FRANCHISE DISCLOSURE DOCUMENT HILTON FRANCHISE …
FRANCHISE DISCLOSURE DOCUMENT
HILTON FRANCHISE HOLDING LLC A Delaware Limited Liability Company 7930 Jones Branch Drive, Suite 1100
McLean, Virginia 22102 703-883-1000
You will operate either a Hampton Inn hotel or a Hampton Inn & Suites hotel, which combines standard guest rooms with a significant block of 2-room suites in a single hotel property, each offering high quality at moderate prices, under a Franchise Agreement with us. The total investment necessary to begin operation of a newly constructed 80-room Hampton Inn hotel, excluding real property, is $7,662,800 to $14,821,500, including up to $202,400 that must be paid to us or our affiliates. The total investment necessary to begin operation of a newly constructed 101room/suite Hampton Inn & Suites hotel, excluding real property, is $9,362,000 to $20,306,500, including up to $202,400 that must be paid to us or our affiliates. This disclosure document summarizes certain provisions of your franchise agreement and other information in plain English. Read this disclosure document and all accompanying agreements carefully. You must receive this disclosure document at least 14 calendar days before you sign a binding agreement with, or make any payment to the franchisor or an affiliate in connection with the proposed franchise sale. Note, however, that no government agency has verified the information contained in this document. The terms of your contract will govern your franchise relationship. Don't rely on the disclosure document alone to understand your contract. Read all of your contract carefully. Show your contract and this disclosure document to an advisor, like a lawyer or accountant. Buying a franchise is a complex investment. The information in this disclosure document can help you make up your mind. More information on franchising, such as "A Consumer's Guide to Buying a Franchise," which can help you understand how to use this disclosure document is available from the Federal Trade Commission. You can contact the FTC at 1-877-FTC-HELP or by writing to the FTC at 600 Pennsylvania Avenue, NW, Washington, DC 20580. You can also visit the FTC`s home page at for additional information. Call your state agency or visit your public library for other sources of information on franchising. There may also be laws on franchising in your state. Ask your state agencies about them.
Issuance Date: March 30, 2019
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STATE COVER PAGE Your state may have a franchise law that requires a franchisor to register or file with a state franchise administrator before offering or selling in your state. REGISTRATION OF A FRANCHISE BY A STATE DOES NOT MEAN THAT THE STATE RECOMMENDS THE FRANCHISE OR HAS VERIFIED THE INFORMATION IN THIS DISCLOSURE DOCUMENT. Call the state franchise administrator listed in Exhibit I for information about the franchisor, about other franchisors, or about franchising in your state. MANY FRANCHISE AGREEMENTS DO NOT ALLOW YOU TO RENEW UNCONDITIONALLY AFTER THE INITIAL TERM EXPIRES. YOU MAY HAVE TO SIGN A NEW AGREEMENT WITH DIFFERENT TERMS AND CONDITIONS IN ORDER TO CONTINUE TO OPERATE YOUR BUSINESS. BEFORE YOU BUY, CONSIDER WHAT RIGHTS YOU HAVE TO RENEW YOUR FRANCHISE, IF ANY, AND WHAT TERMS YOU MIGHT HAVE TO ACCEPT IN ORDER TO RENEW. Please consider the following RISK FACTORS before you buy this franchise. 1. THE FRANCHISE AGREEMENT REQUIRES YOU TO RESOLVE DISPUTES WITH US BY
LITIGATION ONLY IN FAIRFAX COUNTY, VIRGINIA, UNLESS WE SUE YOU WHERE THE HOTEL IS LOCATED. IF THE COURT REJECTS THESE VENUE SELECTIONS, THEN SUIT MAY BE BROUGHT IN NEW YORK, NEW YORK. OUT OF STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO SUE US IN NEW YORK OR VIRGINIA THAN IN YOUR HOME STATE. 2. THE FRANCHISE AGREEMENT STATES THAT NEW YORK LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS. 3. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE. Effective Date: See the next page for state effective dates.
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Effective Dates The following states require that the Franchise Disclosure Document be registered or filed with the state, or be exempt from registration: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. This Franchise Disclosure Document is registered, on file or exempt from registration in the following states having franchise registration and disclosure laws, with the following effective dates:
California Hawaii Illinois Indiana Maryland Michigan Minnesota New York North Dakota Rhode Island South Dakota Virginia Washington Wisconsin In all other states, the effective date of this Franchise Disclosure Document is the Issuance Date of March 30, 2019.
