As we approach the year 2000, is there a
hotel company out there that can reinvent hotel franchising? The 21st century franchisor
would examine every aspect of its relationship with existing or prospective franchisees.
It would create a new system of franchising
that would be so mutually beneficial that it would attract entrepreneurs, owners and
investors. A hotel company would develop a franchise license agreement with features that
would be far more owner-friendly to franchisees with regard to royalty fees, exclusive
territories, termination clauses, renewal terms and product improvement requirements.
A company that could reinvent franchising
would reveal just how good a reservation system is with regular reports quantifying the
number of room nights actually delivered to franchisees. H the performance of a hotel
brand fell below a certain agreed-upon reservation and occupancy level, the franchisee
would be able to exit the system without paying any liquidated damages.
It would help to create independent
franchise advisory councils which would partner with the franchisor to monitor service
levels, insure compliance with license requirements, negotiate changes in product design,
etc.
Revolutionizing franchising would help in
the creation of purchasing cooperatives so that the rebates paid by preferred vendors
would be shared equally. In any event, franchisees would be free to buy from any vendor
(not just those mandated by the franchisor) as long as specifications and quality were
equal.
A progressive hotel company would enable a
franchisee to exit a license agreement without penalty after sixty days written notice
provided the franchisee met certain reasonable prearranged conditions, such as being
current in fee payments and passing the most recent physical inspection. In all other
cases, the franchisee should be able to exit the system without liquidated damages after
giving the franchisor a reasonable period of time to replace the property in the marketing
area.
In creating a mutually beneficial
franchising culture, the 21st century franchisor will carve out an exclusive territory for
each franchise with definitive boundaries, so that no property of the same flag can be
licensed. Regarding an affiliated brand, an independent impact study should be
commissioned to determine the extent of incremental impact. The impact study should be
paid for equally by the franchisor and franchisee.
The franchisor would seek approval from a
majority of the franchisees before:
Increasing fees for reservations,
advertising, marketing, training programs, computer and software upgrades, etc.
Changing the physical requirements for
facade and building design, signage, amenities, guest room and bathroom design, public
space, recreational facilities, landscaping, food and beverage outlets, etc.
Creating a new brand name.
Engaging in any cross-brand selling
through the franchise database.
It would mandate mediation and arbitration
(in that order) to settle disputes. In the event of such disputes, the proceedings would
take place in the county and state where the hotel is located, not in the franchisor's
home state.
Finally, if the franchisor sells the brand
to another company who changes the system requirements, the physical standards, or the
level of amenities, the franchisee would have the option to depart the system without
payment of any liquidated damages. The distinctive qualities of such a franchise package
would create a level of trust between hotel owners and franchise companies that does not
now exist in the hotel business. It would be the sine qua non by which all others are
measured and, I believe, would be hugely successful.
Stanley Turkel, MHS,
ISHC is a New York-based hotel consultant specializing in operational audits, asset
management and litigation support services.