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Nobody Asked Me, But… No. 50
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Do You Know About O8A? Do Hotel Franchisees Need Independent
Associations? The Best Franchise Advisory Councils
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By Stanley Turkel, MHS, ISHC
March  2009

1.  Do You Know About O8A?-   A group of Super 8 hotel owners recently organized and formed the Owners 8 Association (O8A) which is the only independent association of Wyndham Hotel Group franchisees.  The Association currently consists of over 1,276 members who have joined together to create a more unified voice to represent their concerns with the franchisor.  During the past year, O8A has played an integral role in bringing many positive changes for franchisees, O8A continues to try to forge new relationships with Wyndham Hotels officials to create a better working environment.  

Currently, because of O8A’s efforts, an important decision by Eric Danziger, President, Wyndham Hotels Group stopped automatic enrollment into the Wyndham Rewards Program.  O8A considers this action to be a significant victory which will result in immediate savings for franchisees.  For more information regarding O8A, visit their website at www.O8A.org or call Jay Patel at 336-998-9116.

2.  Do Hotel Franchisees Need Independent Associations?  In the volatile world of franchisor/franchisee relations, reconciliation often seems hopeless because the franchisor usually has the upper hand.  Even the modest proposals embodied in the AAHOA 12 Points of Fair Franchising are seen as revolutionary and radical.

At the center of the dialogue between franchisors and franchisees are the sometimes invisible franchise advisory councils (FACs).  These organizations are created and subsidized by franchisors with the idea of fostering and controlling communication and franchisee participation.

As the name indicates, FACs are usually purely advisory and their bylaws determine issues the franchisor will address.  The franchisor usually shapes meeting agendas and appoints the franchisee members who serve on the FAC.

Franchisors, of course, claim that the FACs are a progressive force in promoting good relations and cooperation with franchisees, some of whom are likely to define them as little more than window dressing.  FACs can be an inexpensive mediation tool to solve conflicts in the entire system, because they enable the franchisee, who has hands-on experience, to be able to filter information back to the franchisor.  According to some industry observers, those tools can get tarnished pretty quickly, especially if the creation of an advisory council is nothing more than an extension of the franchisor’s power in a polite “Rubber Stamping” process.

It has come to my attention that over the past ten years significant improvements in franchise systems were due to one major factor: the formation of independent franchisee owner associations.  In 1992 in all U.S. industries, there were fewer than 30 independent associations; by 2007 about 300 such groups had formed.  In the past, franchisors turned their backs on these associations, claiming their own franchise advisory councils were sufficient outlets for complaints.

But, as corporate attitudes hardened, Dairy Queen, Burger King, KFC, 7-Eleven, GNC, Subway, Dunkin Donuts, Quiznos, UPS Stores, among other franchisees, have formed independent associations.

In hotel franchising there are three independent franchisee associations: 

