Total revenues, excluding management services, for the three months ended June 30, 2000 increased 47 percent to $6.28 million, up from $4.27 million during the same period in 1999.  The largest component of revenue growth came from franchise royalty fees that increased 76 percent from $2.42 million in second quarter 1999 to $4.26 million in second quarter 2000.  This reflects a 60 percent increase in the number of hotels paying royalties to USFS from 273 at June 30, 1999, to 436 at June 30, 2000. 

Commented Mike Leven, chairman and chief executive officer of U.S. Franchise Systems, �In the second quarter, we decided to refocus our energies on our franchising business.  Our core franchising business, exclusive of the charges referred to above, continues to be profitable.  We remain optimistic about the future and about our ability to continue to generate strong franchise sales and increase our number of open hotels and revenues as new hotels ramp up.�  According to Business Travel News� May 29, 2000 issue, USFS is now the nation�s 10th largest hotel company in terms of numbers of hotels.

During the second quarter, 75 franchises were sold, 41 properties broke ground or began the conversion process, and 47 properties opened.  USFS ended the quarter with a systemwide total of 464 hotels open and 116 under construction.  This includes 196 Microtel Inns & Suites, 126 Hawthorns and 142 Best Inns & Suites properties open, and 58 Microtels, 32 Hawthorns and 26 Bests under construction or conversion.

Microtel Inns & Suites

• Thirty-five franchise agreements were executed during the quarter.
• Nine Microtels opened and 12 broke ground.
• The 200th property opened in Myrtle Beach, S.C. in July, and the entire system is currently celebrating this milestone.  Microtel, which had 22 open hotels when it was acquired by USFS in October 1995 and reached its 200th property opening in less than five years, represents one of the fastest growing chains in lodging history. 
• Another international property broke ground in Calapan City in the Philippines. 
• For the second quarter 2000 for Microtel Inn & Suites properties open one year or more, RevPar (room revenue per available room) increased from $28.56 to $30.03 or 5.2%; occupancy increased from 62.6% to 63.0% or 0.6%, and average daily rate increased from $45.61 to $47.68 or 4.5%, compared to second quarter 1999. 

• Twenty-two franchise agreements were executed during the quarter.
• Eighteen new properties opened during the quarter (there were only 17 operating hotels when USFS acquired the rights to Hawthorn in March 1996) and nine broke ground. 
• USFS signed an international master license agreement to develop Hawthorn and Best properties in Canada. 
• For the second quarter 2000, RevPar for properties open one year or more increased from $56.11 to $63.24 or 12.7%; occupancy increased from 66.0% to 73.0% or 10.7%, and average daily rate increased from $85.07 to $86.62 or 1.8%, compared with the same period last year.  
• Approximately 21% of reservations for hotels open one year or more were derived through the Spirit Reservation System for the three months ended June 30, 2000.
• The alliance with ImOn� Hospitality, Inc. has been formalized to add computers and wireless high-speed Internet access to every Hawthorn guestroom in North America. 

• Eighteen franchise agreements were executed during the quarter. 
• Twenty properties opened and 20 broke ground or began the conversion process. 
• The 100th Best property since USFS acquired the brand opened in Cedar Falls, Iowa.  When USFS acquired the brand in April 1998, there were 35 properties open.
• For properties open one year or more, RevPar increased from $33.04 to $33.71 or 2.0%; occupancy rate declined from 65.8% to 65.1% or 1.0%, and average daily rate increased from $50.24 to $51.78 or 3.1%, compared to the second quarter of 1999. 
• Installations of EverGreen� healthy hotel rooms continue, with the entire system expected to be completed by early fall.  Guest and franchisee response has been positive, and significant publicity for the concept has been generated with distribution of a video news release viewed nationwide on local television news stations. 

Certain matters discussed in this release are �forward-looking statements�, including statements about the Company�s future plans, goals and other events which have not yet occurred.