Do the Radisson Franchisees Agree?; At Last: A Win-Win Victory for Tourism; Congratulations to the Harris Rosen Foundation; Judge Grants Summary Judgment to Super 8 Franchisees; Quote of the Month

1.  Do the Radisson Franchisees Agree?

Carlson Hotels Worldwide recently unveiled their five-year program to separate the Radisson brand into two distinct products: Radisson Blu which will fit into the upper-upscale segment and Radisson Green, which will fit into the upscale segment.  This Radisson makeover is part of a billion-dollar program, a centerpiece of Carlson�s so-called �Ambition 2015� campaign- a program designed to expand Carlson�s global portfolio by at least 50% to more than 1500 hotels by 2015.

Since 93% of the Radisson properties in North America are franchised and 7% are managed or owned, more than $900 million of the required $1 billion for this proposed program must come from Carlson franchise owners.  I looked but could not find any agreement from the Radisson Franchise Advisory Council to budget and expend $900 million in the next five years.  Is there any franchisee agreement on this blue-sky program?

In a study performed in September 2008, I measured the Performance Appraisal Reports prepared by the Asian America Hotel Owners Association (AAHOA).  My purpose was to quantify the relative compliance of five franchise companies (Accor, Carlson, Choice, La Quinta and Wyndham) with AAHOAs 12 Points of Fair Franchising.  Since Carlson finished last at 34.3% compliance, I wonder how they expect to expand without improving the factors that are of greatest importance to franchisees: territorial protection, termination and windows provisions, liquidated damages, choice of venue, dispute resolution, vendor exclusivity, minimum performance, etc.

2.  At Last: A Win-Win Victory for Tourism

Congress finally passed the Travel Promotion Act (TPA) and President Barack Obama signed it into law on March 4, 2010.  AH&LA President and CEO Joseph McInerney said, �Achieving this victory was the result of years of hard work by many individuals in the travel industry and Congress.  I want to personally thank Senate Majority Leader Harry Reid, who early on recognized the importance of this bill to the U.S. travel industry.  He understood what we have been saying all along about the TPA, its ability to create jobs, and the economic stimulus thousands of American lodging and tourism-related business will receive from it.�

The legislation creates the Corporation for Travel Promotion, a public-private partnership to attract more visitors to the U.S. Part of the funding comes from a $10 entry fee levied on inbound visitors from countries included in the Visa Waiver Program except Canada.  Other countries charge considerably more as much as $25 or $50- and countries like the U.K. $80 for a coach ticket and $140 for a first-class ticket.  This bill will reduce the federal deficit by more than $425 million and the U.S. Travel Association estimates it will create 40,000 jobs in the first year.

3.  Congratulations to the Harris Rosen Foundation

When Haiti experienced a devastating earthquake, Orlando hotelier Harris Rosen, Sen. Bill Nelson and Orlando�s Haitian community joined hands to provide a relief fund of one million dollars in order to help the victims.  The Rosen organization has not confined itself to raising financial donations but is also engaged in providing first aid, medical and hygiene supplies, towels and clothes.  The relief effort also includes flashlights, batteries, bug spray and various other necessities.  Medical personnel are also working on a disaster footing to provide medical treatment to the victims.  The Harris Rosen Foundation has taken up the responsibility of channeling the money appropriately and has guaranteed 100 percent utilization.  Rosen said that even after they achieve the initially-set target of one million dollars, their efforts would continue as the damage done by the earthquake is immense and needs long-term commitment. 

4.  Judge Grants Summary Judgment to Super 8 Franchisees

Legal reporter Janet Sparks reported on the BlueMauMau website (2/19/10):

Souix Falls, S.D.:   Federal Judge Lawrence L. Piersol signed on Tuesday an order granting and yet denying in part the motion for summary judgment filed on behalf of 160 franchisees, and denying Super 8 Motels� motion for summary judgment entirely.

The class action lawsuit was filed to determine if Super 8 breached its franchise agreement with the motel owners when it imposed a five percent fee on room sales to customers registered with is TripRewards Program.

In response to this latest ruling, Scott Abdallah of Johnson, Heiderpriem & Abdallah, representing the franchisee plaintiffs, said, �Obviously, our clients are very pleased with the court�s decision.  We have felt all along that this was a straightforward breach of contract case, and the Court agreed.�

Judge Piersol clearly states that the agreement specific to these 160 motel operators does not permit Super 8 to charge the five percent fee.  He declares in his ruling, �The Agreement provides that franchisees will be charged 2 percent, not a 7 percent fee for a franchisee�s participation in the customer loyalty program.� In answer to the franchisor�s argument for the additional fee, the judge explained that even if Super 8 has the right in its contract to change its system standards and rules of operation, including its customer loyalty program, it may not unilaterally impose a fee for the operation of that program greater than what is stated in the agreement.

But in his order denying in part the franchisees� motion for $3 million in compensation, he states that whether any benefits accrued to class members as a result of Super 8�s breach of the agreement and the monetary value of those alleged benefits are issues that need to be determined by a jury.  In a breach of contract, the plaintiffs are entitled to recover all damages, $3,418,112. plus interest in their motion for summary judgment, plus any additional amount paid out by the judgment date of the case.

Although Judge Piersol agrees that franchisees are entitled to reasonable amounts, he questions if the sum they claim are owed them exceeds the actual amount that they would have gained had Super 8 fully performed its contractual duties.  The company had argued that awarding class members the full sum would result in a windfall to the franchisees.  The franchisor�s attorneys argue that the damages figure does not account for the amount the motel owner-operators allegedly save as a result of not being required to give customers participating in the old customer loyalty program.  Company lawyers also state the franchisees ignore income received from room sales to customers seeking to take advantage of the benefits of the TripRewards program.

The judge ruled that the parties will be able to represent their respective �non-speculative� damages positions to the jury.  The trial that was previously scheduled to commence on April 13, is now scheduled for June, 1, 2010.

5.  Quote of the Month

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