  1. EconoLodges of America Franchisee Association (ELFA) is a 28 year-old independent franchisee association (the oldest in the U.S.) 
  2. Association of Starwood Franchisees & Owners North America (ASFONA) was formed in 1997 by owners of Sheraton and Four Points by Sheraton hotels in North America.  In January 2006, the Board of Directors approved a motion to expand ASFONA to include all brands in the Starwood Hotels and Resorts portfolio 
  3. Owners 8 Association (O8A).  See Above.
3.  FACs: Powder Puffs or Powerhouses?  On February 11, 2009, I was the luncheon speaker at the AAHOA Franchise Advisory Council Summit in Orlando.  In my talk, I made the following points:
  • The essential requirements for a successful hotel brand are critical mass, brand awareness and name recognition by potential customers.  If the hotel brand fails in any of these vital areas, the franchisee will suffer failure also.  The universal image of a franchise is of a business person striving to share in the American Dream of business ownership—driven by an entrepreneurial spirit, but cautious enough to buy a franchised business to ensure success of the enterprise.
  • This model franchise conjures up an image of the franchisor and franchisee working hand-in-hand to achieve financial success.  The franchisor has been described (mostly by franchisor organizations) as a partner, a mentor, a big brother, a coach in your corner- all images of benevolent, experienced, knowledgeable support center and resolve who is ready, willing and able to nurture, support and protect the franchisees of the system of the good of all.
  • However, the history of franchising in the United States reveals a far different scenario.  In 1971, after a rash of scams, rip-offs and franchisor horror stories, the Federal Trade Commission (FTC) held public hearings on these fraudulent business practices.  After 30,000 pages of testimony describing some 5,000 complaints, the FTC instituted its Rule on Franchising which mandated that all franchisors must provide a Uniform Franchise Offering Circular (UFOC).  This document must disclose all material information to help prospective franchisees to make an informed franchise purchase decision.  More recently, the UFOC has been renamed the Franchise Disclosure Document (FDD) and requires more information than before.
  • Nevertheless, franchise agreements are one-sided documents, drafted by franchisor attorney’s and presented on a take-it-or-leave-it basis to franchisees.  Why do hotel franchisees agree to these agreements?  They do it for these vital and important reasons:
    • To gain brand name awareness
    • To join a system that is identifiable and attractive to the traveling public
    • To join a system that has appropriate system growth
    • To receive beneficial reservation contributions
  • Despite what many franchisees may think there are no federal rules, no duty of due care, no fiduciary duty even when the franchisor collects franchisee money in pooled advertising funds.  The language of the franchise agreement is all that defines the  relationship between the franchisee and the franchisor.  It is for this basic reason that franchise advisory councils are so carefully named: they are mostly “advisory” only with no real negotiating clout.
  • Are franchise advisory councils powerhouses or powder puffs?  My long experience with hotel franchising reveals many of them to be paper tigers with no real clout and no independence.  On the major issues: encroachment and impact, termination and liquidated damages, transferability, choice of venue and dispute resolution, FACs have little negotiating strength and no veto power. 
4.  The Best FACs-  However, there are some FACs which are better than others:
1. International Association of Holiday Inns (IAHI)- created by Kemmons Wilson in 1956, it claims to be an independent association.  Despite its good works and its valuable voice, it nevertheless does not meet the test of a completely independent franchise owners association.  For example:
    • The IAHI office is located in Holiday Inn headquarters
    • Five members of the IAHI Board are appointed by the InterContinental Hotel Group and are not elected by members
    • Important issues like areas of protection, encroachment and impact, termination and liquidated damages are essentially determined by IHG.
    • Impact studies are done by in-house Holiday Inn employees


    Nevertheless, I would characterize the IAHI as the oldest and one of the most effective FACs in the hotel industry.

    2.  Choice Hotel Owners Council (CHOC) formed in 1967 to create a unified voice for owners of Comfort Inn, Comfort Suites, Clarion, MainStay Suites, Quality and Sleep Hotels.  The mission of CHOC is to represent the Licensees of the Company through a unified voice, protecting the greater interest of its members by providing ideas, advocacy programs and services.  The country is divided into thirteen regions, with a Regional Director elected from each Region to represent its Licensees.  Every year CHOC holds an annual conference to review Choice policies and to criticize how Choice Hotels International conducts business with its franchisees.  This annual Owners’s Summit is a perfect place for Choice owners to express their frustrations, blow off steam, and to make recommendations to bring the Choice franchise agreement in closer alliance with AAHOAs 12 Points of Fair Franchising, CHOC’s Summit works well as a relief value to give voice to franchisee frustrations.  But unfortunately, since Choice pays many of the expenses, the ultimate outcome of the Summit is predictable with only minor improvements in the franchise agreement.  The CHOC FAC is mostly advisory with no real power to negotiate as an equal partner but, as I observed first hand as a featured speaker in 2007 and 2008 it provides a good forum to raise major issues for negotiation with Choice management.

    My recommendations to all the other hotel franchise advisory councils:

    •  Follow the IAHI and CHOC models
    •  Become as independent as possible
    •  Establish a separate headquarter office with your own executive director
    •  Form a purchasing coop
    •  Negotiate fair franchising clauses into your franchise agreement using AAHOAs 12 Points as a guide and model
5.  Quote of the Month

“In a democracy dissent is an act of faith.  Like medicine, the test of its value is not in its taste, but its effects.”
  J. William Fulbright




