酒店特许经营协议和管理(Franchise Agreements and Management)

日期:2018-01-10 / 人气: / 来源:http://www.ldsfunny.com/ 作者:译声翻译公司

 

 

•Statusofemployees(Arethehotel'semployeesemployedbythehotelownerorthemanagementcompany?)

THEINTERNETATWORK

 

•Reflaggingahotelfromalowerqualitybrandtoahigherone

 

Thehospitalityindustry,becauseitiscyclical,sometimesexperiencesfallingoccupancyratesandADRs.Sometimesthesecyclesresultinpropertiesthattallintoreceivershipandlenderswhofacetheconsequenceofbecominginvoluntaryowners.Incasessuchasthese,effectivelymanagingahotelmaysimplymeanoptimizingtheproperty'svaluewhileofferingitforsale.Managementcompaniesthatspecializeinhelpinglendersmaintainrepossessedpropertiesuntiltheycanberesoldwill:

•Operatingahotelinaseverelydepressedmarket

•Reports.Thissectionlistsanymonthlyorannualreportsthatmustbeprovidedbythehotelownertothefranchisorandwhensuchreportsaredue.Examplesmayincludereportsrelatedtoroomrevenuegenerated,occupancylevels,andoccupancytaxespaidandaveragedailyrate(ADR).

Anotherwaytoexaminemanagementcompaniesisbythenumberofhotelstheyoperate.Becauseahotelmanagementcompanythatoperatesoneresorthotelwith750roomsislikelytoemploymoremanagersandhaveresponsibilityforhigherrevenuethananotherhotelmanagementcompanythatoperatesthreelimited-servicehotels,eachofwhichconsistsof100rooms,historicallyhotelmanagementcompanieshavebeenranked(insize)bythenumberof"rooms"theymanage,ratherthanthenumberofhotelstheymanage.Thehospitalitytradepresspublishesrankingsofthelargesthotelmanagementcompaniesperiodically.

FOC(franchiseofferingcircular)

Systemwide

 

 

Thefranchisorquestionnaire

AdvantagestotheHotelOwner

 

TheFranchiseAgreement

ManagingtheFranchiseRelationship

 

 

•Managingahotelthatisslatedforpermanentclosing

FOCsaretypicallydesignedtocomplywithboththelawsofthestateinwhichtheyarefiledandtheFTC'sFranchiseRuleandwillgenerallyincludeinformationabout:

OriginandPurpose

 

 

 

Basicconsiderations

 

Advantagestothefranchisee

 

 

•Disclosethenumberandpercentageoffranchiseesachievingtheearningsratesadvertisedinanypromotionaladsthatincludeearningsclaims

WhataresomeofthefactorsJ.D.shoulddiscusswiththehotel'sowners?Howdoyouthinkanamechangewouldaffectthehotel'smanagementstaff?Howwoulditaffectguests?Howcoulditaffectthehotel'sstandingwithinthecommunity?

MajorElements

 

Despitemanyadvantages,hotelownersfacesomedisadvantagesinherentintheselectionofamanagementcompany.Theseinclude:

 

(FTC)

 

HOTELTERMINOLOGYATWORK

•Thebrand.Evenwhenahotel'sownersdonotinitiatebrand-relatedconflictwithaG.M.andtheG.M.'srelationshipwiththeFSDisgood,personalconflictmaystillarisebetweenaG.M.andthebrand'smanagers.Assume,forexample,thatthosebrandmanagersresponsibleforsellingfranchisestoownersweresuccessfulinconvincingthosewhoownyourhoteltoreflagthepropertytotheirbrand.Afteroneyearofoperation,theownerscomplaintothefranchisecompanythatthenumberofreservationsreceivedthroughthefranchisor'snationalreservationcenterisnotconsistentwiththeamountspromisedbythesalesrepresentatives.Infact,complaintheowners,thevolumeofreservationsreceivedisonlyone-halfofthatpromised.Incasessuchasthese,itisnotatallunusual,andinfactismostlikely,thatthebrandmanagerswillclaimthatitistheG.M.,theworkoftheEOC(ExecutiveOperatingCommittee),andtheoperationofthehotelitselfthatisthecauseoftheshortfall.Notsurprisingly,asthehotel'sG.M.,youarehighlyunlikelytoagreewiththisassessment.Thepotentialforresultingconflictisclear.

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FederalTradeCommission(FTC):TheFTCenforcesfederalantitrustandconsumerprotectionlaws.Italsoseekstoensurethatthenation'sbusinessmarketsfunctioncompetitive^andarefreeofunduerestrictionscausedbyactsorpracticesthatareunfairordeceptive.

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Impactstudy

ThisChapteratWork

 

•Basefeestobecharged

 

 

 

•Requiredoperatingpolicies

Forthefranchisee,franchisinghelpsreducerisk.Provenoperationalmethods,developedbythefranchisor,arcusedtomanagethebusiness.Thefranchiseegivesupthefreedomofbeingcompletelyindependenttobecomepartofagroupcommittedtobuildingabrandandincreasingtheirgroup'smarketshare.Afranchisesystemcan(butmaynot)alsoprovidegroup-buyingpowertoreducethefranchisee'soperatingexpenses.Thetrade-offsforthefranchiseearethefeespaidtothefranchisorfortheoperatinglicenseandtherestrictionsthatareimposedbythefranchisor.Forthefranchisor,franchiseesandtheirfinancialcapitalexpandthebrandfasterthanitwouldeverbepossibleforthefranchisortodosoalone.

 

Toillustrate,assumethat,inourexample,J.D.Ojisimaandthehotel'sowners,afterathoroughinvestigation,selectthe"SleepWell"brandasthefranchiseaffiliationfortheirproposed150-roorn,limited-servicehotel.Assumealsothatthe"SleepWell"brandismanagedbythesamecorporation(ExcaliburHotels)thatmanagesthe"SleepBetter"brand.The"SleepBetter"brandisalsoalimited-servicehotel;however,unlikea"SleepWell"hotel,franchiseesselectingtinsbrandmustofferaswimmingpool,aswellasprovideguestsacomplimentaryhotbreakfasteachmorning.Neitheroftheserequirementsexistsfora"SleepWell."

 

•Talentedmanagersleavefrequently.Assumeyouweretheownerofahotelmanagementcompany.Youhavecontractstooperatelargehotels(thatpayyoulargefees)andsmallerhotels(wherethefeesyouearnareless).OneofyourG.M.sshowsconsiderabletalentoperatingasmallerhotel.Theownerofthepropertyisveryhappywithher.AnopeningforaG.M.arisesatoneofyourlargerhotels.DoyoumovetheG.M.?Inmanycases,theanswerisprobably"yes."Inthoseeases,hotelownersmayexperiencefrequentturnoverofG.M.s,especiallyifthehotelownedissmaller,isinalesspopulargeographiclocation,orforsomeotherreasonisnotviewedasdesirablebyG.M.swithinthemanagementcompanythathasthecontractforoperatingit.

 

"Iwantedyoutoknowup-front,J.D.,"saidWilliamZollarstoJ.D.Qjisima,themanagerofa350-roonifull-servicehotel.

 

 

 

•Managementcompanyinvestmentrequiredorownershipattained

 

Thefranchiseagreementis,inthefinalanalysis,simplyacontractbetweenthebrand'smanagersandthehotel'sowners.Assuch,itisnegotiable.Thestrongerthepositionofeachside,themorepowereachwillbringtothenegotiatingprocess.Itisalwaysinthebestinterestofthehotel'sowners,aswellastheG.M.advisingthem,toberepresentedbyanattorneyduringthefranchiseagreementfinalizationperiodbecausetheseagreementsaredetailedandcomplex.Intheopinionofmanyinthehotelindustry,franchiseagreements,whicharcdraftedbythefranchisor,tendtobewritteninthefavorofthefranchisor.Becausethisistrue,ownersshouldcarefullyreadeverylineofthefranchiseagreementtodetermineexactlywhatthehotelmustdotostayincompliancewiththeagreement,aswellasthepenaltiesthatwillbeincurredifthehoteldoesnotstayincompliance.

 

FSD(FranchiseServicesDirector):Therepresentativeofafranchisehotelbrandwhointeractsdirectlywiththefranchiseehotel'sG.M.s.

 

 

 

 

Inthepast,somecompaniesofferingfranchisestoindividualbusinessownersdidsoinwaysthatwereunscrupulousandoftenillegal.Inanefforttoleveltheplayingfieldbetweenthosewhosellandthosewhowouldbuyfranchises,theFederalTradeCommission(FTC)in1979,issuedregulationswiththefullforceoffederallaw.Thissetoflawsaretitled"DisclosureRequirementsandProhibitionsConcerningFranchisingandBusinessOpportunityVentures."Commonlyreferredtousthe"FranchiseRule,"therulesspellouttheobligationsoffranchisorswhentheyattempttoselltheirfranchisestopotentialfranchisees.

Forahotel'sowners,purchasingahotelfranchiseisactuallyverymuchlikepurchasingthelong-termservicesofotherprofessionals,suchasattorneysoraccountants,whohelptheownermaximizethevalueoftheirasset.Forexample,whenselectingafranchise,therewillbeanumberofcompanies(franchisors)offeringtheservice.Theseserviceprovidersofferavarietyofexperience,skills,andknowledge.Inaddition,thepriceschargedfortheirserviceswillvary.Last,asistrueinmanyrelationships,thefranchisorislikelytohaveaunique"style"ofdoingbusinessthatattracts(ordetracts!)potentialfranchisees.

 

•Paymentforservicescanfietiedtoperformance.Whilemostmanagementcompanieschargearevenue-basedfeetooperateahotel,ownerscannegotiateadditionalpaymentincentivesthathelpassuretheverybestmanagementcompanyperformancepossible.Inthisway,alloftheresourcesofthecompanycanbeutilizedinwaysthatbenefitboththecompanyandthehotel.Goodmanagementcompanieswelcomesucharrangementsbecausetheyallowforaboveaveragefeestobecarriedinexchangeforaboveaveragemanagementperformance.

 

•Thecostsofmanagementcompanyerrorsarebornebytheowner.Unlikealeasearrangement,inamanagementcontractitistheowner,notthemanagementcompany,thatisresponsibleforallcostsassociatedwithoperatingthehotel.Asaresult,theunnecessarycostsincurredasaresultofanyerrorsinmarketingoroperatingthehotelarebornenotbythemanagementcompanymakingtheerrors,butratherbythehotel'sowner.

•Partnershipopportunitiesareenhanced.Manyhotelownersareinvolvedinmultipleproperties.Whenthatisthecase,anestablishedmanagementcompanyandanownershipentitycanworktogetherinavarietyofhotels.Themanagementcompanywillbecomeknowledgeableabouttheowner(s)andthegoalstheownerhasforitshotels.Theownerwillbecomefamiliarwiththeabilitiesaswellasthelimitationsofthemanagementcompany.Along-termpartnershipcan,incasessuchasthese,besynergistic.

•Reportregularlytotheownersaboutthehotel'scondition

 

 

•Manageandbeanowningpartnerinanotherhotel

 

Buyout:Anarrangementinwhichbothpartiestoacontractagreetoendthecontractearlyasaresultofonepartypayingtheotheranagreed-uponfinancialcompensation.

Essentially,theFranchiseRulerequiresthatfranchisors:

THEINTERNETATWORK

FranchiseAgreement:Thelegalcontractbetweenthehotel'sowners(thefranchisee)andthebrandmanagers(thefranchisor),whichdescribesthedutiesandresponsibilitiesofeachinthefranchiserelationship.

