The Score at Vista Hospitality
Vista Hospitality is examined on how it promotes compliance with the standards of the Asian American Hotel Owners Association's 12 Points of Fair Franchising. AAHOA is the largest association of franchise owners in hoteling.
Last year I reported on the AAHOA Performance Appraisal Reports of Accor, Carlson, Choice, La Quinta and Wyndham.
In October 2008, I began a series of reports about hotel franchise companies which promote their compliance with AAHOAs 12 Points of Fair Franchising in detail. These reports are based on self-evaluation by each of these companies. So far, I have reported on Vantage Hospitality (Americas Best Value Inns and the Lexington Collection) and Budgetel Inn & Suites.
This month, I will focus on Vista Inns Hospitality Solutions, which offers franchises for Vista Inns & Suites. Vista Hospitality recently announced that it is acquiring the Select Inn brand (located in 14 cities in Minnesota, Wisconsin and North Dakota). Vista President Ramesh Gokal stated that, “Compliance to the AAHOA 12 Points is a core company belief, so we are excited and expect to bring our fairness doctrine to the Select Inn Franchisees.”
According to my rating system, the eight franchise companies scored as follows:
Point 1: Early Termination and Liquidated Damages
AAHOAs Position: 1(a) Most Franchisors assess liquidated damages at unfair and punitive rates, often 36 to 60 months of royalty fees. AAHOA states that Franchisees should only have to pay 6 months of royalty fees.
Vista Position: Vista provides a 15-year agreement with annual windows (with or without cause) subject to 180-day notice. No Liquidated Damage provisions in our agreement.
Point 2: Impact/Encroachment/Cross Brand Protection
AAHOAs Position: All Franchisors should establish a fair and reasonable formula to protect a Franchisee’s assets, and the formula should be included as a contractual provision in their franchise agreements, including a geographic “area of protection” (AOP).
Vista Position: Vista provides a clear written Area of Protection based on market dynamics to protect the business of each licensee. As a policy we will not entertain an addition even outside the AOP if the addition will impact the business of the existing licensee.
Point 3: Minimum Performance & Quality Guarantees
AAHOAs Position: If a Franchisee’s hotel is not able to maintain certain occupancy levels over a designated period and has not received a minimum level of reservations, Franchisee should be able to terminate the agreement without penalty.
Vista Position: Vista offers a money back performance guarantee; if we fail to deliver the agreed reservations performance in any licensee year, we refund the royalties paid that year. We maintain brand quality through guest complaint tracking and support for corrective remedies.
Point 4: Quality Assurance Inspections/ Guest Surveys
AAHOAs Position: All Franchisors should have the same standards for each of their facilities operating under a specific brand name in the franchise system. All Franchisors should conduct their Quality Assurance (QA) inspections in a fair, reasonable and unbiased manner, and use their best efforts to prepare QA reports that are accurate and complete.
Vista Position: Vista does not perform QA inspections. We continuously educate licensees (a support visit is conducted every 60 days) on the value of Guest Satisfaction and effective complaint handling and track quality through guest complaints tracking.
Point 5: Vendor Exclusivity
AAHOAs Position: In general, all Franchisees should be free to buy conforming goods from any vendor, not just these mandated by the Franchisor.
Vista Position: Vista does not enforce Vendor exclusivity
Point 6: Disclosure and Accountablity
AAHOAs Position: There should be greater disclosure and accountability on the part of the Franchisors concerning the expenditure of marketing and reservation fees collected from their Franchisees. On an annual basis, all Franchisors should disclose how the marketing and reservation fees are spent, including identifying the specific products and services that are paid for with the fees. A Franchisor should not profit directly from the marketing and reservation fees it collects from the Franchisees, or use such fees to pay for marketing and advertising related to a Franchisor’s sale of hotels.
All Franchisors should have their books and records audited on an annual basis concerning the collection and disbursement of marketing and reservation fees, and should share the results of the audits with the Franchise Advisory Councils (FAC), or the designated audit committee of the FACs.
Vista Position: Vista provides regular shared funds disclosure and decision participation to the duly elected Customer (Franchisee) Advisory Committee (CAC). No shared funds are used for franchise sales.
Point 7: Maintaining Relationships with Franchisees
AAHOAs Position: All Franchisors should strive to maintain and build on their relationships with the Franchisees by actively seeking feedback from the Franchisees themselves, and by working with the various councils and associations that represent the Franchisees, including the Franchise Advisory Councils (FAC) and AAHOA.
Vista Position: We promote a robust relationship with our CAC and our Franchisees. Brand standards are basic and amenities are self directed by each licensee based on market competition. We are an engaged AAHOA Platinum member and endorse and promote the CHO Program. We also promote and endorse AH&LA, NABHOOD and HHOA.
Point 8: Dispute Resolution
AAHOAs Position: In all franchise agreements, the Franchisors and their Franchisees should commit to establishing an independent and fair process for the resolution of any disputes concerning the terms of the franchise agreement itself, or the relationship between the parties. Specifically, the Franchisors and their Franchisees should agree to participate in good faith in an informal, in-person meeting between the authorized representatives of the parties in an attempt to resolve their disputes.
