Franchisors Show Flexibility to Franchisees in Hard Times

Can you believe that some hotel franchisors whose agreements are usually extraordinarily one-sided, are exhibiting an unheard-of flexibility in negotiating with their franchisees?  Even if the cause is the severe economic recession, it is still a rare and appreciated benefit.  The concessions include:

  • Fee reductions
  • Extensions on PIP deadlines
  • Reduction of otherwise required amenities
  • Approved delays in renovation projects
  • No new service standards

Owners are assessing and measuring their franchisor’s responses and storing away their reactions for future deal-making.  It appears that the most flexible franchisors are Wyndham, Choice, Hilton, IHG, Starwood and Marriott.  Then there are those franchisors who have decided to hold the line on many standards like Carlson and LaQuinta.

Listen to Nancy Johnson, Carlson’s executive vice president and chief development officer, “Some reasonableness does come into play, but it’s most important for us to make sure our portfolio of brands is relevant and that standards are maintained to the expectations of our customers.  So this is the time when you should invest in brand standards in order to prepare to take advantage of market opportunities when they come back.  And we are telling franchisees that while we understand the economy right now, this is what you’ll have to do to maintain the brand.”

Carlson’s hard line makes one wonder if they understand just how difficult it is for owners to pay debt service when their occupancies and average daily rates are dropping precipitously.  Johnson’s response to the question as to how she feels about the majority of other major brands instituting extended deadlines and curtailing new standards was less than sympathetic:

“My mother would ask then if everyone jumped off the bridge, would you?  You cannot grow a brand and maintain brand values by doing what everyone else is doing.”

When the recession ends, will franchisees remember which franchise companies were sympathetic and helpful during the hard times?

About the 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 hotels subjects have been published in
the Cornell Quarterly, Lodging Hospitality, Hotel Interactive,
Hotel-Online, Blue MauMau, Hotel Resource News, etc.  Don’t hesitate to
call 917-628-8549 or email stanturkel@aol.com.

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