•Term(lengthofagreement).Thebeginningandendingdateoftheagreementwillbespelledoutindetail.Themostcommonfranchiseagreementsarewrittenforalengthoftwentyyears.Most,however,alsocontainawindowatthefifth,tenth,andfifteenth,years.Morerecentlysomeagreementshavebeenwrittenwithearlyoutsasfranchisorsaggressivelyseektoenticehotelownerstochoosetheirbrands.

 

HOTELTERMINOLOGYATWORKGLOSSARY

Inhis1980book,AdministrationofHotelandRestaurantManagementContracts,JamesEysterdetailedmanyofthecomponentstypicallyincludedinamanagementagreement.Consideredaclassicworkinthefieldofhotelmanagementcontracts,itisanexcellentadditiontotheseriousG.M.'spersonallibrary.

 

 

HOTELTERMINOLOGYATWORK

•Manage,butnotownanypartof,yetanotherhotelproperty

2.Somehotelmanagersbelievethatthe"brand"nameonahoteliscriticaltoitssuccesswhereasothersfeelprofitablehotelscanstillbeoperatedasindependentsorthatthebrandnameonthehotelisactuallylessimportantthanitoncewas.Whatdoyoubelievearethemajorobstaclesfacedbyindependenthotels?Howcananeffectivemanagementteamovercomethese?Doyoubelievethetrendtowardanincreasednumberofhotelsaffiliatedwithbrandswillcontinue?Whatisthelikelyimpactonindependenthotels?

SelectingaFranchisor

 

 

•Earningsclaims

 

 

muststillbeaddressedbyownersandprospectivemanagementcompanieswhentheyarediscussingapotentialmanagementagreement.Today,majorelementsofmanagementagreementsinclude:

 

Withtheownershipofahotelvestedinonebusinessentityandtheresponsibilityforbrandstandardsrestingwithanotherbusinessentity,itisnotsurprisingthatconflictcanarisebetweenthehotel'sownersandthebrandmanagers.Forexample,assumethemanagersofagivenbranddecidethatthelogofortheirbrand,andthustheexteriorbuildingsignageidentifyingthebrandtothetravelingpublic,hasbecomedatedandisinneedofmodernization.Thebrandmanagersmayhavetheauthority,becauseofthefranchiseagreement,torequireaffiliatedhotelownerstoupdatetheirhotelsignage.Theowners,however,facingsignificantpurchaseandinstillationcostsforreplacingsignsthatareinperfectlygoodworkingorderbutthathavebeendeclared"dated"bythebrandmanagers,maywellattempttoresistthepurchaseofthenewsigns.Infact,thesehotelownersmaydisagreewiththebrandmanagersaboutnumerousoperatingissues.

 

•Generatereliablefinancialstatements

HOTELTERMINOLOGYATWORK

PerhapsoneofthemostusefulservicesahotelG.M.canprovidetoanowneristhatofassistanceintheselectionofahotelbrandwhensuchassistanceisrequested.ItissimplytruethatanexperiencedG.M.,moresothananinexperiencedownerorthefranchisor(whohasavestedinterestinthesale),isinthebestpositiontoprovideadviceabouthowwellagivenbrandnamewill"fit"aspecifichotelproperty.Itisalsotruethatmanyhotelbrandsgothroughalifecyclethatincludesearlybuildup,inwhichnearlyeverypropertyenteringthesystemisnewlybuilt.Laterinthedevelopmentofthebrand,andinanefforttopromoteunitgrowth,brandmanagersmayallowconversions.

 

 

 

HOTELTERMINOLOGYATWORK

PIP(productimprovementplan)

Inthe"Search"field,enter"Books"andthenentertheauthor'snameorthehook'stitle.

 

Conversion

 

•Thenameandaddressofthelegalrepresentativeofthefranchisor

TheManagementOperatingAgreement

•Renewal,transfer,andterminationprocedures

Negotiatingthefranchiseagreement

Conversion:Asaverb:Theprocessofchangingahotel'sflagfromonefranchisortoanother.Alsoknownas"reflagging."Forexample,"WeneedaG.M.experiencedinmanagingahotelconversion."

THEHOTELFRANCHISERELATIONSHIP

HOTELTERMINOLOGYATWORK

 

•Fees.Thissectiondetailsthefeesthefranchiseemustpaytothefranchisor.Whileeachbrandisfreetosetitsfeesasitwishes,thetypicalfeesinahotelfranchiseagreementwillinclude:

AdvantagestotheFranchisee

 

Assume,forexample,thatthebrandmanagersforyourhotelhave,asabrandstandard,establishedbreakfasthoursforthehotel'scomplimentarycontinentalbreakfasttobefrom6:00A.M.to9:00A.M.Thehotel'sowners,however,instructyoutobeginthebreakfastat7:00A.M.,ratherthan6:00A.M.ontheweekends,toreducelaborcosts.Ifyoufollowthedirectiveofthebrandmanagers,youviolateyourowner'swishes,however,ifyoufollowtheinstructionsofyourhotel'sowner,youwillbeinviolationofabrandstandard.

 

Inadditiontofederallawsandregulations,moststatesalsohavefranchiseinvestmentlawsthatrequirefranchisorstoprovideapresaledisclosuredocumentknownasanFOC(franchiseofferingcircular)topotentialfranchisees.

IfyouareaG.M.inthehotelindustryforverylong,youwilllikelywork,orhavetheopportunitytowork,forahotelmanagementcompany.Asdiscussedinchapter1,amanagementcompanyisanorganizationformedfortheexpresspurposeofmanagingoneormorehotels.Hotelownerssignmanagementcontractsthatclearlyestablishthefees,operatingresponsibilities,andlengthoftimeforwhichthemanagementcompanywilloperatetheirhotel.Whenamanagementcompanysecuresacontracttooperateahotel,itmustprovideaG.M.Insuchasituation,themanagementcompanyitself,ratherthanthehotel'sowners,employstheG.M.Asaresultofthepopularityofmanagementcompanies,mostG.M.swillspendatleastaportionoftheircareersworking,notdirectlywithahotel'sownersbutratherdirectlyforamanagementcompany.

Oncealistofpotentialfranchisorshasbeenobtained,itispossibletobegintheselectionprocess.Figure12.2showsasurveythatcouldbeusedtosearchforafranchisor.

 

 

Franchisingisabusinessstrategythatallowsonebusinessentitytousethelogo,trademarksandoperatingsystemsofanotherbusinessentityforthebenefitofboth.Asaresult,franchisingisanetworkofinterdependentbusinessrelationshipsthatallowsanumberofpeopletoshareabrandidentification,asuccessfulmethodofdoingbusiness,and,hopefully,astrongmarketinganddistributionsystem.

 

 

 

www.aahoa.com.

Onewayforapotentialfranchiseetobegintheprocessofnarrowingdownthenumberofprospectivefranchisorstoheselectedisthroughtheuseofastructuredseriesofquestionstowhichallfranchisorsunderconsiderationmustrespond.ListsofandaddressesforhotelfranchisecompaniescanbeeasilyobtainedontheInternet.

•Perceivedquality/servicelevelofthebrand.Travelersassociatesomebrandswithhigherquality,servicelevels,andcost,thanotherbrands.AHolidayInnCrownPlaza,forexample,willlikelybeperceivedbymosttravelersashavingmoreservices(andthusahigherADR)thanaHolidayInnExpress.Inmostcases,franchisors,inanattempttoofferafranchiseproductthatappealstohotelownersatavarietyofdesiredinvestmentlevels,willofferbrandsatarangeofqualityandguestservicesprovided.Thosehotelownerswhoelecttooperatethehighestqualitybrandofferedbyafranchisorwillspend,onaverage,moretobuildorrenovateeachoftheirhotelroomsthaniftheyselectedalowerqualitylevel.Inaddition,totaloperatingcostsarelikelytobehigherwithbrandsthatofferguestsmoreservices,althoughADRsarealsolikelytobehigherinthesecases.Ofcourse,awell-managed,lower-cost,limited-servicebrandcanbemoreprofitableforanownerthanapoorlymanaged,limited-servicebrandpropertywithahighersystemwideADR.Hotelownersthatseektomaximizetheirreturnoninvestmentmustselectabrandthatisbothwellmanagedandthatisappropriate(meetsquality/serviceexpectations)forthetravelerstowhichthehotelismarketed.

 

ItisimportanttorememberthathotelfranchiseFOCsmustbepreparedtomeetthesamerequirementsasthoseinanyotherindustry.CompaniesissuingFOCsshouldbehonest,butthosewhoreadthemshouldbepreparedtoverifyeveryimportantclaimmadeinthedocument.

 

 

HOTELTERMINOLOGYATWORK

•Yourstaff.Yourstaffwillalsobeinfluencedbytherequirementsofyourfranchisor.Examplesofthisarenumerous,fromstandardsrelatedtotheappearanceandcontentofroomattendant'scarts,toemergencyequipmentthatshouldbeavailableinhotelshuttlevans,tothehoursroomservicemustbeavailable,brandstandardswillaffecteverydepartmentinthehotel.Insomecases,thesestandardsmayconflictwithyourinstructionstoyourstaff.Whentheydo,youmustmanagethatconflict.

Thefinancialsuccessofanylodgingfacilityisdependent,inlargemeasure,onthequalityandskillofitson-sitemanagement.Inthetimeperiodbeforethemid-1950s,theownersofahotelhiredthebestG.M.theycouldfindtooperatethehotel(s)theyowned.Iftheyneededamanagerwithaspecificlevelofskillorexperience,theywouldtrytofindone.EventalentedG.M.s,however,maynothavehadexperienceinspecifictasksthatownersneededtobeundertaken.Whenthatwastheease,theresultwasoftenlessthansatisfactoryforboththeownerandthehotel'sG.M.

FIGURE12.1TenLargestBrands

5.G.M.ssometimesfacedifficultdecisionswhentheyareemployedbyamanagementcompanyandoperateabrandedhotel.Insuchasituation,theG.M.'sloyaltycanbetestedbecauseoftheconflictinginterestsofstaff,guests,thebrand,themanagementcompany,andthehotel'sowners.Considerasituationinwhichthefinancialinterestsoftwo(ormore)ofthesegroupsdirectlyconflict(e.g.,managementcompaniesseektomaximizemanagementfeeswhilehotelownersseektominimizethem).Whatwouldbeinthebestinterestsofeachpartyinyourexample?TowhomdoyoubelieveG.M.sowetheirgreatestloyalty?Why?

•Thehotelisoperatingasafranchise.

•Thehotel'sfranchiseservicedirector(FSD).Eachfranchisecompanyassignsanindividualtomonitorthefranchisee'scompliancewiththefranchiseagreement.ThetitleoftheindividualwhoperformsthistaskistheFSD(franchiseservicedirector).

Oneofthebiggestchallengesfacedbythosewhowouldbuyorbuildahotelisthatofwhichflag,ifany,thepropertyshould"fly."ThequestionisanimportantonebothtotheownersofthepropertyandtotheG.M.whooperatesit.

 

 

 

•Proceduresforextendingthecontract

Thefollowingtermsweredefinedwithinthischapter.Ifyouarenotfamiliarwitheachofthem,pleasereviewthesegmentofthechapterthatcontainstheterm.

 

 

 

 

 

 

EarlyOut:Aclauseinafranchiseeagreementthatgrantsboththefranchisorandthefranchiseetheright,withpropernotification,toterminatetheagreementafterithasbeenineffectforarelativelyshortperiodoftime.Whenthisclauseexists,awindowmaybegrantedafteronlyone,two,orthreeyears.

Originandstructure

FSD(franchiseservicesdirector)

"Whatweneedtounderstandbetter,"saidDan,"isexactlywhattheimpactwouldbeofchangingflags.WeareespeciallyconcernedaboutconversioncostsintheirPIPandthenewfranchisecompany'sshort-termabilitytodriverevenuesthroughtheir800number."

