Hotel Online Special Report
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U.S. Franchise Systems Reports 
Record Franchise Sales in Q2 1998
Hawthorn Suites Sets Records for Executed Agreements
Microtel Inn  Suites Opens Most Hotels Ever
Best Inns Surpasses Expectations
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ATLANTA, July 21, 1998 -  U.S. Franchise Systems, Inc. (Nasdaq: USFS), the company formed in October 1995 to acquire, market, service and rapidly expand well-positioned brands through franchising, today reported that it had record growth for its brands during the second quarter of 1998. 
 
U.S. Franchise Systems - Brand Status
(as of June 30, 1998)
 
Microtel
Hawthorn
Best
Total
Open 98 34 35 167
Under Cosntruction 53 24 4 81
Executed Agreements (not Under Construction) 276 79 8 363
Open and Under Development 511 172 77 760
SOURCE  U.S. Franchise Systems

The company executed more franchise agreements (26) for its Hawthorn Suites extended-stay brand than in any other quarter. For Microtel Inn Suites properties -- the chain of all newly constructed, interior corridor budget/economy hotels -- the company executed 43 franchise agreements. And while U.S. Franchise Systems only had six weeks to sell franchises for its newly acquired Best Inns brand, it executed nine agreements for a total of 78 franchise agreements for all three brands.

Commented Mike Leven, president and chief executive officer, "This was a terrific quarter for U.S Franchise Systems. Franchise sales and our growing backlog are keeping us well on track toward achieving our long-term goals." U.S. Franchise Systems plans for 1,000 Microtel, 200 Hawthorn and 400 Best properties open or under development by the year 2000.

According to Leven, system-wide, as of June 30, 1998, there were a total of 760 properties open or under development, including 511 Microtel, 172 Hawthorn and 77 Best properties.

Hawthorn Suites Momentum Grows

After a record quarter of openings (5) and franchise sales, Hawthorn continues to grow in excellent locations.  Currently under development are several properties in California, including Hollywood, Manhattan Beach, San Jose and Newark-Fremont, along with hotels in high profile markets such as  metropolitan Boston and Philadelphia.

Reflecting mostly older properties which were already open at the time of USFS' acquisition of the Hawthorn brand, properties open one year or more recorded RevPar of $66.55 for the second quarter of 1998 compared to $67.50 for the same period last year or a 1.4 percent decline. Average daily rate increased from $84.22 to $87.52 or 3.9 percent while occupancy declined from 80.2 percent to 76.0 percent. The brand continues to benefit from participation in the Spirit Reservation System that also operates Hyatt's Worldwide Reservation Service, which contributed 25.9 percent of room nights for hotels open more than one year during the first six months of 1998, compared with 23.8 percent for the same period last year.

Microtel Expansion Continues

During the quarter, 23 Microtels opened, a record for the brand.  A greater awareness of the Microtel brand was also seen as the occupancy rate for properties open one year or more increased to 71.3 percent for the second quarter of 1998, compared with 69.2 percent for the same period last year. For the second quarter of 1998, average daily rate increased from $40.42 to $42.48 or 5.1 percent and RevPar increased from $27.97 to $30.29 or a strong 8.3 percent compared to the second quarter of 1997.

In addition, "FIRST," Microtel's innovative new central reservations system that uses the Internet as its network for global distribution, has been installed in nearly all open Microtels. FIRST makes Microtel the first chain in the U.S. to use the Internet as its primary form of communication between hotel properties and central reservations operations.

Best Inns Suites Surpasses Expectations

In the short time since April 29, 1998 when U.S. Franchise Systems added Best Inns  Suites to its roster, it is already proving to be a valuable conversion brand.  "There was no expectation that the team would execute any Best Inns agreements during the second quarter," said Leven.  "However, by the end of the quarter we had already executed nine agreements, with 33 applications pending in 21 states."

About U.S. Franchise Systems

Based in Atlanta, Ga., U.S. Franchise Systems, Inc. was formed in August 1995 by Mike Leven, who has 38 years of experience in the lodging industry, and Neal Aronson, former principal of the New York investment firm Odyssey Partners, L.P.  The company purchased the franchise system rights to Microtel Inn, Microtel Suites and Microtel Inn  Suites in September 1995.  In March
1996, the company acquired the franchise rights to Hawthorn Suites, and acquired full ownership in March 1998.  In April 1998, U.S. Franchise Systems acquired the exclusive worldwide rights to Best Inns  Suites, along with the assets of a fee-based management company.

Certain of the above statements are forward looking statements that involve risks and uncertainties. Actual results could differ materially as a result of a variety of factors, including competitive developments, and risk factors listed from time to time in the Company's SEC reports.
 

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Contact:
Barbara Wiener, 
Vice President, Public Relations for U.S. Franchise Systems, Inc., 404-235-7400; 
BillMurphy, 
General Information, or Susan Steidle, Investor Information, 312-266-7800, both of The Financial Relations Board
 
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Also See:
Microtel Inn Suites to be Developed Throughout Canada / July 1998 
U.S. Franchise Systems Completes Acquisition of Best Inns Suites Brand / April 1998 
U.S. Franchise Systems, Inc. Ends 1997 With 557 Hotels Open or Under Development / Jan 1998 

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