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THE FOLLOWING APPLIES ONLY TO TRANSACTIONS GOVERNED BY THE MICHIGAN FRANCHISE INVESTMENT LAW
THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.
(a) A prohibition on the right of a franchisee to join an association of franchisees.
(b) A requirement that a franchisee assent to a release, assignment, novation, waiver or estoppel which deprives a franchisee of rights and protections provided in this act. This shall not preclude a franchisee, after entering into a Franchise Agreement, from settling any and all claims.
(c) A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision of the Franchise Agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.
(d) A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee's inventory, supplies, equipment, fixtures and furnishings. Personalized materials which have no value to the franchisor and inventory, supplies, equipment, fixtures and furnishings not reasonably required in the conduct of the franchise business are not subject to compensation. This subsection applies only if (i) the term of the franchise is less than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising of other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least 6 months advance notice of Franchisor's intent not to renew the franchise.
(e) A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances. This section does not require a renewal provision.
(f) A provision requiring that arbitration or litigation be conducted outside this state. This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.
(g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause. This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise. Good cause shall include, but is not limited to:
(i) The failure of the proposed transferee to meet the franchisor's then-current reasonable qualifications or standards.
(ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.
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(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the Franchise Agreement existing at the time of the proposed transfer.
(h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the Franchise Agreement and has failed to cure the breach in the manner provided in subdivision (c).
(i) A provision which permits the franchisor to directly or indirectly convey, assign, or otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless provision has been made for providing the required contractual services.
THE FACT THAT THERE IS A NOTICE OF THIS OFFERING ON FILE WITH THE ATTORNEY GENERAL DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION OR ENDORSEMENT BY THE ATTORNEY GENERAL.
ANY QUESTIONS REGARDING THIS NOTICE SHOULD BE DIRECTED TO: OFFICE OF THE ATTORNEY GENERAL CONSUMER PROTECTION DIVISION, FRANCHISE SECTION 525 W. OTTAWA ST. G. MENNEN WILLIAMS BUILDING, FIRST FLOOR LANSING, MICHIGAN 48933 517-373-7117
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Item ITEM 1 ITEM 2 ITEM 3 ITEM 4 ITEM 5 ITEM 6 ITEM 7 ITEM 8 ITEM 9 ITEM 10 ITEM 11 ITEM 12 ITEM 13 ITEM 14 ITEM 15
ITEM 16 ITEM 17 ITEM 18 ITEM 19 ITEM 20 ITEM 21 ITEM 22 ITEM 23
TABLE OF CONTENTS
Page THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES ..................... 1 BUSINESS EXPERIENCE ............................................................................................................ 6 LITIGATION ................................................................................................................................ 10 BANKRUPTCY............................................................................................................................ 15 INITIAL FEES .............................................................................................................................. 15 OTHER FEES ............................................................................................................................. 19 ESTIMATED INITIAL INVESTMENT .......................................................................................... 30 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES ......................................... 35 FRANCHISEE'S OBLIGATIONS ................................................................................................ 39 FINANCING................................................................................................................................. 40 FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING... 41 TERRITORY................................................................................................................................ 52 TRADEMARKS ........................................................................................................................... 55 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION ............................................ 57 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS .................................................................................................................................. 59 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL .................................................... 60 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION ................................ 62 PUBLIC FIGURES ...................................................................................................................... 70 FINANCIAL PERFORMANCE REPRESENTATIONS ................................................................ 70 OUTLETS AND FRANCHISEE INFORMATION ........................................................................ 74 FINANCIAL STATEMENTS ........................................................................................................ 89 CONTRACTS .............................................................................................................................. 89 RECEIPTS .................................................................................................................................. 90
NOTICE OF TRADEMARK OWNERSHIP The following trademarks used in this Disclosure Document are owned by our affiliates:
CanopyTM Canopy by HiltonTM Conrad? Curio? DoubleTree? DoubleTree by Hilton? DoubleTree Suites by Hilton? DoubleTree Club Hotel? eforea? Embassy Suites by Hilton? Embassy Suites Hotels?
Hampton? Hampton by HiltonTM Hampton Inn? Hampton Inn by HiltonTM Hampton Inn & Suites? Hampton Inn and Suites by HiltonTM Hilton HonorsTM Hilton? Hilton Garden Inn? Hilton Inn?