AsaprofessionalG.M.,youarelikelytofindyourself,atonetimeoranotherduringyourcareer,managingahotelinoneofthefollowingsituationsrelatedtofranchisorsandmanagementcompanies:

 

 

 

 

Astheregionalviespresidentforsales,itwasWilliam'sjobtosecurenewmanagementcontractsforRicherlandHospitality,oneofthelargestmanagementcontractcompaniesintheUnitedStates.

HOTELTERMINOLOGYATWORK

Flag:Atermusedtorefertothespecificbrandwithwhichahotelmayaffiliate.ExamplesofcurrentlypopularflagsincludebrandssuchasComfortInns,HolidayInnExpress,RamadaInns,HamptonInns,ResidenceInns,BestWestern,andHawthornSuites.Thehotelsaffiliatedwithaspecificflagaresometimesreferredtoasachain.Forexample,"Whichflagsareyouconsideringforyournewhotelproject?"

 

•Requirementsforalteration.Thissectiondetailstherightsofthefranchisortochangetheagreement.

•Targetedexpertisecanbeobtained.Somehotelshavespecialneeds.Reflagging,renovation,andrepositioningskillsarenotequallypossessedbyallG.M.s.Amanagementcompanymaywellhavemanagersonitsstaffthatareexpertsintheseareas,andthisexpertisecanbeusedtothehotelowners'advantage.

 

•Implementsalesandmarketingplanstomaximizethehotel'sshort-andlong-termprofitability

www.swanhost.com.

 

Somehotelsarereflaggedbecausethehotel'sownershavedeterminedthatitisnotintheirbestinteresttocontinuetomeetthebrandstandardsenforcedbythebrandmanagersinchargeoftheircurrentflag.Theseownerswilltakeadvantageofthewindowsorearlyoutsavailabletothemtoendtheirrelationshipwiththeircurrentfranchisorandswitchtoanewbrand,incasessuchasthese,theownerswilloftenseekafranchisethathaslowerbrandstandards.Theseloweredstandardsmayincludeeverythingfromareducedweightofthetowelsthatmustbeusedintheguestbathroomstothequalityofcarpetusedincorridors.Lowerstandardsgenerallymeantheownersareunlikelytoincurlargeexpensesforimprovingthepropertypriortojoiningthenewfranchise.Infact,reflagssuchasthiscanhappeninamatterofonlyseveralweeksormonthsbecausethemainchangesinvolvereplacementofsomeinteriorsignageandthelogosonguestroomitems.Eveninthesecases,however,thehotel'sownerswilltypicallyherequiredtocompletesomephysicalmodificationsoftheproperty(e.g.,newexteriorsignage)priortobeingacceptedintothenewfranchisesystem.

 

 

Unliketherestaurantbusiness,inmostcaseshotelownersfindtheycannotleasetheirpropertiestomanagementcompanies.Ratheritisthemanagementcompanythatreceivesapredeterminedmonthlyfeefromthehotel'sownersinexchangeforoperatingtheproperty,anditistheownerswhoassumeapassivepositionregardingoperatingdecisions,whileatthesametimeassumingresponsibilityforallworkingcapital,operatingexpenses,anddebtservice.Thefeeschargedbymanagementcompaniestooperateahotelvary,butcommonlyrangebetween1and5percentofthehotel'smonthlyrevenue.Thus,regardlessofthehotel'soperatingperformance,themanagementcompanyispaidthefeeforitsservicesandthehotel'sownersreceivetheprofits(Ifany)afterallexpensesarepaid.

 

WhatfactorswouldcausehotelownerstothinkaboutselectingamanagementcompanytooperatetheirhotelratherthanhiringJ.D.directly?Whattypesofowners'groupsdoyoubelievearebestservedhiringmanagementcompanies?DoyoubelieveJ.D.shouldinformtheothersonhismanagementteamthataproposalforamanagementcontractisbeingsubmittedtothehotel'sownership?Whyorwhynot?

 

AreaofProtection(AOP)

 

"Asyouknew,"continuedDan,"wehaveawindowcominguponourfranchiseagreementwithPremierHotels.Ifwearegoingtoswitchflags,weneedtomakeadecisionwithinthenextsixtydays."

Managementcontract

 

 

 

 

•Thequalityandexperienceofthebrandmanagers.Brandmanagement,likehotelmanagement,iscomplex.Thosebrandmanagerswhoareexperiencedintheirworkwilloperatethebrandbetterthanthosewhoarenot.Inaddition,whenbrandmanagersareexperienced,itispossibleforthehotel'sownerstoseeatrackrecordofsuccess(orfailure)onthepartofthemanagers.Therelationshipbetweenafranchisorandafranchiseeisnot,despitetheclaimsofthefranchisor,atruepartnershipbecause,intheeaseoflossesincurredbythehotel,thebrandanditsmanagersarenotfinanciallyresponsible.Infact,nobrandavailabletodaybasesthefeesitcollectsontheachievedprofits,ratherthantheachievedrevenue,ofitsbrandedhotels.Asaresult,itisthehotelowners,notthebrandmanagers,whobearthefinancialriskofpoorbrandmanagement.Becausethatistrue,itiscriticalthatthebrandmanagersbeexperiencedandtalentedandthattheydemonstrategreatintegrityindealingswiththeirfranchisees.

 

•Reportingrelationshipsandrequirements(howmuchdetailisrequiredandhowfrequentlywillthesereportsbeproduced)

•Thenumberofnewpropertiescurrentlybeingbuiltunderthebrand'sname.

 FIGURE12.4ExampleofHotelOwnersandManagementCompanyDisagreements

 

•Assignmentofagreement.Heretheownershiptransferanditsaffectupontheagreementaredetailed.Inmostcases,thehotelownermusthavetheapprovalofthefranchisortotransfer(assign)theirrightsintheagreementtoanother;however,thefranchisorsaretypicallyfreetoassigntheagreementtoanybusinessentitytheychoosewithouttheapprovalofthefranchisee.

Originandstructure

 

 

 

IftheAOPgrantedJ.D.'sgroupexcludesonlythebuildingofadditional"SleepWell"propertieswithintheprotectedarea,itmaybetheopinionofExcaliburHotels,afterseeinghowwelltheoriginalhotelperformedinthemarket(recallthatfranchisorshavearighttoreviewtherevenuerecordsoftheirfranchisees),thatitisinthebestinterestofExcaliburHotelstofranchisea"SleepBetter"hoteldirectlyacrossthestreetfromJ.D.'shotel.Ofcourse,aquestionthenarisesastothepotential"impact"suchadecisionwillhaveonthehotelfranchisedbyJ.D.'sgroup.Theissueofnegativeimpacthasbecomeincreasinglyimportantasbrandconsolidationplacesmoreandmorehotelbrandsinthehandsoffewerandfewerfranchisors.Increasingly,hotelownershavedemandedthatimpactstudies,preparedbyanindependentpart}',beundertakenandpaidfor,whenappropriate,bythefranchisor.Thisisbecauseimpactstudiesaremostlikelytobeneededwhenafranchisorthatmanagestwosimilarhotelbrandsseekstograntfranchiserightstoonebrand,withintheAOPgrantedtoanotherbrand'sfranchisee.Iftheimpactstudyindicatesthatthegrantingofacompetitivefranchisecoulddamagethevalueoftheoriginalfranchisee'shotel,compensationforthatdamageshould,intheopinionofmanyhotelowners,becomeanegotiablepartofthefranchiseagreement.

 

 

•Licensegrant.Herethefranchisorwilldescribethemannerinwhichthehotelownerisallowedtousethebrand'slogos,signage,andnameintheoperationofthehotel.

Assume,forexample,thataguestchecksintoyourhotel.Theguestistiredandirritable.Thehotelisbusybecauseatourbus,withmanycheck-insarrivedjustbeforethisguestandasaresultittakesnearlytenminutestogettheguestcheckedin.TheguestcomplainstotheFOMaboutthetimeithastakentogetregistered.TheFOM,realizingthatthefrontdeskstaffwasworkingattheirtopspeed,apologizes,explainsthatotherguestshadarrivedfirst,buttakesnootheraction.Whentheguestdemandsthathisroombe"comped,"theFOMdeclinestodoso.Theguest,uponarrivinginhisroom,callsthebrand'snationalguestservicetelephonenumber,tocomplainthatcheck-intooknearly"thirtyminutes,"anddemands,accordingtothebrand's"satisfactionguaranteed"program,thathisroombe"comped."Dependingonthebrandmanagersdecisionaboutthisguest,asaG.M.youmaywellhavetoexplaintoyourFOMthathisorherdecisionmustbeoverturnedInordertocomplywiththebrandstandardof"satisfactionguaranteed."

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FranchisinghaslongbeenapartofAmericanbusiness.Thehistoryofhotelfranchising,however,isrelativelyshort.Manyinthehotelindustrybelievethatthefirstsignificanthotelfranchisingarrangementsbeganinthe1950swithKemmonsWilsonandhisHolidayInnchain.

Avarietyofbenefitscanaccruetohotelownerswhoselectaqualifiedmanagementcompanytooperatetheirhotels.Amongtheseare:

 

Advantagestothehotelowner

Listsofhotelfranchisors,theirmailingaddresses,andtheindividual(s)responsibleforeachbrandtheymanagecanbequicklyobtainedontheInternet.Foronesuchsourceofhotelfranchisorcontactinformation,goto:

 

 

 

 

 

 

 

 

 

 

LegitimatedifferencesofopinionandconflictscanarisebetweenahotelG.M.andthefranchisor'srepresentative.Thepersonalrelationship,however,thatultimatelydevelopsbetweentheFSDandtheG.M,isanimportantone.Whentherelationshipisgood,theFSDisviewedasavaluableresource.Whenitisnotgood,conflictsbetweentheFSDandyourselfcouldescalatetothepointthattheynegativelyimpactyourabilitytoeffectivelyoperatethehotel.

Flag

Hotelmanagementcompaniescanbeexaminedfromavarietyofdifferentviewpoints.Onewaytoviewmanagementcompaniesistoconsiderwhethertheyarefirsttierorsecondtier.Theterm"tier"referssimplytowhosenameisonthehotelthemanagementcompanyisoperating.Tieringdoesnotrefertothequalityofthemanagementoperating,orG.M.sworkingfor,themanagementcompany.

•Insurancerequirement.Toprotectbothparties,thehotelownerwillberequiredtoprovideinsurance.Inthissectionthetypesandamountsofrequiredinsurancewillbelisted.Typicalrequirementsincludeproofofgeneralindemnificationpolicies,automobileinsurance,andmandatoryworkers'compensation(injury)insurance.

•Thepercentageoftotalhotelroomrevenuecontributedbythebrand'sreservationsystemandthepercentageofhotelswithinthebrandthatachievethataveragerateofcontribution.

AreaofProtection(AOP):Thegeographicarea,whichisdesignatedbyafranchisor,andgrantedtoafranchisee,inwhichnodirectlycompetingfranchiseeswillbesold.Used,forexample,in,"TheAOPthefranchisorisproposingconsistsofafive-mileradiusaroundthehotelandlastsforfiveyears."

 

•SpecificinformationrequiredbyeachstateinwhichtheFOCistobefiled

 

 

•Territorialprotectionofferedbythefranchisor

Whilehotelfranchisorswillnot,asarule,estimatetheexpensesrequiredforimplementingthePIPstheyprepare,thehotel'sownersmustdosotoobtainatruetotalcostoftheimprovementsnecessaryforconvertingtothenewflag.AnaggressivePIPcanincreaseanowner'sconversioncostsbymanythousandsofdollars,therefore,athoroughreviewoftherequiredPIPisalwayscrucialpriortobeginningthefranchiseagreementnegotiationprocess.

