Franchise Trust Pact Launched By Choice Hotels

SILVER SPRING, MD? Choice Hotels International vanquished some ongoing areas of contention between franchisors and franchisees with its Franchise Trust Pact announced last month, which essentially states in black and white a new code of conduct for the franchisor of seven mid-market hotel brands.By doing so, Choice hopes to ?become the preferred franchisor, enhance our relationship with franchisees and provide a competitive advantage with developers,?? said Charles Ledsinger, president/CEO during a press conference that unveiled the initiative. The document, which is the first of its kind in the hotel industry, addresses a wide range of issues that traditionally have caused problems between franchise parties, including impact, nonrenewals and mutual outs, supplier options, system standards and dispute resolution. The issue of ?fair franchising? has been a hot topic of late. AAHOA created a guidleline that it encouraged franchisors to follow in order to treat franchisees fairly called the 12 Points of Fair Franchising. However, several franchise companies felt the document was unfair to them. Shortly afterward, Cendant pulled its sponsorship of AAHOA. Many of the items outlined in Choice?s new pact were already being practiced by the franchisor. But there are some key changes being adopted as part of the document. For example, when Choice decides not to renew a franchise agreement it will be required to provide at least 12 months notice, instead of 90 days which was its former policy. Also, franchisees now must give more advance notice if they decide to exercise a mutual out. Instead of 90 days notice, franchisees must give 6 months. A new impact policy gives Choice franchisees more protection than they had previously. The new practice, which ?aims to avoid unfairly depleting the revenues of existing hotels while allowing Choice to expand the system,? grants franchisees in certain geographic regions larger areas of protection in which the company will not issue new same-brand franchises. Franchisees have also been given the right to object to proposed same-brand franchises outside the specified area of protection up to 15 miles from their hotel. As for database information, Choice has vowed not to use customer data collected through its central reservations system for the purpose of cross-brand selling. This was a concern among franchisees who felt that their brand positioning would be compromised and consumer loyalty to their brand would be jeapordized if consumers were cross sold. Also being formalized is the process by which Choice solves disputes with its franchisees. The company is currently developing a mediation program to resolve certain types of disputes as a quicker and more economical alternative to litigation. The new mediation policy is expected to be complete by August.