Hilton SuitesTM Hilton Supply Management? Home2 Suites by Hilton? Homewood Suites by Hilton? LXR? Motto by HiltonTM OnQ? (formerly System 21?) Signia HiltonTM TapestryTM Tru by HiltonTM Waldorf-Astoria?
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Exhibit A Exhibit B
Exhibit C Exhibit D Exhibit D-1 Exhibit D-2 Exhibit E Exhibit F Exhibit G Exhibit H Exhibit I Exhibit J Exhibit K Exhibit L
TABLE OF EXHIBITS
List of Franchised Hotels as of December 31, 2018 List of Franchised Hotels Terminated, Canceled, Not Renewed or with Changes in Controlling Interest during 2018 Financial Statements Franchise Agreement and Addendum State Addenda to Franchise Agreement Development Incentive Promissory Note Guaranty of Franchise Agreement Franchise Application Information Technology System Agreement (HITS Agreement) Manual Table of Contents ? Brand Standards State Administrators and Agents for Service of Process State Addenda to Disclosure Document Lender Comfort Letter Forms Receipts
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ITEM 1 THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES
About The Franchisor, Its Parents and Its Predecessor
To simplify the language in this Disclosure Document, "we" or "us" mean Hilton Franchise Holding LLC, the Franchisor. "You" means the person(s) who signs the franchise agreement ? the Franchisee. If you are a business entity, "you" means both the business entity and its owners. The "Brand" refers to the name or names under which we will license your hotel. Our agent for service of process in the states whose franchise laws require us to name an agent for service is shown on Exhibit I. "Guest Rooms" means both guest rooms and guest suites. Capitalized words not defined in this Disclosure Document have the meaning set forth in the Franchise Agreement.
We are a Delaware limited liability company, formed in September 2007. For purposes of this franchise offering, we do business under the names "Hampton Inns," "Hampton Inn," "Hampton Inn & Suites," "Hampton Inn by Hilton" and "Hampton Inn & Suites by Hilton." Our principal business address is 7930 Jones Branch Drive, Suite 1100, McLean, Virginia 22102 USA, and our telephone number is 703-8831000.
We became the franchisor of hotels which will operate under the Hampton Brands in the 50 states of the United States of America, its Territories and Possession and the District of Columbia ("US") on March 30, 2015.
Our parent company is Hilton Domestic Operating Company Inc., a Delaware corporation formed on July 12, 2016 ("Hilton"). Hilton's parent company is Hilton Worldwide Holdings Inc., a Delaware corporation formed on March 18, 2010 (NYSE: HLT) ("Hilton Worldwide"). The principal business address of both companies is 7930 Jones Branch Drive, Suite 1100, McLean, Virginia 22102 USA.
Hilton became our parent company on January 4, 2017, as the successor to our previous parent company, Park Hotels & Resorts, Inc. ("Park"). Together, Hilton and Park have conducted a guest lodging business since 1946. Park was originally called Hilton Hotels Corporation ("HHC") from May 29, 1946 to December 19, 2009. It changed its name to Hilton Worldwide, Inc. ("HWI") on December 20, 2009, and to Park Hotels & Resorts Inc. on June 1, 2016. On January 4, 2017, Park became an independent company in a spin-off transaction. As a result of that spin-off, nearly all company-owned hotels were divested with Park. For convenience, all references to "Hilton" in this Disclosure Document include HHC, HWI, and Park during the relevant time frames for each, unless otherwise noted.
Our immediate predecessor in offering the Hampton Brand in the US was our subsidiary, Hampton Inns Franchise LLC, a Delaware limited liability company formed in September 2007 ("HIF"). HIF offered franchises for the Hampton Brands from October 2007 through March 2015. HIF's predecessor was Promus Hotel Systems, Inc., a Delaware corporation incorporated in May 1995 ("Promus"). Promus licensed, owned and operated Hampton Inn & Suites hotels between May 1995 and October 2007. Hampton Inn hotels were first franchised by a predecessor of Promus in 1983. Hampton Inn & Suites hotels were first franchised by a predecessor of Promus in 1993. Hilton acquired Promus's indirect corporate parent on December 1, 1999, and became the ultimate parent corporation of Promus and all its affiliates.
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