 

 

 

Toreadtheentire"FranchiseRule"developedbytheFTCandtofamiliarizeyourselfwiththerequirementsplaceduponthosewhosellfranchises,goto:

 

SecondTier:Managementcompaniesthatoperatehotelsforownerswhohaveenteredintoanagreementtouseoneolafranchisor'sflagsasthehotelbrand.AmericanGeneralHospitality,SummitHotelManagement,andWinegardnerandHammons,Inc.areexamples.

BasicConsiderations

Insomecases,hotelownersdonegotiatecontractsthattie,atleasttosomedegree,managementcompanycompensationtothehotel'sactualoperatingperformance.Insomecases,thisisacceptable,especiallywithhotelsthatareprovenprofitable.Inothercases,however,itcantakemonthsorevenyearstoturnanunprofitablehotelintoaprofitableone.Often,itistheownersofunprofitableordistressedmarkethotelsthatseektheassistanceofmanagementcompanies.Understandably,however,fewhotelmanagementcompaniesarewillingtoenterintoriskymanagementcontractsthatmayresultinthemfinanciallysubsidizinginvestorswhoownahotelthateitherhasbeenpoorlymanagedinthepastorthatisnotlikelytobeaprofitablehotelinitscurrentcondition.

 

Whilethequestionsthatareimportanttoanyspecifichotelownerwilldeterminetheinformationrequestedonthefranchisorsurvey,usingtheresultsoftheinformationgatheredinasurveysuchasthatpresentedinFigure12.2,ownersoftheprospectivehotelwouldcontact,andtheninterviewinperson,thefranchisorfinalists.

 

 

 

Conversionscanbebeneficialtoabrandbecausetheyallowthebrandtogrowmorequickly.Theycanbeadetrimenttothebrand,however,iftheconvertedpropertiesdonothavethefeaturesandqualitylevelsofthehotelsalreadyinthebrand.

•Thebusinessexperienceofthefranchisecompany'sofficers

 

•Feesaridroyaltiesthatmusthepaid

GoodG.M.sareoperationalprofessionalswhomay,atvarioustimes,findthemselvesworkingdirectlyforthosewhoownthehoteland,atothertimes,foramanagementcompanyselectedbytheownerstooperatethehotel.Inmostcases,afranchisecompanywillbeinvolvedalso.Becausethatistrue,itisimportantforG.M.stoknowaboutboththerelationshipthatexistsbetweenahotel'sowners,(thefranchisee)andthehotelbrand{thefranchisor)whenbothpartiessignafranchiseagreementandthespecialrelationshipthatexistsbetweenownersandamanagementcompanywhenamanagementcontractisinplace.

Eachoftheabovestructuretypeshasadvantagesanddisadvantagesbothtothemanagementcompanyandtothosewithwhomitpartners.IfamanagementcompanyemploysyouasaG.M.,itisimportantforyoutoknowyourcompany'sownershipparticipationlevelinthespecifichotelyouaremanagingsothatyoucanbetterunderstandthecompany'soperatingphilosophy,aswellasadviseyourstaffabouttheownershipofthehotel.

Window:Aclauseinafranchiseeagreementthatgrantsboththefranchisorandthefranchiseetheright,withpropernotification,toterminatetheagreement.

MANAGERSATWORK

 

ManagingforaManagementCompany

Franchise:Anarrangementwherebyoneparty(thebrand)allowsanother(thehotelowners)touseitslogo,name,systems,andresourcesinexchangeforafee.

 

 

Theresultisthat,despitethefactthatthesamemanagementcompanycurrentlyoperatingthehotelemploysallEOCmembers;somemayfeelmoreloyaltytothehotelanditsownersthantothecompany.AsaG.M.,itisnothardtounderstandthesemanagers'perspective,yetastheleaderofthehoteloperatingteam,youmustdoyourbesttopreventthisdichotomyofinterestsfrominfluencingtheexperiencethatguestsinyourhotelreceive.

•Bankruptcy/repossessionofthehotel

 

 

•Thepercentageofhotels,onanannualbasis,thathaveelectedtoleavethebrandinthepastfiveyears.

 

HOTELTERMINOLOGYATWORK

www.amazon.com.

•Managing/directingamajor(complete)renovationofahotel

 

 

•Thenumberofhotelscurrentlyoperatingunderthebrandname.

•Thelengthoftheagreement

AsaG.M.advisinganowneraboutfranchiseselectionsavailable,itisimportanttoknowasmuchaboutapotentialfranchisoraspossiblesothatyouradvicewillbeasaccurateasitcanbe.Aswehaveseen,franchisorsarcrequired,bylaw,todiscloseagreatdealofinformation.Thisinformationshouldbereviewedcarefullybypotentialfranchisees.Evenmoreinformationcanbeobtainedthroughadiligentprocessofinvestigationandinterview.Forthepurposeofillustratingtheprocedureofselectingafranchisebrand,assumethatyouareapproachedbyaninvestmentgroupthathasdecidedtobuildanewISO-roomlimitedservicehotel.Theywanttohireyoutoadvisethemonselectingthebestpossiblebrandforthehotel.Whileyouwillhavemuchtoinvestigate,someofthefactorsthatyouwouldcertainlywanttoconsiderbeforemakingarecommendationwouldbe:

HOTELTERMINOLOGYATWORK

Insomecases,therenovationandreplacementrequirementsimposeduponahotelwillbequiteextensive.Majorconstruction,roomadditions,andfar-reachingfacilityupgradesmayberequired.Inallcases,installingnewoutdoorsignageandpurchasingnewandremovingoldlogoitemsrequiredbythepreviousfranchisorwouldalsoneedtobedone.Ingeneral,aconversionwillalwaysrequiresomefacilitymodificationand,insomeeases,thesecanbequitecostly.

NegotiatingtheFranchiseAgreement

•Showthehoteltoprospectivebuyers

"Wewantedtogetyourinput,J.D.,becauseyouareclosesttotheoperation,"saidDanielFlood.Daniel,knowntoJ.D.as"Dan,"wastheheadoftheinvestmentgroupthatownedthe350-roomfull-servicehotelatwhichJ.D.wastheG.M.

TheFranchisorQuestionnaire

www.ftc.gov/bcp/franchise/16cir436.htm.

ManagementContract:Anagreementbetweenahotel'sownersandahotelmanagementcompanyunderwhich,forafee,themanagementcompanyoperatesthehotel.Alsosometimesknownasamanagementagreement.

 

•Managingahotelasaresultoftheunexpectedresignationofthehotel'sG.M.

MajorElements

Unlikethehistoryofsomeotherindustries,thehistoryofhotelfranchisingdoesnotincludewidespreadcasesoffranchisorfraudordeception.Despitethatfact,hotelfranchiserelationshipsaresubjecttothesamefederalandstatelawsthathavebeenenactedtoprotectfranchiseesfromunscrupulousfranchisorsinallindustries.

 

•Affiliationfees.Theseareflatfees,paidupfront(uponsigningtheagreement),toaffiliatewiththebrand.

FirstTier:Managementcompaniesthatoperatehotelsforownersusingthemanagementcompany'stradenameasthehotelbrand.Hyatt,Hilton,andSheratonareexamples.

 

Whilethetitleofthisindividualmayvarysomewhat,thepositionisalwaysresponsiblefortheday-to-dayrelationshipbetweenthefranchisorandthefranchisee.Insomecases,theFSDmayperformthequalityassuranceinspectionsrequiredbythefranchisor.Otherroutinetasksincludeassistingthehotel'ssaleseffort,monitoringandadvisingaboutthehotel'suseofthefranchise-providedreservationsystemandadvisingthefranchiseontheavailabilityanduseoffranchisorresources.

 

theWebsiteoftheAmericanHotelandLodgingAssociation.

 

AsaG.M.,itisimportantforyoutounderstandthatifyouareoperatingabrandedhotel,youhavearesponsibilitytoyouremployer;however,youalsohavearesponsibilitytoabidebythefranchiseagreementsignedbyyourhotel'sowners.Thatagreementwillalwaysincludeasectionthatrequiresyourbesteffortsinmaintainingtheestablishedstandardsofthebrand.Conflictscananddoarisebetweenhotelownersandbrandmanagers.AsaG.M.,itisyourresponsibilitytobalancethelegitimateinterestsofyourhotelandthebrandinamannerthatreflectspositivelyonyourownprofessionalism.

 

 

 

3.Productsegmentationinthehotelindustryistypicallygoodforfranchisecompaniesbecauseitallowsthemtomaximizethenumberofhotelstheyhaveinagivengeographicareaandthusmaximizethefeestheyreceive.Criticscontend,however,thatexcessiveproductsegmentationunfairlypitshotelownersagainstotherownersoperatingvirtuallyidenticalhotelproducts(albeitwithdifferentbrandnames)withinthesamefranchisegroupandinthesamegeographicarea.Asfewerandfewerfranchisecompaniesownincreasinglylargernumbersofbrands,thisdebatewilllikelyintensify.AsaG.M.concernedaboutguestsatisfaction,how,ifatall,doesthisissueaffectguests?Considerbothpositiveandnegativeimpacts.Dothepositivesoutweighthenegatives?Whyorwhynot?

•Documentedmanagerialeffectivenessisavailable.Banks,mortgagecompanies,andotherswhoareaskedsupplyinvestmentcapitaltoownerswanttoknowthatthehoteltheownersarepurchasingorforwhichloansarcsoughtwill,infact,beoperatedwithprofessionalhotelmanagers.Theselectionofanexperiencedmanagementcompanywithdocumentedevidenceofpastsuccessinrunninghotelssimilartotheoneforwhichinvestmentisrequestedaddscredibilitytoloanapplicationssubmittedbyhotelowners.

•TheADRtrendforthelastfiveyearsincomparisontotheADRtrendfortheindustrysegmentinwhichthebrandcompetes.

Whilealargenumberofhotelsarebuilteachyear,anevenlargernumberofbrandconversionsareundertakeneachyear.Abrandconversionmayoccurforavarietyofreasons,includingafranchisor/franchiseedispute,becausetheownersofthehoteldecidethefutureprospectsforthebrandtheyarecurrentlyaffiliatedwitharenotgood,orbecauseanewbrandappearstoofferabetterfinancialreturnontheowner'sinvestment.

 

4.Traditionally,managementcompanieshavebeenpaidamonthlyfee(usuallyapercentageofgrossroomsrevenue)tomanageahotel.Morerecently,managementfeesaretiedtoactualhotelperformanceasmeasuredbyRevParindexes;generatedbytheSTARReport(secchapter10).Criticsofthisnewerapproachcontendthat,whiletheSTARReportmeasuresthesalesabilityofthemanagementteam,itdoesnotmeasuretheteam'sabilitytocontrolcostsandmaximizeprofitability.Ifyouformedamanagementcompany,wouldyouproposetomanagehotelsforApercentageofthegrossroomsrevenue,forateedeterminedbyyourSTARReportresultsorforafeedeterminedbythehotel'sprofitability?Why?Whichdoyoubelievewouldappealmosttohotelowners?AsaprofessionalG.M.,underwhichsystemwouldyoumostliketomanage?