If the informal meeting is unsuccessful, the parties should agree to participate in a non-binding mediation, before a mediator who is neutral and mutually acceptable to the parties, including a mediator associated with the National Franchise Mediation Program.
If the mediation is unsuccessful, the dispute should not be submitted to binding arbitration unless and until all of the parties agree to do so, including mutually agreeing on the arbitrator who will hear the dispute, the location of the arbitration proceedings and the corresponding rules and procedures for the arbitration.
Vista Position: Vista offers informal discussions and non-binding mediation on all disputes and allows litigation if necessary.
Point 9: Venue and Choice of Laws Clauses
AAHOA Position: In the event a dispute between a Franchisor and Franchisee has not been resolved by participating in an informal, in-person meeting with authorized representatives from the parties, or by participating in mediation proceedings, the party pursuing its claims in a court of law should do so in the county and state in which the subject Facility is located. Further, any lawsuit or claims should be governed by the laws of the county or state in which the lawsuit or claims are filed.
Vista Position: Vista offers venue negotiation on each licensee.
Point 10: Franchise Sales Ethics and Practices
AAHOAs Position: All Franchisors should mandate fair and honest selling practices among their salespersons and agents.
Vista Position: Vista sales representatives are bound by a Code of Ethics and are required to submit all representations in writing. They are also required to submit a personally signed “Vista Fairness Doctrine” to each potential licensee. Each license agreement is accompanied by a Mutual Commitment Agreement, which outlines all representations by both parties; and a Business Terms Summary which outlines all business terms of the license agreement.
Point 11: Transferability
AAHOAs Position: In situations in which a Franchisee seeks to transfer its property to an unrelated third party, the Franchisor should not delay, withhold its consent, or impose conditions on the transfer in an unreasonable, arbitrary or capricious manner. Transfer fees should be fair and reasonable (i.e., generally no more than $1,500), and based solely on the estimated administrative costs to process the transfer.
There should be no fees for a Franchisee’s transfer to a spouse, child, parent, sibling, niece, nephew, descendent, spouse’s descendent, or other family member, if the transferee is legally competent to assume the Franchisee’s obligations under the franchise agreement.
There also should be no transfer fee for a Franchisee’s buyout of other shareholders or partners who have an interest in the Facility, or for the addition of any shareholders or partners who will gain an interest in the Facility.
In the event of a requested transfer, the Franchisors should not condition the granting of the request on a requirement that the Franchisee or new owner adopt an extensive renovation or modernization plan for the subject property. Any required renovations for the subject property in connection with a transfer should be limited to only those specific items identified in the last two (2) quality assurance (QA) inspection reports for the subject Facility that were issued prior to the requested transfer.
To the extent a Franchisor approves a requested transfer, the Franchisor should not seek liquidated damages (LDs) from the prior Franchisee, or seek any increased fees from the new Franchisee owner of the subject Facility because the Franchisee sought to transfer its Facility prior to the scheduled termination date of its franchise agreement.
Within ten (10) days of the completion of an approved transfer of a subject Facility, the Franchisors should automatically release the prior Franchisee from any and all obligations it had under the terminated franchise agreement, and provide it with a written letter of release in connection therewith.
Vista Position: All licensees in good standing are transferable with appropriate documentation. Transfers are free for family and estate transfers and with a payment of a nominal administration fee for others.
Point 12: Sale of the Franchise System Hotel Brand
AAHOA Position: The new franchise company should maintain the same or higher level of quality as the prior Franchisor and strive to ensure that the transition is a smooth one. The new Franchisor should work closely with the existing Franchisee Advisory Councils and honor existing guest loyalty programs.
Vista Position: A sale is not planned or expected; and with an annual window on each license the licensee has the opportunity to leave the brand without undue hardship.
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- Fair Franchising Is Not An Oxymoron
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Author: Stanley Turkel, MHS, ISHC operates his hotel consulting office as a sole practitioner specializing in franchising issues, asset management and litigation support services. Turkel’s clients are hotel owners and Franchisees, investors and lending institutions. Turkel serves on the Board of Advisors and lectures at the NYU Tisch Center for Hospitality, Tourism and Sports Management. He is a member of the prestigious International Society of Hospitality Consultants. His provocative articles on various hotel subjects have been published in the Cornell Quarterly, Lodging Hospitality, Hotel Interactive, Hotel-Online, AAHOA Lodging Business, etc. If you need help in negotiating a franchise agreement or with a problem such as encroachment/impact, termination/liquidated damages or litigation support, call Stanley at 917-628-8549 or email [email protected].
Stanley Turkel is available as a featured speaker at on the following subjects:
- From Ragas to Riches: The Origin and Growth of the Asian American Hotel Owners Association
- Great American Hoteliers: Pioneers of the Hotel Industry
- Franchise Advisory Councils: Powerhouses or Powderpuffs?
- Henry Morrison Flagler: The Robber Baron Who Invented Florida
- Fred Harvey: Great Food, Unique Hotels and the Harvey Girls