ATLANTA, Nov. 6 / U.S. Franchise Systems, Inc. USFS today announced that it has signed a letter of intent under which it will acquire full ownership of its Hawthorn Suites brand from HSA, the company controlled by Pritzker family business interests that owned the Hawthorn Suites brand. Hawthorn Suites is an upper-end extended stay hotel chain that has grown to 97 properties open or under development from 19 in the 15 months that it has been managed by U.S. Franchise Systems.

Under the terms of the transaction, U.S. Franchise Systems will issue 2.22 million shares of its Class A common stock to HSA's successor. The new agreement will eliminate royalties that U.S. Franchise Systems would have owed HSA under the original agreement's royalty-sharing arrangement, and will remove restrictions on U.S. Franchise Systems' ability to purchase other hotel brands. Hawthorn Suites will retain its unique relationship with the Spirit Reservation System, which also operates the Hyatt Worldwide Reservation System.

Mike Leven, president and chief executive officer of U.S. Franchise Systems, reviewed the benefits of the transaction for USFS. "Taking full ownership of the brand provides three significant positives for us. First, the transaction is accretive in 1998 and even more so in 1999 and beyond. Second, we will have removed the restrictions on our ability to acquire hotel brands in a variety of segments and price points, expanding our universe of potential acquisitions. Finally, the transaction simplifies our company, making it easier to value the Hawthorn Suites franchise royalty stream."

Neal Aronson, executive vice president and chief financial officer of U.S. Franchise Systems, said, "With this agreement, USFS will gain the $2 million of annual franchise royalty fees from the 23 open Hawthorn Suites properties plus the future royalties that would have accrued to HSA. That cash flow will be offset, in part, by the non-cash amortization expenses related to this transaction."

Aronson added, "Under the terms of the original agreement with HSA, USFS would pay HSA 67 percent of the franchise royalties collected on the first 3,600 Hawthorn Suites rooms franchised by USFS and 50 percent of the royalties related to the next 3,150 rooms. Those 6,750 rooms would be equivalent to approximately 67 Hawthorn Suite hotels. As of November 6, 1997, 23 Hawthorn Suites were open, 13 were under construction and an additional 61 properties were in the pipeline, including 43 executed franchise agreements not yet under construction and 18 approved applications."

Leven added, "We're thrilled that a group with such a successful investment track record, both inside and outside the hotel industry, would show such a strong level of confidence in U.S. Franchise Systems." As a result of the transaction, Pritzker family business interests will become one of USFS' three largest shareholders. Among its vast holdings, Pritzker family business interests include Hyatt Hotels. Upon completion of the transaction, Doug Geoga, president of Hyatt Hotels Corporation (age 42), will join U.S. Franchise Systems' board of directors, raising the number of board members to eight.

Nick Pritzker, president of Hyatt Development Corporation, said, "The growth of the Hawthorn Suites brand under U.S. Franchise Systems' leadership has been most impressive – far exceeding our expectations. Our confidence in Mike Leven and the USFS team, however, led us to this transaction, which will let us participate in the growth of the entire USFS brand portfolio."

The proposed transaction is subject to completion of a definitive agreement, clearance of the transaction in accordance with the Hart-Scott- Rodino Act, and approval by U.S. Franchise Systems' shareholders. Shareholders representing a majority of the votes have already indicated that they will vote for the transaction.

About U.S. Franchise Systems

Based in Atlanta, Georgia, U.S. Franchise Systems, Inc. was formed in August 1995 by Michael A. Leven, who has 37 years of experience in the lodging industry, and Neal K. Aronson, former principal of the New York investment firm Odyssey Partners, L.P. The company purchased the franchise system rights to Microtel Inn, Microtel Suites and Microtel Inn & Suites in September 1995. Microtel properties are all newly constructed, interior corridor, limited service budget hotels with an average daily rate between $35 and $45.

In March 1996, the company acquired the franchise rights to Hawthorn Suites, a limited service extended-stay product, offering side-by-side separate living and sleeping rooms and fully equipped kitchens, a complimentary hot breakfast buffet and evening refreshments. Hawthorn Suite's locations are serviced by the Spirit Reservation System, which also operates the Hyatt Worldwide Reservations Service.

U.S. Franchise, which completed its initial public offering in October 1996, is traded on the Nasdaq National Market System using the symbol USFS.

Certain of the above statements are forward looking statements that involve risks and uncertainties. Actual results could differ materially as a result of a variety of factors, including competitive developments, and risk factors listed from time to time in the Company's SEC reports.

For more information on U.S. Franchise Systems, Inc. via facsimile at no cost, simply dial 800-PRO-INFO and enter the ticker symbol USFS.

Barbara Wiener, Vice President of Public Relations of U.S. Franchise Systems, 404-235-7400, ext. 7442
U.S. Franchise Systems