Hotelmanagementcompanystructures

TheAsianAmericanHotelOwnersAssociation(AAHDA)hasbeenattheforefrontofpromotingfairnessinhotelfranchising.Theirassociatemembersinteractwithmanybrandmanagementcompanies.TolearnmoreaboutAAHOAandtoreviewtheir12PointsofFairFranchising,goto:

•Conflictswithbrandmanagers.Somemanagementcompanieshaveexcellentrelationswiththebrandstheymanageforownersbutothersdonot.AsaG.M.,youmayfindthatsomeofthewishesoreventhedirectivesofthebrandmanagersareinconflictwiththoseofyourmanagementcompany.Forexample,afranchisecompanymay,inanefforttopromotebusiness,sendtothehotellarge,exteriorbannersthatadvertiseaspecialrateorhotelfeature.Obviously,thebrandwouldlikethesesignsdisplayedontheproperty.Themanagementcompany'ssalesphilosophy,however,maynotincludehangingexteriorbannersbecauseitbelievessuchbannerscheapentheimageofthehotel.Asaresult,thebannersarenotdisplayed.ItislikelythattheFSDwillcomplaintotheG.M.whowas,quiterightly,simplyfollowingthedirectiveofthemanagementcompanytowhomheorshereports.

Itisimportanttonotethat,unlikesomeotherfranchiseindustries,themajorityofhotelbrandmanagers(franchisors)donotoperatehotels.Theyoperatefranchisecompanies.Hotelowners(thefranchisees)andtheirG.M.saretheoperatingentitiesinnearlyallhotelfranchiserelationships.

Managingforamanagementcompany

•Responsibilitiesofthefranchisor.Thissectiondetailstheobligationsofthefranchisorundertheagreementandlistswhatthehotelownerwillreceiveinexchangeforpayingfeesandroyalties.ItwillincludeitemssuchasInspectionschedules,marketingefforts,andbrandstandardsenforcement.

Majorelements

Conflictswithbrandmanagerscanrangefromtheveryminortotheveryserious.Astheowner'srepresentativetothebrand,virtuallyanyconflictthatcouldarisebetweenafranchisorandanownercouldarisebetweenafranchisorandtheowner'smanagementcompany.AsaprofessionalG.M.,youmustbeawareofthesepotentialconflictsandbereadytoactinthelong-termbestinterestsofyouremployer.

•Thecontrol,ifany,thattheownerhasintheselectionorremovaloftheG.M.andothermanagersemployedbythemanagementcompanyandworkingattheowner'shotel

Inthischapteryouwilllearnaboutmajorfranchisecompaniesandthebrandstheyoperate.TheownersofhotelsoftenaskexperiencedG.M.stheiropinionsaboutthebestbrandtobeselectedforaspecifichotel.Therefore,youwillalsolearnhowtoevaluatealternativebrandoptionswiththegoalofchoosingthebestbrandforaspecifichotel.ManagingafranchisedhotelpresentsspecialchallengestotheG.M.Thischapterreviewstheadvantagesofbrandaffiliationfromtheperspectivesofboththeownersofahotelandthefranchisorwithanemphasisonhowthefranchiseagreement,whichisthelegaldocumentgoverningtherelationshipbetweenthehotelandthemanagersoftheselectedbrand,affectstheworkoftheG.M.

HOTELTERMINOLOGYATWORK

 

Theproductimprovementplan(PIP)

Whilethesizeofahotelmanagementcompanymayindeedsaysomethingaboutthesuccessfulnessofthecompany,itisoftenmoreusefultosegmenthotelmanagementcompaniesbythemannerinwhichtheyparticipate,ordonotparticipate,intheactualriskandownershipofthehotelstheymanage.Asaresult,thesecompaniescanbeexaminedbasedupontheirparticipationinone(ormorethanone)ofthefollowingarrangements.

 

 

 

 

 

•Incentivesfeesearnedorpenaltiesassessedrelatedtooperatingperformance

THEINTERNETATWORK

•Themanagementcompanyonlymanageshotelsitowns.Somemanagementcompaniesareformedsimplytomanagethehotelstheythemselvesown.Thesecompanieswanttoparticipateinthehotelindustryasbothinvestorsandmanagers.Clearlyanadvantageofthissituationisthatthemanagementcompanywillbenefitfromitsownsuccessifthehotelsitmanagesareprofitable.Ifthecompanyisnotsuccessful,however,itwillberesponsibleforanyoperatinglosesincurredbyitshotels.

Todayhotelownersincreasinglyelecttoaffiliatetheirhotelswithotherhotelsunderacommonbrandname.Infact,aswesawinchapter1(Figure1.6),thegreatmajorityofhotelsintheUnitedStatescurrentlyoperateaspartofaregionalornationalbrand.Manyofthesebrandsarcgroupedunderacommonbrandmanagementgroup.Forexample,ChoiceHotelsInternationalmanagestheClarion,Quality,ComfortInn,ComfortSuites,SleepInn,MainStaySuites,RoadwayInn,andEconolodgebrands.Cendant,asofthetimeofwritingthisbook,managestheAmerihost,Day'sInn,HowardJohnson,KnightsInn,Ramada,SuperEight,Travelodge,andWingateInnbrands,aswellasotherfranchisednamesincludingAvis(carrental)andCentury21(realestatesales).

 

 

www.franchise.org.

 

 

 

•StrainedEOCrelationships.AnimportantpartofaG.M.'sjobistoassureeachmemberoftheEOCthatheorsheisavaluablepartnerinthehotel'sultimatesuccess.Certainlythispartnershipiseasiertomaintainwhenthemanagementcompanyisnotthreatenedbythelossofthecontracttomanagethehotel.Whenthemanagementcompanyisindangerofloosingthecontract,thepartnershiptheG.M.wishestodevelopmaybestrainedbythefactthatsomemembersoftheEOCenjoygreaterjobsecuritythanothers.

•Themanagementcompanyisapartner(withothers)intheownershipofthehotelstheymanage.Acommonarrangementwithinthehotelcommunityisthatofamanagementcompany,partneringwithaninvestor(s)tojointlyownandmanagehotels.Frequently,inthissituation,themanagementcompanyeitherbuysorisgivenaportionofhotelownership(usually1%-20%),andthenassumesthemanagementofthehotel.Thosehotelownerswhopreferthisarrangementfeelthatthepartialownershipenjoyedbythemanagementcompanywillresultinbetterperformancebythem.Ontheotherhand,ifthehotelexperienceslosses,themanagementcompanymaysharetheselosses,andthisfactcanalsohelpserveasamotivatorforthemanagementcompany!

 

Depressedmarket

Whiletheactualnumberofhotelsmanagedbyanysinglemanagementcompanyvariesfromyeartoyear,thetenlargestmanagementcompaniesbasedonannualrevenueandthenumberofpropertiestheymanageatthetimeofthiswritingareincludedasFigure12.3.

THEHOTELMANAGEMENTCOMPANYRELATIONSHIP

Firsttier

 

HOTELTERMINOLOGYATWORK

•Affectedandconcernedemployees.G.M.sworkingformanagementcompaniesknowtowhomtheydirectlyreportandgenerallywillbefamiliarwiththeemploymentpoliciesandprocedureofthemanagementcompanyemployingthem.Hourlyemployeesmaynotbeasfamiliarwiththemanagementcompany,andthiscanbearealconcernwhenanownerchoosestoemployanewmanagementcompany.When,forexample,anownerdecidestoallowonemanagementcontracttoexpireandelectstochooseadifferentmanagementcompany,thehotel'semployeeswilllikely,underthetermsofthecontract,beterminatedbythefirstmanagementcompanyand"hired"bythenewcompany,eventhoughtheymayhavebeenatthehotelformanyyears.Avarietyofemployment-relatedissuesmayarise.Forexample,assumethatMaria,ahousekeeper,hasbeenatthehotelforfifteenyearsasanemployeeofManagementCompany#1.ThatcompanylosesitsmanagementcontracttoCompany#2.Asaresult,Maria'semploymentwiththefirstcompanyisterminated.Asafifteen-yearemployeeofManagementCompany#1,Mariawasentitledtothreeweeks'paidvacationperyear.ManagementCompany#2,however,viewsMariaasanewemployee,andunderitspoliciesMariawillqualifyforonlytwoweeks'vacationperyear.Infact,shemustbeemployedbythenewcompanyforaminimumofsixmonthsbeforesheisallowedanyvacationatall!TheimpactonMariaisobvious,asaretheresultingchallengesaG.M.faceswhenanewmanagementcompanymustimplementitsbenefit,pay,seniority,andrelatedemploymentpoliciesinplaceofthoseofapreviousmanagementcompany.

Ahotelfranchiserelationshipexistswhentheownersofahotelchooseaflagandenterintoafranchiseagreementwiththemanagersofthatspecificbrand.

 

 

Whenfranchiseagreementsand/ormanagementcontractsexist,theywillaffectyourroleasaG.M.,aswellashowyouperformyourjob.InthissectionweexaminehowworkinginabrandedpropertyaffectstheG.M.,aswellashowworkingforamanagementcompanycanimpacttheG.M.'sdailyefforts.

 

 

Inthe1950sandlater,asmorehotelsbecamefranchisedandashotelownergroupspurchasedeverlargernumbersofhotels,theseowner'sinabilitytoactivelyrecruit,train,andsupervisethemanyG.M.stheyrequiredtomanagetheirpropertiesresultedinthegrowthofcompaniesthatwereformedsimplytomanagehotelsunderordinaryaswellasout-of-theordinarycircumstances.Today,withtheadventoflarge(andsmall)managementcompanies,ownersoftenfindthat,becauseahotelmanagementcompanyemploysmanymanagers,oneormoreofthosemanagershastheexactexperiencethattheownerislookingfor.Inmanycases,ownersfacespecialcircumstancesintheoperationofthehotelstheyown.Someofthesespecialsituationsinclude:

Eachbrandwill,dependingontheparentcompany'sstructure,haveabrandmanagerorpresidentresponsibleforgrowingthenumberofhotelsinthebrandandmaintainingthequalitystandardsthathavebeenestablishedforthatbrand.Itisimportanttounderstandthatintheoverwhelmingmajorityofcasesfranchisecompaniesdonotactuallyownthehotelsoperatingundertheirbrandnames.Companiessuchastheseown,instead,therighttosellthebrandnameanddeterminethestandardsthatwillbefollowedbythosehotelownerswhodoelecttoaffiliatewiththeirbrands.

 

JustasbrandaffiliationinfluencestheactivitiesoftheG.M.,so,too,doesthespecialsituationinwhichtheG.M.isemployednotdirectlybythehotel,butratherbythemanagementcompanyselectedtooperatethehotel.Inthischapteryouwilllearnabouthowsomeofthemajorhotelmanagementcompaniesoperate.Inaddition,youwillreviewhowthemanagementcontract,whichisthelegaldocumentgoverningtherelationshipbetweentheownersofahotelandthecompanyselectedtooperatethehotel,affectstheday-to-dayresponsibilitiesoftheG.M.

 

HOTELTERMINOLOGYATWORK

 

TheFranchiseAgreement

 

•Themanagementcompanyowns,byitself,someofthehotelsitmanages,andownsapart,ornoneatall,ofothersitmanages.Somemanagementcompanieswillvarytheirownershipparticipationdependingonthehotelinvolved.Thus,agivenmanagementcompanymay:

 

 

 

Earlyout

 

AsaG.M.,itisimportantforyoutofullyunderstandtherelationshipthatexistswhenahotelownersignsamanagementcontractwithahotelmanagementcompany.Onewaytounderstandtherelationshipbetteristocontrasttherestaurantbusinesswiththehotelbusiness.Intherestaurantbusiness,theownerofarestaurantwhoelectsnottooperateit,butwishestocontinueownership,willoftenleasethespacetoanotherrestaurateur.Inthatsituation,theperson(s)owningthenewbusinessentitythatleasestherestaurantpaystherestaurant'sowneranagreed-uponamountandassumesresponsibilityforalltheexpensesassociatedwithoperatingthebusiness.Iftherestaurantmakesmoney,thebenefitgoestotheperson(s)wholeasedthespace.Iftherestaurantlosesmoney,thesameperson(s)areresponsiblefortheloss.