Stanley Turkel, MHS, ISHC operates his hotel consulting office as a sole practitioner specializing in franchising issues, asset management and litigation support services.  Turkel’s clients are hotel owners and franchisees, investors and lending institutions.  Turkel serves on the Board of Advisors and lectures at the NYU Tisch Center for Hospitality, Tourism and Sports Management.  He is a member of the prestigious International Society of Hospitality Consultants.  His provocative articles on various hotels subjects have been published in the Cornell Quarterly, Lodging Hospitality, Hotel Interactive, Hotel-Online, AAHOA Lodging Business, etc.  Don’t hesitate to call 917-628-8549 or email stanturkel@aol.com.
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Contact:

Stanley Turkel, MHS, ISHC
917-628-8549
stanturkel@aol.com

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Also See: Nobody Asked Me, But No. 49 / Slave Trading at the Saint Charles Hotel in Washington DC, Why Are Some Hotel Franchise Companies Defranchising Exterior Corridor Hotels / Stanley Turkel / February 2009
Nobody Asked Me, But No. 48 / New President of Wyndham Ignores the Real Issues; Hotel Franchises Compared to Auto Dealer Franchises / Stanley Turkel / January 2009
Nobody Asked Me, But No. 47 / New CEO of Choice Misses an Opportunity; Lost and Forgotten Hotels; Little Known Hotel Facilities in New York / Stanley Turkel / December 2008
Nobody Asked Me, But No. 45/ Remembering John Curry; Hotel Owners Have The Power / Stanley Turkel / October 2008
Nobody Asked Me, But No. 44 / Hotel Franchise Companies Performance Appraisal Report, a Down-to-earth Assessment of the Hotel Capital Markets / Stanley Turkel / September 2008
Nobody Asked Me, But… No. 43  / Hotel Franchisor Companies Ignoring Critical Franchising Issues,  Marriott Leads the Way with Aggressive Environmental Strategies / Stanley Turkel / August 2008
Nobody Asked Me, But No. 42 / Remembering Jack Craver; World Record-Setting Hotels; At Last: A Major Gaming Facility in the Catskills / Stanley Turkel / July 2008
Nobody Asked Me, But No. 41 / Landmark Belleview Biltmore Resort Saved; Hotel Developers Take Note - the Borough of Bronx in NYC Has 1.5 million Residents and Just One Hotel in the AAA Guide; Boutique Hotel Bandwagon / Stanley Turkel / June 2008
Nobody Asked Me, But No. 39 / Say Goodbye To The UFOC; Dunfey Brothers To Be Honored; The Plaza Hotel Reopens After a $400 Million Renovation / Stanley Turkel / April 2008
Nobody Asked Me, But No. 38 / Super 8 Owners Form an Independent Franchise Association; Why Is There a Bible in Every Hotel Room? / Stanley Turkel / March 2008
Nobody Asked Me, But No. 37 / Remember the Savoy Plaza Hotel?; Is Economic Disaster Imminent; Cuba at the Crossroads / Stanley Turkel / February 2008
Nobody Asked Me, But No. 36 / What the Advertisements for the Largest Hotel Franchise Companies Never Mention - Also Measuring Hotel Brand Value / Stanley Turkel / January 2008
Nobody Asked Me, But No. 35 / Casino Expansion Has Transformed America, Exercise Awareness / Stanley Turkel / December 2007
Nobody Asked Me, But… No. 34 / IHG’s Great Idea, Sound-Proofing Hotels, Best Western Enters the Upper Midscale Segment, How to Convert Confusion Into Order,  Sign at a Tarrytown, NY Inn, 1798 / November 2007
Nobody Asked Me, But… No. 33 / 1957 Murder at the Park Sheraton Hotel; How Much Does A Franchise Really Cost?A Marriage Made in Heaven?; A Good Night’s Sleep at the Benjamin Hotel / Stanley Turkel / October 2007
Nobody Asked Me, But… No. 31 - Rhode Island Improves Franchise Rules, What’s Up With Canada? Conversion of a Jail Into a Hotel, The Richest (and Poorest) Places in the U.S. / Stanley Turkel / September 2007
Nobody Asked Me, But… No. 31 - Blackstone's Acquisition of Hilton, The Art of Groveling, The Origin of Franchising / Stanley Turkel / August 2007
