Hotels Weighed on Fair Franchising Practices
But that initial list of good practices quickly became old. Under Mr. Mukesh Mowji's chairmanship in 2006, Mr. C.K. Patel took on the task to develop the organization's fair franchising standards to keep it current with what franchisor attorneys had been adding to franchise agreements during the years. Those upgraded points were published for the education of its members on what constituted a fair shake in franchising.
In this first effort, AAHOA scores only franchisor members with a strong presence in the association; namely, Accor, Carlson, Choice Hotels, La Quinta and Wyndham. Last week, it released a performance report on these hotels in conjunction with its annual convention in San Antonio, Texas.
A tally of other hotel franchise chains will follow.
In an industry that sometimes gives out awards for money, AAHOA has worked long and hard to involve franchisor members with its standards of fair franchising.
Fred Schwartz, president of AAHOA, stresses that the measurement of fair franchising practices matter. He declares, "These are not awards. We felt the progress report is important to facilitate a continued dialogue [of fair franchising] with members. Because two-thirds of hotels are franchised, it is incumbent to engage in fruitful dialog [between franchisee and franchisor members]."
According to Stanley Turkel, a New York-based hotel consultant specializing in hotel franchising issues, these tough standards in the past have caused a franchisor to walk away, only to regret it later on.
Turkel recalls, "Years ago a large franchisor walked off the stage of AAHOA and withdrew because of disagreeing with fair franchising standards. The hotel chain took away their sizable funding from the association. That lasted less than a year. What happened next was that franchisees stopped signing up for new properties. The hotel franchisor lost so much business that they returned to AAHOA. The next year they contributed even more to the franchisee association in sponsorship.
The progress report on fair franchising (pdf) is based on a long and complex process in which hotel franchisors worked with the association to measure fair franchising practices against the association's fair standards. Progress Report for 2007 summarizes improvements made to date by leading franchise companies in their respective Uniform Franchise Offering Circulars ("UFOCs"), franchise agreements and related business policies and procedures. AAHOA released the report to its members and the industry during its annual convention in San Antonio.
Stanley Turkel underscores the market forces at work. Says Turkel, "Why are the hotels adopting AAHOA's 12 points of fair franchising? It is because AAHOA has become bigger and more powerful. There are 8700 owners who are members of AAHOA. Their members own 22,000 hotels in total, of which 13,500 are franchised. It is some one million guest rooms. And it is some 40% of all hotels in the United States. AAHOA's members and friends are the franchisor's potential franchisees. To the extent that franchisors apply the 12 points, members will introduce franchisees to sign with them."
C.K. Patel, secretary of AAHOA, elaborates on those observations. "It is in a franchisor's best interest to work fairly with franchisees just as much as it is in the interest of our franchisee members to grow their hotel portfolios with their franchisor. Our association is the marketplace for franchisors to find franchisees and for suppliers to sell their hotel supplies and services. We have played a major role in helping franchisors become wealthy. Franchisees just ask for fairness and a share of the profits in return. Depending on how our hotel owners are treated, our members will get the word out to future hotel buyers on their franchisor's behavior. This is the beginning of building a better and more profitable relationship between franchisee and franchisor."
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Related readings:
- Accor's CEO Discusses Working With Franchise Owners and the Future
- Fair Franchising Is Not An Oxymoron, AAHOA's 12 Points of Fair Franchising
- When Cendant Walked Out on AAHOA: The March of Folly
| Attachment | Size |
|---|---|
| 12 Points.pdf | 454.37 KB |
| AAHOA PRoFF 03 28 08.pdf | 251.04 KB |
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