Hotel Online Special Report
Cendant Launches Precedent-Setting 
Hotel Franchise Relations Policy
Long-term Discussions with Franchisees Yields New Flexible Policy
PARSIPPANY, N.J., Sept. 17, 1998 -  Cendant Corporation (NYSE: CD) today announced the launching of a new franchise policy initiative by its Hotel Division. The policy, drafted following discussions with Cendant hotel franchisees, breaks new ground in the setting of standards in several areas including terminations by franchisees, potential adverse impact from newly franchised units, mediation and required property renovations at transfer.

"This is a precedent-setting and positive step in franchisee-franchisor relations," said John Russell, vice chairman of Cendant's Travel Division. "This policy demonstrates Cendant's leadership in the industry as well as the continuing dialogue we maintain with our franchisees. Many of these options had been practiced by our company in the past on a case-by-case basis, but now these opportunities will consistently be company-wide policies and procedures."

The new initiative permits a franchisee to terminate an agreement without penalty or payment of liquidated damages with 60 days advance written notice provided certain clearly delineated conditions are met. These conditions include:

  • The franchisee has been operating with a fully executed agreement for at least two years;
  • The franchisee has attained an occupancy rate of less than 50% -- a rate lower than that determined by leading industry analysts to be the "break-even" point for a hotel -- for any one-year period after the end of the first two years of operation;
  • The franchisee has participated in all mandatory national and regional marketing programs of the hotel brand, and has successfully completed all required training courses;
  • The franchisee has maintained the brand average quality assurance score and is current with royalty payments.
The new policy also states that when the ownership of a property is transferred, the renovations mandated for the new owner will be limited to (a) any items deemed unsatisfactory on the quality assurance inspection immediately preceding the transfer and, (b) "face-lift"-type renovations that will modernize the appearance of the property to conform to brand entry standards for converting properties.

Eric E. Pfeffer, Chairman and CEO of Cendant's Hotel Division also announced another revolutionary policy change. "Franchisees of the brands that don't already offer lifetime area protection will be able to choose between two types of protection -- a 'designated area of protection' for the life of the franchise or protection under the brand's 'encroachment/impact policy,'" he said. The first sets a definitive boundary for the life of the franchise agreement where no hotel may be developed; the second examines the potential economic impact of a new hotel within a designated radius on a franchisee's operations.

"This policy gives Cendant franchisees an exceptional choice regarding development protection," Pfeffer added. Under this new initiative, Cendant's hotel brands will continue to utilize the National Franchise Mediation Program, which offers franchisees and franchisors the opportunity to mediate disputes through the offices of the CPR Institute for Dispute Resolution, an alternative dispute resolution agency based in New York City.

"As franchising continues its global evolution, it is crucial that business partners build and maintain strong relationships," said Don DeBolt, president of the International Franchise Association. "Cendant's leadership in establishing a new franchise policy initiative that places such a premium on franchisee involvement is to be applauded. This straight-forward approach to achieving solutions to such crucial issues as terminations, proximity impact and mediation will serve as a guide to other advancing systems.

"Taking the added step of joining the National Franchise Mediation Program to ensure fair and timely dispute resolution is confirmation that Cendant strives to build a franchise system that values all parties," DeBolt added.

"As the world's leading hotel franchisor, Cendant will continue to seek the input of our franchisees in refining our policies and procedures," Pfeffer said. "Cendant's number one mission is to service our franchisees, and we do that best by listening to them."

Cendant's hotel brands include Days Inn(R), Howard Johnson(R), Knights Inn(R), Ramada(R), Super 8(R), Travelodge(R), Villager Lodge(R), and Wingate Inn(R). Cendant is the world's premier provider of consumer and business services. 

The Company operates in three principal segments: Travel Services, Real Estate Services and Alliance Marketing. In Travel Services, Cendant is the leading franchisor of hotels and rental car agencies worldwide; the largest provider of vacation exchange services; a leading fleet management company; the UK's largest private car park operator; and a leading motorist assistance group in the UK. In Real Estate Services, Cendant is the world's premier franchisor of residential real estate brokerage offices; a major provider of mortgage services to consumers; and a global leader in corporate employee relocation. In Alliance Marketing, Cendant provides access to insurance, travel, shopping, auto and other services, primarily through direct marketing to customers of its affinity partners. Headquartered in Parsippany, NJ, the company has more than 40,000 employees and operates in over 100 countries.

Jim Ferri, 973-496-8527, 
or Andrew Miller, 973-496-7067, 
both of Cendant Hotel Division
Also See:
Hotel Brand Impact: Can Hotel Franchisors Compete With Their Own Franchisees? / Jeff Coy / Oct 1998

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