 

 

DepressedMarket:Thetermusedtodescribeahotelmarketareawhereoccupancyratesand/orADRsarefarbelowtheirhistoriclevels.Used,forexample,in,"Thepermanentclosingofthemilitarybaseinthattownresultedindepressedmarketconditionsintheentirecounty."

•Initialinvestmentrequirements

Inmanycases,thosewhoinvestinhotelsarenotthesameindividualsasthosewhowanttomanagethehotels.ThesenonoperatinghotelownerscaneitherhireindividualG.M.stodirecttheirhotels,or,iftheydesire,theycanhireamanagementcompanytodoso.Insomecases,theownersofahotelhaveabsolutelynointerestinmanagingoreveninthecontinuedownershipofthehotel.Forexample,assumethatabankhasloanedmoneytoahotelownertodevelopaproperty.Theowneropensthehotel,but,overtime,failstomaketherequiredloanrepayments.Asaresult,thebankisforcedtorepossessthehotel.Inacasesuchasthis,thebank,whichisnowtheowner,willlikelyseekamanagementcompanythatspecializesindistressedpropertiestomanagethehoteluntilitisputupforsaleandpurchasedbyanewowner.

HOTELTERMINOLOGYATWORK

•Provideevidence,inwriting,ofanyearningsclaimsorprofitforecastsmadebythefranchisor

 

 

TheProductImprovementPlan(PIP)

 

 

 

 

 

 

 

GovernmentalRegulationsRelatedtoFranchises

 

 

 

Thereareasmanydifferentcontractsbetweenthosewhoownhotelsandthemanagementcompaniestheyemploytomanagethem,astherearehotelsundermanagementcontract.Everyhotelownerwill,dependingonthemanagementcompanyselected,haveauniquemanagementcontract,oroperatingagreement,foreachhotelowned.Insomecases,thesecontractsmayincludepreopeningservicesthatareprovidedevenbeforethehotelisofficiallyopen.Preopeningactivitiesmayincludehiringandtrainingstaff,purchasinginventories,andotheroperationalactivitiesthatmustbedonebeforethefirstguestcanbehoused.Becauseyounowunderstandthebusinessrelationshipthatcanexistbetweenanownerofahotelandamanagementcompany,itisimportantthatyou,asaG.M.,knowaboutthebasicelementsfoundinamanagementcompany'soperatingagreement.

 

 

 

 

Ownersshouldcertainlyevaluateallcomponentsoftheirproposedfranchiseagreements;however,oneareaofspecialconcern,especiallytothosemanagingandinvestinginahotel,istherelativelynewmatteroftheimpactstudy,thatis,whenthesestudiesshouldbeundertaken,andwhoshouldpayforthem.

BrandStandard:Ahotelserviceorfeaturethatmustbeadoptedbyanypropertyenteringaspecifichotelbrand'ssystem.Used,forexample,in,"Thefranchisorhasdeterminedthat'freelocaltelephonecalls'willbecomeanewbrandstandardeffectiveJanuary1st."

 

Thegreatestadvantagetoafranchisorofenteringintoafranchiseagreementwithahotelowneristheincreaseinfeepaymentstothebrandthatwillresultfromtheagreement.Likeallbusinesses,franchisecompaniesdesiregrowth.Thegreaterthenumberofhotelsthatoperateunderasinglebrandnamethegreater,ingeneral,thevalueofthenameandthusthefeesthatcanbechargedforusingthatname.Inaddition,eachadditionalhotelthataffiliateswithahotelbrandhelpstopayforthefixedoverheadoioperatingthatbrand.Therefore,additionalhotelpropertiesoperatingunderthesamebrandnameresultingreaterprofitsforthefranchisecompany.Asaresult,franchisorsareaggressiveinsolicitingagreementswithhotelownerseveniftheseownersareaffiliatedwithanotherbrand.Aswell,franchisorsactivelypursuethoseownersdevelopingnewhotelswhohavenotyetselectedafranchisebrand.

•Thenumberofexistinghotelsconvertingtothebrand(ifconversionsareallowed).

 

Selectinganewfranchisorwhenconvertingahotelfromonebrandtoanotheriscomplicatedbythefactthatthenewbrandmanagersarelikelytoimposerenovation,repair,orupgradeconditionsonthehotel'sowners.Forexample,anewfranchisormayagreetoenterintoafranchiseagreementonlyifahotel'sownersarewillingtoreplaceoldercarpetsandfurnitureinthehotel'sguestroomswithnewcarpetsandfurniture.Brandmanagerswanttomakesurethateachhotelconvertingintothesystemwillmeetthebrandstandardsestablishedforthebrandtheymanage.

 

Advantagestothefranchisor

 

 

 

 

 

•Improvedmanagementquality.Insomecases,amanagementcompanyisabletooffertalentedG.M.sabetteremploymentsituationthanthataffordedbyanindividualhotelowner.AG.M.'sopportunitiesforadvancement,increasedtrainingprospects,andemploymentsecurityarcfrequentlyenhancedbyworkingforamanagementcompany.Asaresult,ownersbenefitfromtheeffortsofG.M.swhoartmorehighlyskilled.Inaddition,amanagementcompanymayhavespecialistsonstaffthatcanassistthepropertyG.M.inareassuchashospitalitylaw,accounting,andfoodandbeveragemanagement.Inmanycases,thehotel'sownerscouldnotsupplytheseadditionalresources.

IssuesAffectingtheGeneralManager

 

•Royaltyfees.Thesefeesarepaidbaseduponanagreeduponformulaandaretypicallytiedtothelevelofrevenuegeneratedbythehotel.

Theprimaryadvantagestoahotelofbuyingafranchisearcthatdoingsoallowsthehotel'sownerstoacquireabrandnamewithregionalornationalrecognitionandtoconnectthehoteltotheGlobalDistributionSystem(GDS).Asseenearlier,connectivitytotheGDSis,intoday'shotelmarket,anecessity.Anindependenthotelcan,infact,purchasethisconnectivity;however,ifiscostly.

 

 

HotelFranchising

HOTELTERMINOLOGYATWORK

 

DisadvantagestotheHotelOwner

 

MANAGERSATWORK

 

•Directionofthebrand.Byfarthemostimportantfactorinthelong-termsuccessofthefranchisor/franchiserelationshipisthefuturedirectionofthebrand.Obviously,itisimpossibletopredictthefuture,yetknowinghowabrandwillbeperceivedbythepublicinfive,ten,ortwentyyearsisimportantwhensigningafranchiseagreementforthatsamenumberofyears.Cluestothefuturesuccessofthebrandcanbedetectedbyaskingthefranchisorabout

Majorelements

•Marketingfees.Thesefeesarealsodeterminedbythehotel'srevenuelevelsandaretobeusedexclusivelytoadvertisethebrandname.Suchmarketingeffortsmayincludeadsplacedonnationalorregionalradio,magazines,newspapers,ortelevision.

(imagesP408)

 

 

THEHOTELMANAGEMENTCOMPANYRELATIONSHIP

 

 

 

•Transferofownershipmaybecomplicated.Theterm(length)ofamanagementcontract,especiallyifthehotelislarge,canbeseveralyears.Asaresult,iftheownersdecidetoputthehotelupforsaleduringthelifeofthecontract,thosepotentialbuyerswhoeitheroperatetheirownhotels,oruseadifferentmanagementcompany,maynotbeinterestedinbuying.Ifthecontractiswritteninsuchawayastohaveabuyoutofthecontract,thecostofthebuyoutmaybesohighthattheownercanonlyselltothosepotentialbuyerswillingtopaytheveryhighestpricefortheproperty,whichlimitsthenumberofpotentialbuyers.

Inadditiontoincreasedsaleslevels,affiliationwithabrandaffectstheabilityofahotel'sownertosecurefinancing.Whenownersseekfinancingfrombanksorotherlendinginstitutions,theyfindthattheselenderswill,almostwithoutexception,requireanaffiliationwithanestablishedbrandpriortoconsideringthehotelforaloan.

 

HotelManagementCompanyStructures

ISSUESATWORK

 

 

•Establishsuitablestaffingtomaximizecustomerandemployeesatisfaction

 

 

AAHOA(AsianAmericanHotelOwnersAssociation):Anassociationofhotelownerswho,throughanexchangeofideas,seektopromoteprofessionalismandexcellenceinhotelownership.

 

Thesestatesprohibitthesaleofafranchiseinsidetheirbordersuntilafranchisor'sFOChasbeenfiledwiththeproperstateauthorities.Whilethesestates,liketheFTC,imposedisclosurerequirementsonfranchisors,neitherverifiestheaccuracyoftheinformationinthedisclosuredocuments.Verificationofafranchisor'sclaimsistheresponsibilityofthebuyer(franchisee).Forexample,ahotelfranchisecompanycanmakeaclaimthatits800numberprovidestheaveragefranchiseewithfiftysoldguestroomspernight.ThisclaimwillnotbeverifiedasaccuratebyeithertheFTCorthestateinwhichthefranchisorfilesanFOC.ThepotentialfranchisorshouldseekverificationofanyitemintheFOCthatisquestionablepriortosigningafranchiseagreement.

 

Additionaladvantages,dependingonthefranchisorselected,mayincludeassistancewithon-sitetraining,adviceonpurchasingfurnishingsandfixtures,reducedoperatingcostsresultingfromvendorswhogivebrandoperatorspreferredpricing,andfreeinteriordesignassistance.

•Theinterestsofhotelownersandthemanagementcompaniestheyemploysometimesconflict.Onthesurface,itwouldseemthattheinterestsofahotelownerandthemanagementcompanyselectedtooperatethehotelwouldalwayscoincide.Bothareinterestedinoperatingaprofitablehotel.Infact,disputesarisebecausehotelownerstypicallyseektominimizethefeestheypaytomanagementcompanies(becausereducedfeesyieldgreaterprofits),whilemanagementcompaniesseektomaximizetheirfees.Asaresult,hotelownerswhohiremanagementcompaniesoftenhaveseriousdisagreementswiththosecompaniesoverwhetherthehotelsareindeedoperatedinthebestinterestoftheowners.ExamplesofsuchdisagreementsarcevidentinnewsreportssuchasthatinFigure12.4,astoryreportedonwww.Lodgingnews.com,

 

 

 

 

12FranchiseAgreementsandManagement

Afranchiseagreementissimplyawrittencontractbetweenafranchisor(thebrandmanagers)andafranchisee(thehotelowner).Whileeachbrandwilldevelopitsownfranchiseagreement,thefollowinginformationistypicallyincluded:

 

•Contracttermsintheeventofthehotel'ssale

 

Franchise

 

 

 

"ThanksforlettingmeknowBill,"saidJ.D.,"butIhadalreadyheardfromourhotelownersthatyouweregoingtopresentaproposal."Infact,theownersofthehotelhadletJ.D.knowthatRicherlandhadapproachedthemwiththeideaofassumingthemanagementofthehotel.BecausethehotelJ.D.operatedhadhighvisibilityinthecity,andbecauseitwasveryprofitable,itwasnotunusualthatamanagementcompanywouldattempttosecureamanagementcontractforit.Ithappenedalmosteveryyear.

 

 

•Detaileddefinitions.Inthissection,anydefinitionsusedintheagreementthatcouldbesubjecttomisinterpretationbythepartiestotheagreementaredefined.Forexample,manyfranchiseeagreementsbasethefeestobepaidbyownersonthegrossroomrevenueachievedbythehotel.Inthissectionoftheagreement,thefranchisorwoulddetailexactlywhatgrossroomrevenuemeans.Thefollowingisanexampleofadefinitionthatdescribesthetermingreatdetailandisofthetypefoundinthissectionofthedocument:"Grossroomsrevenue"meanstherevenuefromtherentalofsleepingroomsandmeetingroomsatthehotel.ItdoesnotincluderevenuefromInternetaccessfees,telephonecalls,in-roomsafesorminibars,vendingmachines,foodandbeveragesales,orroomservice.

