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Log In / Register | Dec 22, 2014

Hotel Chains Going to One-Year Franchise Agreements

Until recently, Teresa Matsui Sanders's 18 hotels were under 20-year franchise agreements with Super 8, part of the Wyndham Hotel Group. But now she has transferred her hotels to Americas Best Value, which provides owners to renew annually.

Franchisors believe that owners feel more secure with long-term contracts so as to get a return on their investment. Hotels are some of the highest capital investments of all franchise sectors, costing millions. A spokesman for Wyndham said that their franchise agreements are now for a 15-year term. But Ms. Sanders feels differently.

Too much has changed since the 1980s, when Wyndham was a small company and, she said, “I could get any of the principals on the phone.” With hotel companies changing hands regularly, “it’s hard to imagine committing to a 20-year alliance with anyone,” she added. - NY Times

The New York Times adds,"Offering an alternative to the industry’s traditional 20-year contracts has helped make Americas Best Value one of the fastest-growing lodging chains. Nine years after it was founded, its name is on some 800 hotels — nearly all of which once waved other companies’ flags."

According to Ms. Sanders, royalties for Americas Best Value, is about 4 to 6 percent of revenue, which is about half the hotel industries standard royalty fee.

Americas Best Value is not the only one shortening franchise terms.

Choice Hotels International is joining in. The chain announced that it will shorten their Rodeway Inn agreements to allow hotel owners to terminate contracts at the end of each year.

Read full story at the New York Times

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