Listening to Franchise Owners

ATLANTA (Blue MauMau) - Mr. Fred Schwartz, president of the Asian American Hotel Owners Association, sat down with Blue MauMau for a chat about franchising. What ensued was an insightful discussion on the importance of listening for both franchisors and owners.

Schwartz is a 28 year veteran of the hospitality industry. In his past life he has held senior positions with Hyatt, Crowne Plaza and others. Since 1996, Schwartz has helped lead AAHOA, a coalition of independent franchisee associations of 8,300 members who own some 22,000 hotels.

From the start and rather naturally, the conversation gathered steam around a central theme of the franchise relationship—strong franchise networks have an uncanny ability to listen to franchise owners. Schwartz observes, “Franchisors may not like the message but they will listen to franchisees because there is value in doing so. The franchisor has ultimate control. That’s clear in the agreement that the franchisee signs. But that doesn’t preclude the franchisor listening to its licensees. They cannot just ignore them. That’s not right for a franchisor to do.”

AAHOA's president stresses that listening is far from a passive activity. There are listening channels that need to be developed by franchise systems. A franchisee association can be a very helpful vehicle to engage dialogue because their independence puts them in a good position to solicit honest dialog. “The franchisor needs to work it out with their independent association," Schwartz observes. “Making the independent association persona non-grata is not in the best interest of the franchisor.”

In the past year AAHOA has organized activities to facilitate listening among the hotel chains and franchise owners. The association has had 18 regional meetings, 30 town hall meetings, an annual convention. Those meetings help develop a close group of franchisors and franchisees. Schwartz views AAHOA as “a very fraternal organization, even among franchise sales people.”

Still, there is more to setting up an organization to listen than engaging the independent association and having frequent meetings. Franchise chains are developing organizational structures for listening. Hotel chains are beginning to create senior fair franchise positions that are meant to engage associations and franchisees. Mr. Schwartz observes, "Mr. Tim Shuy is Sr. Vice President of Fair Franchising for Choice Hotels. They created that position. And Wyndham is looking to create a Sr. Vice President of Franchise Relations.”

Listening should be done with cool heads. But sometimes the passions of franchise owners become so high that owners aren’t able to engage in constructive dialogue. They may want to seek their pound of flesh. Schwartz comments, “There is so much mistrust. Owners and management can easily pour gasoline on the fire. If cooler minds prevail at least you can start the recovery. Sometimes like a bad marriage you need someone to intercede or sometimes to move on.”

As a member of the steering committee of the National Franchise Mediation Program, Schwartz knows something about interceding in franchise disputes and mediation. He stresses how hotel chains are active in organizing many venues for listening. “AAHOA has had so many meetings with franchisors in 2007," he observes. "There are so many issues between franchisor and franchisee that can be dialogued out."

Such mechanisms go a long way in having constructive and healthy relations with franchise owners. But even then there will be a few franchise owners that just do not fit in the network for various reasons.

What then?

Schwartz thinks constructive dialog can help the franchise network in these situations as well. "If you are not right for us and we aren’t right for you, then let us figure out how we can lose each other," he declares.

With all of that dialogue and the insights that can be gained from listening, there is still risk for a hotel buyer—market risk and risk in the franchise relation. "You have to look at the franchise disclosure document and do your research. And remember that the government doesn’t monitor the contents of those documents.” Schwartz concludes the conversation with a warning to would-be hotel owners, “at the end of the day, it is still ‘buyer beware’."