•Notmakeclaimsorallyorinwritingthatconflictwiththewrittendisclosuredocumentsprovidedtothefranchisee

ManagementCompanies

 

HOTELTERMINOLOGYATWORKGLOSSARY

 

•Reservationfees.Thesearecollectedtooperatethebrand'sreservationsystem(800number).

 

 

 

 

 

 (imagesP420)

 

•Rightsandobligationsofthefranchisorandfranchisee

SelectingaFranchisor

Managingthefranchiserelationship

 

 

ToorderacopyofJamesEyster'sbookAdministrationofHotelandRestaurantManagementContracts,publishedbyCornellUniversityPress,goto:

Chapter12Outline

 

 

 

Forexample,assumeahotelbrandallowshotelownerstochargeguestsforlocaltelephonecalls(somebrandsdonotallowthis).AstheG.M.inacompetitivemarket,youdeterminethatmanyofyourguestswillexpectfreelocalcallsbecausethatiswhatyourcompetitorsoffer.Ifyouimplementthefreelocalcallpolicy,yourguestswillbepleased,butthesesameguestsmaybeunhappyiftheylaterstayatoneoftheotherhotelsinyourchainthatdoesnotoffercomplimentarylocalcalls.Theseguestsmay,infact,bedisappointedbecausetheybelieved,andjustifiablyso,thatallhotelsaffiliatedwithyourbrandofferedtreelocalcalls.AsaG.M.,whenitisyourownhotelthatfallsshortofafeatureofferedbyanotherhotelwithinyourbrand,youmaybechallengedtosatisfyaguestwhoseexpectationsexceedthatwhichyourhotelisabletomeet.

 

 FIGURE12.3TenLargestManagementCompanies

•Thehotelisoperatingunderamanagementcontract.

•Namesofthepartiessigningtheagreement.Inthissection,thenameofthelegalentityrepresentingthebrandaswellasthecorporation,partnership,orsoleproprietorowningthehotelislisted.

ManagementCompanies

Managementcompaniesconcentrateonavarietyofspecialtyareas.SwanInc.isoneofthemosttechnologicallyadvanced.Toviewitssiteandservices,goto:

HOTELTERMINOLOGYATWORK

HOTELTERMINOLOGYATWORK

Brandstandard

 

•Exclusivity(Isthemanagementcontractcompanyallowedtooperatecompetinghotels?)

Sinceallconversionswillrequireatleastsomepropertychangeandimprovement,ownerscontemplatingabrandconversionwillwanttoknowtheextentofthechangestheymustimplementpriortobeingacceptedbythenewbrand.Whenapotentialfranchisorinspectsahotelpropertywhoseownersareinterestedinaconversion,aPIP(productimprovementplan)willbeprepared.

 

FOC(FranchiseOfferingCircular):Afranchisedisclosuredocumentthatispreparedbyafranchisorandthenisregisteredandfiledwiththestategovernmentalagencyresponsibleforadministeringfranchiserelationshipsinthatstate.

 

 

OccupancyTax:Moneypaidbyahoteltoalocaltaxingauthority.Theroomrevenuegeneratedbythehoteldeterminestheamountpaid.Thistaxisalsoknown,insomeareas,asthe"bed"tax.Forexample,"Inourcity,theoccupancytaxis4percent."

 

 

•Currentfranchisees

 

 

 

 

 

 

 

Asanoun:Thetermusedtodescribeahotelthathaschangeditsflagfromonefranchisortoanother.Forexample,"Hasthishotelalwaysbeena(brandname],orisitaconversion?"

 

 

Whenahotel'sownerselecttoaffiliatetheirhotelwithabrand,theywillsignafranchiseagreementwiththefranchisor'sbrandmanagers.Thefranchiseagreementwillspellout,ingreatdetail,theresponsibilitiesofboththebrandmanagers(franchisors)andthehotelowners(franchisee).Inthepast,manyownerswithinthehotelcommunityfeltthatbrandmanagershadtoomuchpowertocontrolthetermsandconditionscontainedinthefranchiseagreements.Morerecently,vocalgroupsofowners,ledchieflybytheAsianAmericanHotelOwner'sAssociation(AAHOA),haveproposed,andactivelycampaignedfor,fundamentalchangesinthebasicfranchiseagreementsthathavelongbeeninuse.Theseproposedchangesseektogivehotelownersmorecontroloverthecontentoffranchiseagreementsandamoreequalsayintheoperationoftheirhotels.

Whiletimeshavechanged,andcertainlyeachspecificmanagementcontractisdifferent,manyofthenegotiableissuesidentifiedinEyster'sbook

 

 

 

 

Whiletheexampleaboveissimplyoneinstanceofpossiblebrandconflict,therearecertainlymanyothers.TheimportantfactortorememberincasessuchastheseisthatthehotelindustryisrelativelysmallandG.M.s(aswellasbrandmanagers)canquicklydevelopreputationsthatwillfollowthemthroughouttheircareers.AsaprofessionalG.M.,itisalwaysinyourbestinteresttoapproachanypotentialconflictsituationwithbrandmanagersinawaythatiscredible,principled,andstraightforward.

 

Inacombinationofwhatmaywellbeparthistoricalfactandparthotellore,thestoryistoldofhow,in1951,Wilson,aresidentofMemphis,Tennessee,loadedhiswifeandfivechildrenintothefamilyearanddrovetoWashington,D.C.,foravacation.Hewasquiteunhappywiththemotelaccommodationshefoundalongtheway.Theroomsheencounteredwere,hebelieved,toosmall,tooexpensive,andinmanycases,notclean.WilsonreturnedtoTennesseeconvincedthathecouldbuildachainofhotelsacrossthecountrythatwouldoperateunderthesamenameandprovidethetravelingpublicwithalodgingexperiencetheycouldcountontobeclean,comfortable,andmoderatelypriced.Hehiredanarchitecttodrawuptheplansforaprototypehotel.Thearchitect,accordingtolegend,waswatchinganoldBingCrosbymovietitledHolidayInnwhilehewasworking,andsketchedthatnameonthetopoftheplanshewasdrawing.Wilson,uponseeingtheplans,likedthemandthenameatthetopaswell.Asaresult,theHolidayInnwasborn.ThefirstHolidayInnopenedinTennesseein1952andthe400thHolidayInnfranchisebeganoperationinDecember1962.Today,HolidayInnsfranchisesitsnameaspartoftheInterContinentalhotelgroupthatconsistsofover1,500propertiesworldwide,includingthebrandsInter-ContinentalHotels,HolidayInn,HolidayInnSelect,HolidayInnExpress,HolidayInnCrownPlaza,andStaybridgeSuites.

 

 

•Secure,andifithasclosed,reopenthehotel

THEINTERNETATWORK

•Providepotentialfranchiseeswithcopiesofthebasicfranchiseagreementusedbythefranchisor

•Ownallofaspecifichotelaswellasmanageit

HotelFranchising

Aswehaveseen,sometimesamanagementcompanyownsthehotelitoperates.Whenthatisthecase,thepropertyG.M.is,ofcourse,workingdirectlyforthehotel'sowners.Inmanycases,however,themanagementcompanydoesnotownthehotelitoperates.Whenthatisso,theG.M.,becauseheorshedocsnotworkdirectlyforthehotel'sowners,maybefacedwithspecialchallenges.Thesecaninclude:

 

 

 

 

•Terminationordefault.Theeventsthatpermitatermination,ordefineadefault,byeitherpartyaredetailedinthissection.Inmostcases,adefaultonthepartofthefranchiseewillresultinpenaltiesthatmustbepaidbythefranchiseetothefranchisor.

PotentialfranchiseescanlearnagreatdealaboutbuyingandoperatingafranchisebyjoiningtheInternationalFranchiseAssociation(IFA).Toreviewthetypeofinformationtheypro-widetotheirmembers,golo:

Disadvantagestothehotelowner

 

•Proceduresforearlyterminationbyeitherparty

•Responsibilitiesofthefranchisee.Thissectiondetailswhatthehotelownerwilldoinexchangefortherighttousethenameofthefranchisor'sbrand.Itwillincludeitemssuchassignagerequirements,operationalstandardsthatmustbeimplemented,andpaymentschedulesthatmustbemet.

 

 

 

 

 

Consider,forexample,thehotelinwhichanownerisconsideringchangingatier-twomanagementcompany.Ifthechangetakesplace,itislikelythattheG.M.,thedirectorofsalesandmarketing,thecontrollerand,ifitisafull-servicehotel,thefoodandbeveragedirectorwillbereplaced.Otherdepartmentheads,suchaytheFOM,theexecutivehousekeeper,andthemaintenancechiefaremuchlesslikelytobereplaced.Thisistruebecauseamanagementcompanywinninganewcontractdoesnot,assomebelieve,replaceeveryemployeeatthehotel.Infact,todosowoulddisruptthehoteltremendously.Thus,dependingonthesizeofhotelandphilosophyofthemanagementcompanyassumingthecontract,theG.M.(almostalways),aswellassomenumberofmanagers(butgenerallynotall),willbereplaced.

 

•Yourguests.KemmonsWilson'svisionforHolidayInnwasachainofhotelswherearrivingguestsknewexactlywhattoexpectfromtheirstay.Thissamevisionexistsinthemindsofmostbrandmanagerstoday.Infact,however,hotelsaswellasthosewhooperatethemcanandwillvary.Asaresult,guestexperiencescanvaryalso.Whentheguest'sexpectationsareexceeded,thisvariationcanbegood.Unfortunately,thatsameguestmayexpectthesameexperienceatthenexthotelaffiliatedwiththebrand,andtheymay,infact,bedisappointed.

 

 

 

 

1.SomeG.M.sbelievethattheycanbestfurthertheircareersbychoosingtomanageonlyhotelsaffiliatedwithaspecificbrand(i.e.,Hyatt,Westin,HolidayInn,etc.).OtherG.M.sbelievetheyaremostmarketableiftheyhaveexperiencemanagingseveraldifferenthotelbrands.Assumeyouwereahotelowner.WhichtypeofG.M.doyouthinkwouldbemostvaluabletoyourhotel?Wouldthebrandwithwhichyouareaffiliatedaffectyourdecision?Wouldyouropinionhealteredifyouwereconsideringchangingtheflagatyourproperty?Whyorwhynot?

 

 

 

•Asamplefranchiseagreement

 

Window

TheManagementOperatingAgreement

 

IssuesAffectingtheGeneralManager

THEINTERNETATWORK

 

Originandpurpose

"Don'tbeconcerned,J.D.,"continuedWilliam."Ourproposalwillrecommendthatwekeepmostofyourmanagementteaminplace,includingyou…ofcourse."

AdvantagestotheFranchisor

 

HOTELTERMINOLOGYATWORK

 

Clearly,inthesituationabove,amanagementcompanyprovidesavitalservicetothebank.WhileanindividualG.M.mightbeabletoprovidethesameservices(andusuallyatalowerinitialcost),manyhotelinvestorsandownersprefertohiremanagementcompanies.

