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.

• 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. 

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

Stanley Turkel, MHS, ISHC
917-628-8549
[email protected]