Do the Radisson Franchisees Agree?

Carlson Hotels Worldwide recently unveiled their five-year program to separate the Radisson brand into two distinct products: Radisson Blu, which will fit into the upper-upscale segment, and Radisson Green, which will fit into the upscale segment.

This Radisson makeover is part of a billion-dollar program, a centerpiece of Carlson’s so-called “Ambition 2015” campaign- a program designed to expand Carlson’s global portfolio by at least 50% to more than 1500 hotels by 2015.

Since 93% of the Radisson properties in North America are franchised and 7% are managed or owned, more than $900 million of the required $1 billion for this proposed program must come from Carlson franchise owners. I looked but could not find any agreement from the Radisson Franchise Advisory Council to budget and expend $900 million in the next five years. Is there any franchisee agreement on this blue-sky program?

In a study performed in September 2008, I measured the Performance Appraisal Reports prepared by the Asian America Hotel Owners Association (AAHOA).  My purpose was to quantify the relative compliance of five franchise companies (Accor, Carlson, Choice, La Quinta and Wyndham) with AAHOAs 12 Points of Fair Franchising.  Since Carlson finished last at 34.3% compliance, I wonder how they expect to expand without improving the factors that are of greatest importance to franchisees: territorial protection, termination and windows provisions, liquidated damages, choice of venue, dispute resolution, vendor exclusivity, minimum performance, etc.

Please take note that Stanley Turkel, MHS, ISHC has just published the book “Great American Hoteliers: Pioneers of the Hotel Industry.” It contains 359 pages, 25 illustrations and 16 chapters devoted to each of the following pioneers: John McEntee Bowman, Carl Graham Fisher, Henry Morrison Flagler, John Q. Hammons, Frederick Henry Harvey.  Ernest Henderson, Conrad Nicholson Hilton, Howard Dearing Johnson, J. Willard Marriott, Kanjibhai Patel, Henry Bradley Plant, George Mortimer Pullman, A.M. Sonnabend, Ellsworth Milton Statler, Juan Terry Trippe and Kemmons Wilson.  It also has a foreword by Stephen Rushmore, preface, introduction, bibliography and index. Visit www.greatamericanhoteliers.com to order the book.

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Comments

Standards

Stan is making an excellent point here.

At a recent conference I ran into a hotel executive who was planning to transition their system to meet the AAA/CAA 3 and 4 diamond standards.

But the executive didn't know a) how to comply or b) what the cost of maintaining these standards was.

How is this executive going to communicate the value of this new program to their franchisees, I wonder?

Let’s guess

When compliance costs take the joy from the ROI within the contract term then a franchise model determined to expand is going to feel and inflict a whole lot of pain. 

Strong healthy franchise systems do communicate and justify every initiative that impacts on franchisee ROI because that is the path to wrath-free compliance. Moving brands forward to meet higher compliance standards must fit with the franchisee financial model.

There is no excuse for a franchisor not knowing compliance costs. That would mean a franchisor plans to introduce something not knowing to what degree it will influence financial models. The franchisor’s long-term business aspirations are at stake as well as those of franchisees.

Managed standards moving forward can be the mark of a model that produces a worthwhile return on compliance or the mark of a poor [or delinquent] franchisor operator. In this instance it seems that every franchisee will be up for close to $1M with no consideration for;

territorial protection, termination and windows provisions, liquidated damages, choice of venue, dispute resolution, vendor exclusivity, minimum performance, etc.

That is a lot of money to outlay in one term to assist the franchisor to grow the network by 50% so it has to be justified or you just won't see that growth.