark disputes with former franchisees, most of which resulted in settlements ranging from $10,500 to $500,000 paid by or to Sonesta RL Hotels Franchising Inc.

Renewal Conditions

To qualify for a successor franchise, Sonesta RL Hotels Franchising Inc. franchisees must: give timely notice of their election to renew; have substantially complied with their franchise agreement and not received four or more default notices during the term; be in full compliance with the franchise agreement and all Brand Standards on the notice date and the commencement date of the new agreement; maintain possession of their hotel premises and remodel the hotel as necessary to comply with then-current Brand Standards; transition their hotel to a different brand concept offered by Sonesta RL Hotels Franchising Inc. or an affiliate, if required; correct any deficiencies identified by Sonesta RL Hotels Franchising Inc. before renewal; sign Sonesta RL Hotels Franchising Inc.'s then-current form of franchise agreement and any ancillary agreements, which may have materially different terms; pay the renewal fee, which is equal to the Initial Fee; and the franchisee and their owners must sign a general release.

Staffing Notes

Sonesta RL Hotels Franchising Inc. requires one of the franchisee's Hotel Representative(s), such as a general manager or owner, to complete initial brand training. Franchisees are solely responsible for all decisions regarding employees, agents, and independent contractors hired for their hotel, including recruiting, hiring, firing, training, and compensation. They must ensure their staff is adequately trained and manage employment functions in compliance with applicable laws. If a management company is used, it must be approved by Sonesta RL Hotels Franchising Inc. and its representative must attend the Brand Conference.