By Robert A. Nozar H&MM Editor-in-Chief November 1998
Could this really be Bob Hazard? It looks like him and acts like him,
but he sounds different. Not the voice: It's the same as when Hazard was
at the podium before thousands of Choice Hotels International franchisees-at
Choice's annual convention-as companychairman.
Rather, it is what Hazard says that is so different. Where he once personified
the hotel franchising game, he has done an about-face and taken a starring
role as put-upon franchisee. Who would have thought that Hazard, when he
led the most dynamic franchising effort in the U.S. hotel industry, would
now use franchise companies for target practice?
A sample:
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"[Franchise contracts] contain as many rights and as few responsibilities
as possible for franchisors, while just the opposite is true for franchisees."
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"The stronger the brand, the more one-sided the franchise contract
tends to be."
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"Liquidated damages are simply a way for the franchisor to discourage a
challenge from a franchisee and gain the upper hand in a legal dispute."
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"Preferred-vendor revenue goes directly to the franchisor's bottom line."
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"[Franchise-company lawyers] prefer the status quo, the current master-slave
relationship, with its imbalance toward the franchisor."
It might have been easy to assume that once Hazard left Choice and formed
Creative Hotel Associates-a developer, investor and manager of limited-service
and full-service hotels-he would start to take a different point of view
relative to the franchisor/franchisee relationship. The extent of that
change, though, is amazing.
Hazard even authored a paper on the franchising game that he titled
"Confessions of an Ex-SOB Franchisor." Is he being a little hard on himself?
"My loyalty is to the lodging industry," Hazard said. "There are now
significant differences among franchisees in how they do business and it's
much worse now, but even we weren't perfect. When I was at Choice, I did
believe that we were partners in profit with our franchisees, but now when
you hear statements like that, you realize that rhetoric and reality are
strangers."
Hazard is one of those whose physical appearance barely changes over
the years. He lives in Paradise Valley, Ariz., having returned to the desert
where he first made a name for himself as c.e.o. of Best Western International.
He loves the Arizona sun and complained one recent day of having had
to don a suit and tie to attend to business. His co-founders of Creative
Hotel Associates-Gerald Petitt, Richard Kaden and Steve Mullinger-are in
CHA offices in Rockville, Md., and Daytona Beach, Fla. What they did is
put together a company that wants growth, but has no problem acting as
a conscience of the industry.
Describing the U.S. hotel industry as having lost its soul, Hazard has
problems with the way most hotel companies do business, and the concern
he said they have with shareholder value, but not with customer or franchisee
value. It saddens him that more than 50 of his fellow Choice employees
have left the company since he departed, but Choice by no means is alone
in Hazard's wrath. Marriott International, Promus Hotel Corp. and Cendant
Corp. also stand accused of giving short shrift to franchisees, and Hazard
said he is committed to changing the way the lodging industry does business.
"When I pay my franchisor 9 percent to 10 percent of my gross revenue-which
was about half that amount 20 years ago-I'm really paying them 40 percent
to 50 percent of my net profits," he said. "Each time I raise my room rates
4 percent to 5 percent, my franchisor gets a 4 percent to 5 percent raise.
That's quite a deal for them."
Hazard said the attitude of strong brands is they don't sell franchises,
they grant them; and that's a corporate arrogance that eats away at the
franchisor/ franchisee partnership from Day One.
Creative Hotel Associates will build and buy properties at a pace that
will give it 50 hotels in the next three years, but plans to do so as an
equal partner with the franchise companies with which it does business.
While others may see dreary times for the hotel industry, Hazard said there
are attractive buys available and he is concerned that there are so many
prophets of doom.
"It's not rational that hotel stocks are experiencing severe declines
when there are record profits," he said. "Unwarranted fears spook analysts,
and constant talk of overbuilding is fanning an irrational fear." Hazard
said 38,000 guestrooms become obsolete every year and the industry needs
to replace them.
"Travel is still the hottest industry," he said. "How can people say
things are so bad? If you finance conservatively, which we do, you can
be successful. Cash will be king and we have cash." Franchise companies
that want to join Hazard in this success story will need to
change the way they do business.
"Franchisors provide me with a recognized brand name, a reservation
system, national advertising, marketing support, a quality inspection system,
and, in some instances, prototype architectural plans, purchasing assistance,
training materials and limited operations support," he said. "What I also
want is fair and honest treatment, appreciation and respect. I need systems
that help me to succeed, and relationships that make life fun and fruitful.
