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Knights Inn Simplifies Franchise Agreement

Senior Vice President of Knights Inn Talks About Why This May Be the New Trend

 PARSIPPANY, NJ (Blue MauMau) - Knights Inn, a Wyndham Hotel Group chain of some 240 properties, has introduced a new simplified franchise agreement, possibly the next evolution for the franchise industry. The new four-page agreement has been trimmed down considerably from the original 35-page contract, laiden with legal language and format.

In this Blue MauMau exclusive, Mr. Rajiv Bhatia, Senior Vice President in charge of Knights Inn, shares how his team simplified the franchise agreement and why.

What made you decide to do this for prospective hotel franchisees?

A number of Knights Inn prospects are entry level franchisees for whom a typical franchise agreement may be intimidating. We feel the new version will be welcomed by potential owners.

Did you simplify the legal language, and how do you protect  both parties if the legal language is not preserved?

We simplified the language but all legal protection remains for both parties.

Editor's note: Here's a complete example of the Knights Inn's protected territory clause (a protection that in itself is somewhat unusual in the hotel franchise sector).

We agree not to own, operate, license, franchise or admit to membership any other Chain Facility in the Protected Territory specified in Schedule C during the Term. We may own, operate, lease, manage, franchise or license anyone to operate any Chain Facility outside the Protected Territory. We may grant Protected Territories for other Chain Facilities that overlap your Protected Territory. The restrictions in this section do not apply to any existing Chain Facility which we may renew, relicense, allow to expand or replace with a replacement Chain Facility.

And here is an example of a much longer standard franchise agreement. The first agreement (33 pages) that was referenced had no protected territory clause for a franchise owner in the hospitality industry so a quick service restaurant agreement (31 pages) was used instead. The territory protection clause and its sub-clauses in its entirety are too long for this article. Also notice the difference in language.

Provided you are in full compliance with this Agreement, neither we nor any of our affiliates will during the term of the Agreement own, operate or grant franchises for the operation of a KRISPY KREME STORE or sell any products identified by the Marks or made utilizing the recipes of the Products within the Territory described on Exhibit B (the "Territory") other than the franchise granted to you under this Agreement. As long as you are in full compliance with this Agreement, any Development Agreement and all other agreements with us during the term of this Agreement, we will not solicit or make, and we will contractually prohibit other franchisees from soliciting or making, Deli Bakery Sales to any account or location to which you have made sales continuously over the prior 12-month period (subject to the provisions of Section 1.D. hereof). Accordingly, you shall not make any Deli Bakery Sales to any account or location to which another franchisee has made sales continuously over the prior 12-month period ...

What were you able to eliminate to simplify the original 35 page agreement to just 4 pages?

A shorter agreement allows franchise prospects to : 

  1. Study and understand the document easily and quickly
  2. Spend less money on attorney reviews
  3. Understand clearly outlined franchisee/franchisor responsibilities, and
  4. Understand terms of the agreement written in precise language. 

So does the 4 page agreement link to the 35 page agreement? Is it just a summary of the original agreement that is actually legally binding?

The agreement contains the essence of the 35 page agreement but does not link to it.   The franchisee is bound only by the terms in the agreement he/she signs.

Have you seen any benefits to Knights Inn of a simplified agreement?

It is too early to say how this approach has impacted the brand. We just announced the new agreement a week ago. Preliminary feedback from our Franchise Sales department is encouraging. Less time is spent on agreement review with the  prospective franchisee  so more time can be used to focus on the features and benefits of the Knights Inn brand.

Last year was a good year. Knights Inn opened 31 hotels in 2006. Most were conversions from other flags.

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Knights_Inn_Franchise_Agreement.pdf319.31 KB
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