Franchisees concerned about Choice's decisions

The hidden agenda seems to be that basically [Choice executives] think this will open up the stock price and they will be able to put in a Comfort and Sleep next to each other. But there is an unbalance happening,” said Mike Patel. “This is a good way for them to put in one-third more brands so they can go up to 7,000 hotels.”

Hotel Interactive
May 7, 2001

Franchisees concerned about Choice’s decisions
Glenn Haussman

NEW YORK — Last week’s announcement that Choice Hotels International is revamping its logos and signage for its Sleep, Comfort Suites and Quality brands has been met with outrage by a vocal group of franchisees that feel the re-imaging has the potential to erode the value and profitability of some of their hotels.

These particular franchisees also feel they were not properly represented by their franchisee advisory organization — the International Operators Counsel (IOC) — and that the newer Sleep product might create impact issues with older Comfort properties. There is also a strong accusation from franchisees that Choice executives are more worried about Wall Street than their franchise clients.

Additionally, Choice franchisees that spoke with Hotel Interactive said that at brand-specific meetings, Comfort Inn owners did not have an opportunity to voice their opinion about any changes, which led to a walk out by a group of owners during the conference.

“With the upgrading of the Sleep brand, what happens is it will impact any Comfort brand in existence and it will be very detrimental to the franchisees that own Comfort. There needs to be an impact policy so that does not happen,” said Gary Tharaldson, CEO of Tharaldson Enterprises, a company with 342 hotels, 88 of which are Choice brands.

Tharaldson also said Choice requires franchisees to pay fees representing 11.5% of their gross, a figure that in his opinion is too high. He believes a more appropriate fee structure should be a maximum of
10%, a sentiment he expressed directly to Choice Chairman Stewart Bainum Jr., and Charles A. Ledsinger Jr., President/CEO, during the Las Vegas conference last week.

“If they do not lower fees, we could change [our Choice branded hotels] to independent properties and we could be better off. The real issue is Choice is right at a cornerstone of a real crisis. Members of the IOC are not happy, the AAHOA board is not happy, and many franchisees that are not part of those groups are not happy. You have a lot of frustrated and dissatisfied franchisees and people will only put up with it for so long.”

Ravi Patel, President and CEO of Sree Hospitality, agrees and also said he is worried about Choice’s decision to not let all franchisees voice their opinions during conference sessions.

“If you are a Comfort owner and they are taking from the sales and marketing fund and do not give [Comfort] owners a chance to ask questions, but Sleep and Quality brand owners had time to ask questions, that is a problem. Do you think this happened accidentally?” said Ravi Patel.

Mike Patel of Diplomat Hotels also senses a lack of commitment by Choice and pegs the problem on the changing nature of the Sleep brand. Additionally, the lack of brand differentiation could not only cause problems with consumers, but also with Comfort owners, because they have no impact protection from newly built Sleep properties that feature suites.

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