 

•Theamountoffeespaidtothefranchisor.Fartoomanyhotelowners,whenevaluatingalternativefranchisors,focusonlyonthefeesthehotelwillpaytothebrand.Whilethefeespaidtoafranchisorarecertainlyonefactortobeconsidered,itisnottheonlyfactor,norisiteventhemostimportant.Nearlyallhotelownersfeelthefranchisefeestheypayaretoohigh;conversely,nearlyallfranchisorsfeelthatwhattheirfranchiseesreceiveinexchangefortheirfeepaymentsisagreatvaluetothehotel.Infact,thefeespaidtoafranchisorareanegotiablepartofthefranchiseagreementandshouldbeconsideredseriouslyonlyafterthehotelownerhasnarroweddownthelistofpotentialfranchisorstothosethatmeetothercriteriatheownerhasestablishedforselectingthebrand.

 

•Refundpromptlyanydepositmonieslegallyduetopotentialfranchiseesthatelectednottosignafranchiseagreementwiththefranchisor

 

•Dualloyaltyissues(ownersvs.managementcompany).AstheG.M.ofahoteloperatedbyamanagementcompany,theremaybetimesthatthebusinessinterestsoftheownersofthehotelyouaremanagingconflictwiththebusinessinterestsofyouremployer.Itisimportanttorememberthat,inthesecases,youwillmostoftenberewardedforloyaltytoyourmanagementcompany.Forexample,'assumethatthecontractformanagingthehotelatwhichyouaretheG.M.isupforrenewal.Mostunbiasedobserverswouldmaintainthatitisinthebestinterestofthehotel'sownerstonegotiateasshortacontractlengthaspossibleandonethatholdsthemanagementcompanyresponsibleforfinancialresultsthatfallshortofexpectations.Thesesameobserverswouldlikelystatethatitisinthebestinterestofthemanagementcompanytonegotiateaslongacontractaspossibleandonethatholdsthehotel'sowners,notthemanagementcompany,financiallyresponsibleintheeventthathoteloperatingperformancedoesnotmeetanticipatedlevels.AsaG.M.workingforamanagementcompany,youmaynot,atalltimes,beinapositiontoadvisethehotelowneroftheirbestcourseofactionbecause,infact,thatcourseofactionworksagainstthebestinterestsofyourowncompany.

Governmentalregulationsrelatedtofranchises

 

•Careermanagementchallenges.Whenyouworkforamanagementcompany,advancementinyourorganizationcomesthroughsatisfyingthedesiresofthecompany,notnecessarilytheownersofthehotelyouaremanaging.Anexamplethatinvolvespositiveconflictpointstooneofthechallengesyoumayfaceinyourowncareerworkingforamanagementcompany.AssumeyouareatalentedG.M.operatinga350-roomhotel.Yourmanagementcompanyhasjustgainedaten-yearcontracttooperatea550-roomhotelinyourhometown.ThehotelwillrequireaG.JVL,anditisapositionyouwouldverymuchliketoassume,yettheownersofyourcurrenthotelareadamantthattheywantyoutoremainandhaveeventhreatenedthemanagementcompanythattheywillnotrenewthemanagementcontractwhenitexpiresifyouareallowedtotransfer.Thisproblem(anditisagoodone!)aswellasotherslikeitcanoccurwhenlong-termcareeradvancementwithyourmanagementcompanyconflictswiththedesiresofthehotelownersforwhomyouarecurrentlymanaging.Inasituationsuchasthis,yourcompanywillevaluateyourlong-termemploymentworth(justasyoualsomustevaluateit),aswellasthecourseofactionthatisbestforthelong-termgrowthofthemanagementcompany.Clearly,however,itwillnotbepossibleto,atthesametime,satisfyyourdesireforpromotionwithyourhotelowner'sdesireforG.M.stability.

•Thehotel'sowners.Itisasimplefactthathotelownersoftenfindthemselvesinconflictwith,orattheveryleastindisagreementwith,brandmanagersabouthowtobestoperatethebranditself,aswellashowtooperatetheindividualhotelsmakingupthebrand.Unfortunately,whenthesedisagreementsoccur,itcanputthehotel'sG.M.inthemiddleoftheconflict.

 

Thisexampleissimplyoneofmanyinwhichthepoliciesusedanddecisionsmadebystaffmaybeinfluencedbytherequirementsolabrand.Asthehotel'sG.M.,itispartofyourjobtoblendtheoperatingpoliciesthatyouandthehotel'sownerpreferwiththosedictatedbythebrandandexplainyouractionstoyourstaffifconflictbetweenthetwoapproachesshouldarise.

 

 

 

Whiletheactualbrandsmanagedbyanysinglefranchisorchangeasthesebrandsareboughtandsold,thetenlargestbrandsatthetimeofthiswritingareincludedasFigure12.1.

•Supplypotentialfranchiseeswithadisclosuredocumentattheearlierofthefirstface-to-facemeetingortenbusinessdaysbeforeanymoneyispaidbythefranchiseetothefranchisor

 

 

 

 

•Theownercannotcontrolselectionoftheon-siteG.M.andotherhigh-levelmanagers.ThroughoutthishookwehavetriedtodemonstratetheimportanceoftheG.M.tothesuccessofahotelproperty.Whenusingamanagementcompany,thehotel'sowner(whomaybeallowedsomeinput)willnottypicallychoosethehotel'sG.M.Asaresult,thequalityofG.M.employedmayberelatedmoretothechoiceofG.M.savailable(currentlyemployedby)themanagementcompanythantothequalityneededbythehotel.Experiencedownersknowtheimportanceofqualityon-sitemanagementandshouldinsistuponthebestG.M.(aswellasothermanagers)thatthemanagementcompanycanprovide.

PIP(ProductImprovementPlan):Adocumentdetailingthepropertyupgradesandreplacementsthatwillberequiredifahotelistobeacceptedasoneofaspecificbrand'sfranchisedproperties.Used,forexample,in,"WeestimatethePIPonthepropertytobe$4,000,000ifwedecidetogowiththatbrand."

•Managingahotelforanextendedperiodoftimeforownerswhoelectnottobecomedirectlyinvolvedintheday-to-dayoperationoftheproperty

•Arbitrationandlegalfees.Inthissection,theresponsibilitiesofeachpartyrelatedtolegaldisputesaredetailed.Alsoincludedinthissectionisinformationaboutthegeographiclocationofthecourtwheresuchdisputesaretoberesolved.Inmostfranchiseagreements,disputesarctoberesolvedinthestateinwhichthefranchisorisincorporated.

•Thenameofthefranchisorandthetypeoffranchiseitoffersforsale

 

HoteloperationscanbefurthercomplicatedbythefactthatthebusinessentityowningthehotelandchoosingbrandaffiliationmayalsoelecttohireamanagementcompanythatwillactuallyselectaG.M.andoperatethehotel.Thus,atypicaltravelerislikelytobestayingatahotelownedbyonebusinessentitythathaselectedtoaffiliatethehotelwithabrand(asecondentity)andentrustthemanagementofthehoteltoamanagementcompany(athirdentity),whoactuallyhirestheG.M.

 

 

J.D.wasawarethatmeetingshadbeenheldbetweentheownersofhishotelandanalternativefranchisecompany.IntheireffortstosecureafranchiseagreementwithFlood'sgroup,thenewfranchisorwasofferingveryattractivereductionsinroyaltyandreservationfeesforthefirstthreeyearsoftheagreement.

•Insurancerequirementsofthemanagementcompany(whomustcarryinsuranceandhowmuch)

ISSUESATWORK

 

THEINTERNETATWORK

 

FederalTradeCommissionOccupancytax

 

 

System-Wide:Thetermusedtodescribeallhotelswithinagivenbrand.Usedforexample,in:"Lastyear,thesystem-wideADRforthebrandwas$115.20,withanoccupancyrateof63.7%."

•Signaturepages.Theauthorizedrepresentativesofthebrand,aswellastheownersofthehotel,willsignthefranchiseagreement.

WhenownersinstructG.M.stoviolateorignorebrandstandards,theresultinginfluenceonthehotel'srelationshipwiththebrandcanbenegative.Alternatively,whenbrandmanagersseektheG.M.'scompliancewithactsthatmaybeinthebestinterestatthebrandmanagers,butnotthehotel'sowners,difficultiesmayalsoarise.Issuesregardingloyaltytoowner/employersandethicalstandardsforfunctioningasaprofessionalG.M.arealwayspresent,butthesetakeonextracomplexitywhenahotelisoperatedaspartofafranchiseechain.

Fromtheperspectiveofthetravelingpublic,perhapsoneofthemostmisunderstoodaspectsofhotelsisthequestionofwhoownsthemandwhomanagesthem.Thisisduetothefactthatinmostcases,hotelsareownedbyabusinessentitythatelects,forthegoodofthatbusiness,toaffiliatewithagroupofsimilarhotelsandoperateunderthenameofthathotelgroup.Thesehotelgroupsarecalledbrands,flags,orchains.Thecompanyadministeringanddirectingthebranditselfisnot,inmostcases,anownerofhotels,butrather,asafranchisecompany,itisresponsibleforthegrowthofthebrand.

Secondtier

 

FIGURE12.2FranchisorSurvey

Affiliationwithastrongbrandincreasesthehotel'ssalesandthusitsprofitability.Thetotalfeespaidbythehotelownertothebrandmanagersarerelatedtothestrengthofthebrandnameandtherevenuethatthenamewillbringtothehotel.Whilethefeesrelatedtoafranchiseagreementaresometimesnegotiable,theywill,onaverage,equalfrom3to15percentofahotel'sgrossroomrevenue.

 

 

•Thehotelisafranchiseoperatingunderamanagementcontract.

Franchiseagreement

 

www.franchisehelp.com.

 

Buyout

 

Franchiseagreementsarecomplexandareincreasinglyimportant.Theyshouldbeenteredintoonlyafteragreatdealofconsiderationandwithexpertassistance.Thefact,however,isthatonlyafewhotelscansurvivewithoutanationallyrecognizedbrandname.Asaresult,G.M.smustbecomeadeptatoperatinghotelsinthebestinterestoftheirowners,aswellasincompliancewiththeirowner'sfranchiseagreement.

•Theoccupancyratetrendforthelastfiveyearsincomparisontotheoccupancyratetrendfortheindustrysegmentinwhichthebrandcompetes.

 

J.D.wasmeetingforbreakfastatWilliam'srequest,andthepurposeofthemeetinghadbecomeclearalmostimmediately.

 

 

•Reflaggingahotelfromahigherqualitybrandtoalowerone

 

THEHOTELFRANCHISERELATIONSHIP

 

HOTELTERMINOLOGYATWORK

Mosthotelsareaffiliatedwithafranchise.Thisisespeciallytrueofhotelswithmorethanseventy-fiverooms.Asaresult,itislikelythatyonwillmanageahotelwheretheownersandabrand'smanagershavesignedafranchiseagreement.AstheG.M.,thisagreementwillaffectyourrelationshipwith:

•Themanagementcompanyisneitherapartnerinnoranownerofthehotelstheymanage.Inthissituation,thehotel'sownershirethemanagementcompany.Thisiscommon,forexample,whenlendersinvoluntarilytakepossessionofahotel.Inothercases,themanagementcompanymay,foritsownphilosophicalreasons,electtoconcentrateonlyonmanagingpropertiesandwillnotparticipateinhotelinvesting(ownership).

ImpactStudy:Anin-depthevaluationoftheeffectonoccupancypercentandADRthatanewhotelinagivenmarketwillhaveonanexistinghotel(s)inthatsamemarket.

 

AAHOA

 

 

 

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答:可以。我们可以为客户提供各种翻译配套服务,包括PDF制作、CAD以及各类文件的排版、语言配音、刻录、字幕处理等。
问:你们可以为其他城市提供翻译服务吗?
答:可以的。我公司拥有一大批经验丰富的项目管理人员,通过成熟的网络平台以及项目经理的专业素养,我们可以承接全球的翻译业务。目前,我们在上海和南京设有办事机构。

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