1、Chapter 12Franchise Agreements and Management ContractsA business strategy allowing one party(the brand)to use the logo,trademarks and operating systems of another business entity in exchange for a feeThe Hotel Franchise RelationshipA network of interdependent business relationships allowing a numbe
2、r of people 1)to share brand identification,2)to develop a successful method of doing business,and 3)to establish a strong marketing and distribution system.For the franchisee,franchising helps reduce risk-Proven operational methods are usedFranchisees and their financial capital expand the brand fa
3、ster than franchiser could do soloFranchise benefits What is franchising?Hotel Operations Management,1/e2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River,NJ 07458History of hotel franchising is relatively short-First significant hotel franchising arrangement began in 19
4、50s with Kemmons Wilson and his Holiday Inn chainToday hotel owners increasingly affiliate their hotels with other hotels under a common brand name.Hotel Franchising:Origin&StructureCompany administering and directing the brand itself is not an owner of hotels,but rather a franchise company.Majority
5、 of franchise companies do not actually own the hotels operating under their brand names.-Those companies have right to sell brand name&determine brand standardsConflict can arise between hotel owners and brand managers-G.M.should balance legitimate interests of hotel and brand Hotel Operations Mana
6、gement,1/e2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River,NJ 07458BrandPropertiesRooms 1.Best Western International4,008304,664 2.Holiday Inn1,576295,252 3.Days Inn Worldwide1,947164,023 4.Marriott Hotels,Resorts&Suites433160,540 5.Comfort Inns and Comfort Suites2,065
7、159,619 6.Sheraton Hotels&Resorts399133,200 7.Super 8 Motels2,092127,533 8.Ramada Franchise Systems971118,114 9.Hampton Inn/Hampton Inn and Suites1,175120,58910.Holiday Inn Express1,351109,186Figure 12.1:Ten Largest BrandsHotel Franchising:Origin&Structure(continued.)Hotel Operations Management,1/e2
8、004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River,NJ 07458Supply potential franchisees with disclosure document at either the first face-to-face meeting or ten business days before any money is paid by franchisee to franchiser Federal Trade Commission(1979):Franchise Rul
9、e requires that franchisers:Hotel Franchising:Governmental Regulations Related to FranchisesProvide evidence,in writing,of any earning claims or profit forecasts made by franchiserDisclose number and%of franchisees achieving earnings rates advertised in any promotional ads that include earnings clai
10、msProvide potential franchisees with copies of basic franchise agreement used by franchiserRefund promptly any deposit monies legally due to potential franchisees who elected not to sign a franchise agreement with franchiserDo not make claims orally or in writing that conflict with written disclosur
11、e documents provided to franchiseeHotel Operations Management,1/e2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River,NJ 07458Name of franchiser and type of franchise it offers for saleBusiness experience of franchise companys officersFees&royalties that must be paidInitia
12、l investment requirementsRights&obligations of franchiser&franchiseeTerritorial protection offered by franchiserRequired operating policiesRenewal,transfer,and termination proceduresEarnings claimsA sample franchise agreementSpecific info required by each state in which FOC is to be filedName and ad
13、dress of legal representative of franchiserFranchise Offering Circular(FOC)includeHotel Franchising:Governmental Regulations Related to FranchisesHotel Operations Management,1/e2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River,NJ 07458Franchise agreement:legal contract
14、between hotel owners(franchisee)and brand managers(franchiser),which describes duties&responsibilities of each in the franchise relationship The Franchise AgreementA hotel franchise relationship exists with a franchise agreement.Hotel Operations Management,1/e2004 Pearson Education Hayes/Ninemeier P
15、earson Prentice Hall Upper Saddle River,NJ 07458Names of parties signing agreement-Name of legal entity representing the brand as well as corporation,partnership,or sole proprietor owning hotelFranchise agreement includes:The Franchise Agreement:Major ElementsDetailed definitions-Any definitions sub
16、ject to misinterpretation by parties to the agreement are defined.License grant-Description of how the owner is allowed to use the brands logo,signage,and name in operating the hotel.Term(length of agreement)-The most common franchise agreements are written for 20 years.-Also include windows at fifth,tenth,&fifteenth years with early outs.Hotel Operations Management,1/e2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River,NJ 07458Fees-Affiliation fees/royalty fees/marke
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