Nobody Asked Me, But…. No. 30 / Impertinent Questions In Search of Pertinent Answers: Carbon monoxide detectors, exterior-corridor properties / Stanley Turkel / July 2007
How American-Owned Can You Get?, ISHC's CapEx 2007 Report, The Bowery Hotel / Stanley Turkel / June 2007
Hotel Franchising and State Laws, Is Immigration Important? Save the Biltmore, The Good Old Days, Quote of the Month / Stanley Turkel / May 2007
Nobody Asked Me, But - No. 27 / Hotel Franchise Agreements: Mediation, Arbitration or Litigation? / Stanley Turkel / April 2007
Nobody Asked Me, But - No. 26 / Energy Usage and Potential Savings; Great Art in Hotels; Lifestyle Hotels; The Minimum Wage Issue; Quote of the Month / Stanley Turkel / March 2007
Nobody Asked Me, But - No. 25 / Guestroom Design & Amenities, Get a Human, Best Luxury Hotels in the U.S., Turnpike, The Pineapple as Symbol of Hospitality, Fair Franchising / Stanley Turkel / February 2007
Nobody Asked Me, But - No. 24 / Loose Cannon, Fair Franchising, Manhattan Hotel Profits, Hotels of the Future, Interesting Miscellany, Quote of the Month / Stanley Turkel / January 2007
Nobody Asked Me, But - No. 23 / Biting The Hand That Feeds You?, By The Numbers, Shortage of Hotel Rooms, There is No Free Lunch, Iron Laws of Business Travel, Happy New Year / Stanley Turkel / January 2007
Nobody Asked Me, But - No. 22 / Smart Elevators, Tony Marshall’s Memorial, Women in the Hospitality Industry / Stanley Turkel / December 2006
Nobody Asked Me, But… No. 21 / The Drake Hotel in New York, Fair Franchising is Not an Oxymoron, By the Numbers, Another Secret Underground Shelter, Passing of Anthony G. Marshall / Stanley Turkel / December 2006
Nobody Asked Me, But… No. 20 / Turnabout Is Fairplay, Secret Underground Shelter, By the Numbers, Genuine Fair Franchising/ Stanley Turkel / November 2006
Nobody Asked Me, But… No. 19 / International Society of Hospitality Consultants, Great Miami Hotels, Reduce Carbon Monoxide Emissions, Turn Gray Into Gold / Stanley Turkel / November 2006
Nobody Asked Me, But… No. 18 / John Q. Hammons, Save the Belleview Biltmore, Chinese Tourism, CFLs, Ernie Byfield, Guestroom Entertainment in 1905 / Stanley Turkel / October 2006
Nobody Asked Me, But… No. 17 - AAHOA's 12 Points of Fair Franchising, Protected Territories, / Stanley Turkel / September 2006
The Newest Independent (and Oldest Partially Independent) Franchise Association in the Hotel Industry / Stanley Turkel / September 2006
In Hotel Franchising, Reality Trumps Wishful Thinking / Stanley Turkel / August 2006
Nobody Asked Me, But… No. 14; Impact Studies, Stretching Segments, Short-Stay Rentals, Smoke-free Marriotts, Franchising in China, Save the Belleview Biltmore Hotel / August 2006
The U.S. Population Age 65 and Over is Expected to Double in the Next 25 Years; What Does this Mean for the Hotel Industry? / Stanley Turkel / July 2006
Nobody Asked Me, But… No. 12; Portman, Women Homeowners, Minimum Wage, Tipping, Brooklyn Bridge, Chinese Tourism, Impact Studies / Stanley Turkel / July 2006
Do Hotel Franchisees Need Independent Franchise Associations? / Stanley Turkel / June 2006
Nobody Asked Me, But… No. 10 / Chinese Tourists, Gasoline Prices and Alternatives, GLBT Segment, Travel Agents, FAC's, Manhattan's Record Breaking Year, Impertinent Questions / Stanley Turkel / June 2006
Nobody Asked Me, But… No. 9 / Blang, Bathtubs, Best Green, Arbitration, Best Western, AAHOA, State Franchising Laws, VFR / Stanley Turkel / May 2006
Nobody Asked Me, But… No. 8; Bathtubs, Smokefree Hotels, Maps, Saving Water, Nevada Revenues, H.P. Rama, Ritz-Carlton, Statler Service Code, Mother’s Day / Stanley Turkel / April 2006
Nobody Asked Me, But….No. 7 / Stanley Turkel, MHS, ISHC / March 2006
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