Anything less should not be acceptable."
Hazard said when he ran Choice, he did not realize how one-sided the
franchise agreements were.
"We hired the best lawyers we could find to design agreements that way,"
he said. "We built in all the rights for the franchisor, but not the franchisee."
He said franchise agreements that allow no negotiation are not a fair
way to deal with potential partners whose investment capital and fees build
the brand and create added value for a successful franchisor.
Agreeing with the need to weed out bad franchisees, Hazard wants to
stand shoulder-to-shoulder with the franchisor. "I'm not interested in
protecting bad franchisees," he said.
What Hazard wants is a universal fair-franchise agreement that allows
five-year escape windows with one-year notice. He said notice gives franchisors
adequate time to find a replacement franchisee, and the franchisee time
to seek another franchisor.
"Franchisor attorneys argue that five-year windows reduce the value
of the franchisor because a potential buyer cannot depend on an uninterrupted
20-year stream of royalty income," Hazard said. "In fact, this erosion
in value has not proven to be true in practice. However, it's an argument
I used myself and it's still a favorite of franchisor corporate attorneys."
Hazard said it is a mystery to him why any franchise company would want
to force an unhappy franchisee to stay in its system.
"Best Western has the right idea; they allow their members to terminate
from the system at any time," Hazard said. "This imposes a strong franchisor
obligation and responsibility to provide meaningful services that add value.
It is one reason why Best Western has enjoyed enormous growth and success."
Franchisee guarantees
Guarantees of 100-percent customer satisfaction have revolutionized
the hotel industry since the concept was introduced by Promus, but Hazard
is at a loss to explain why franchise companies don't give their real customers-the
franchisees- the same guarantee.
"Why isn't a 100-percent franchisee-satisfaction guarantee equally good
for the franchisee and the franchisor?" Hazard said. "Promus, or one of
its competitors, should take an emboldened customer-satisfaction position
and be the first franchisor to implement a 100-percent franchisee-satisfaction
guarantee." What Hazard said would be a nice turnabout is if franchisors
agree to friendly change, but he frets that it will take the threat of
a concerted franchisee effort by franchisors' best franchisees to negotiate
fairness and redress the imbalance.
"The franchisees of the world should unite," he said. "We have nothing
to lose except our chains by demanding fairer franchise agreements and
a relationship that makes rhetoric and reality more closely coincide."
Bob Hazard
on...
Book most recently read: "American Journey" by Colin Powell
All-time favorite movie: "High Noon" starring Gary Cooper. "That's
because it showed that individual character and integrity count."
Favorite music: Theme song from "Chariots of Fire"
Favorite hotel amenity: Big, soft, fluffy, thirsty towels
Biggest hotel gripe: "Dark shower with moldy plastic curtains
and shower controls contrived by an evil genius."
President Clinton: "We have a rabbit in the White House."
When I was 12, I wanted to: "Hit .300 on my Little League baseball
team."
First newspaper read each day: "Hotel & Motel Management,
of course."
Hobbies: Golf. "Life's a game; golf is serious."
A poem I know by heart: "The shortest poem in the world, 'Ode
on the Antiquity of Fleas.' The poem is: "Adam had 'em.'"
First movie seen in a theater: "An 11-cent, Saturday morning
western at the Avon Theater in Baltimore where the first four rows were
saddles."
Nation's biggest problem: "Creating a world-class education system
free of teachers' unions and teenage graduates who cannot read."
Rather, Jennings or Brokaw: Brokaw
Political philosophy: "Government has become too large and too
inflated. It no longer fears disgruntled customers who can't take their
business elsewhere."
Taxes: "With the end of the Cold War, the total state, federal
and local tax burden can be reduced to 25 percent."
Corporate welfare: "Cut it with as much vigor as we cut other
unnecessary government spending programs."
Affirmative action: "Quietly, coolly phase it out. Ability counts
more than gender, ethnicity or sexual orientation."
Biggest concern: "The erosion of America's core values, especially
the loss of individual responsibility and personal accountability."
Campaign funding: "The current system corrupts."
Air travel: "Airport congestion, chaos and cattle-car seating
are guaranteed when nearly a billion people fly U.S. carriers in the next
decade."
Cocktail hour: "Keep it short."
In New York, I stay at: "Any hotel under $200 a night." |
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