NEW YORK— Tensions seemingly ran high during a session here entitled “Hotel Franchising: a Power Shift?” Panelists representing different sides of the franchising industry ended up squaring off in a debate over several major issues, including liquidated damages and areas of protection. During the liquidated damages discussion, Stanley Turkel, a hotel consultant, claimed that liquidated damages provisions in franchisor-franchisee contracts are punitive and unfair to franchisees. Disagreeing with Turkel were panelists Bill Clegg, regional vice president of franchise services at Choice Hotel International, and William Sipple, the head of full-service property development in the Americas for Carlson Hotels Worldwide. Both claimed that liquidated damages simply protect franchisors from suddenly losing an income stream when a franchisee opts out of a franchise agreement. “To the extent that the income stream is interrupted, we need something to replace that funding,” Sipple said. When the discussion shifted to the subject of areas of protection, Neil H. Shah, director of development at the Hersha Group, said his firm’s hotels are often not protected within a five-mile radius from other hotels opening under the same brand. Clegg added that Choice Hotels’ policy is to employ a seven-mile area of protection for hotels of the same brand. However, he said Choice will not protect one of its brands from another of its brand, unless the situation involves a Comfort Inn and Sleep Inn, which are very similar.
