Industry Update
Opinion Article 4 July 2011

Nobody Asked me, But… No. 78

AAHOA Chairman Hits a Home Run; Universal Franchisee Bill of Rights; HomeSpun; Quote of the Month

By Stanley Turkel, CMHS, Hotel consultant

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1. AAHOA Chairman Hits a Home Run
At the recent AAHOA Convention in Las Vegas, Chairman C.K. Patel reported on the following five major initiatives which have been activated and will soon be implemented:

  • AAHOA and InnLink announced that they will launch a customized online travel company (mybestrate.com) similar to Hotels.com, Expedia and Orbitz to facilitate online booking of rooms in almost 100,000 properties across the United States. This new online reservation system will include both AAHOA member and non-member properties and will be available to anyone with internet access.
  • AAHOA and BirchStreet Systems will launch a cooperative purchasing program. Members will be able to purchase furniture, fixtures, equipment, food, beverages and supplies more economically and efficiently through an innovative Internet- based purchasing cooperative.
  • AAHOA will create the Educational Experience on television and the AAHOA YouTube channel.
  • Franchise ROI Study- HVS will analyze the performance and return on investment for several key industry factors (e.g. brand, location, amenity, creep). These studies will help owners decide which hotel capital expenditure will produce the greatest return.
  • Fair Franchising- AAHOA joined with the Coalition of Franchisee Associations (CFA) to create the Universal Franchisee Bill of Rights:
2. Universal Franchisee Bill of RightsFranchising is one of the most powerful brand building tools ever created. It is reported that franchising is responsible for 760,000 businesses, 18 million jobs, 14 percent of the private sector employment, and over $500 billion in annual payroll. Total sales by businesses operated by franchisees are projected to reach over $2 trillion this year. 1 out of every 12 businesses is independently owned and operated by a franchisee.

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Over the last 50 years franchisees have invested their capital and hard work in creating some of the most recognized brands in the marketplace. The success of franchising is predicated on the investment by franchisees. This is now at risk because the terms of the franchise agreements have become more one-sided in favor of the franchisors. They have significantly reduced the ability of franchisees to build their businesses and serve their customers. This Universal Franchisee Bill of Rights is a fairness doctrine. It has been developed by franchisees in multiple systems and industries to identify the basic terms of fairness that are missing in their franchise agreements and must be restored to ensure the success and growth of the franchise systems.

Freedom of Association:

A franchisee may freely associated with other franchisees or associations.

Good Faith and Fair Dealing: A franchisee may rely on a franchisor's good faith, fairness, exercise of due care, and performance including the administration of advertising, rewards programs, marketing funds, and franchise or development agreements.

Uniform Application of Brand Standards: Franchisors shall maintain consistent operating standards under a specific franchise system brand name and uniformly apply such standards in a non-discriminatory manner.

Full Disclosure Regarding Fees Collected From Franchisees: A franchisor shall make available to the franchisee all records of marketing, rewards programs, and related fees that have been paid by franchisees, vendors, suppliers, and licensees.

Right to Price: A franchisee may establish the price of goods and services it sells.

Right to Renew the Franchise: A franchisee may renew its franchise under terms free of unreasonable costs and or stipulations.

Right to Transfer: A franchisee shall have a right to transfer its franchise to a qualified purchaser, including, but not limited to, family members or business partners, without unreasonable costs, stipulations and penalties.

Encroachment: A franchisee shall have specific market protection where franchisor shall not materially impact the franchisee's business, or allow another entity with the same or a similar brand to operate.

Ample Notice of Significant Change; Franchisee Termination Rights: Notice of significant change to the franchise system shall be given in a reasonable time prior to required changes. A franchisee may terminate without penalty, or liquidated damages, if a change to the franchise system would cause substantial negative impact or if the franchisee is experiencing substantial financial hardship. Under such termination any non-competition covenant shall be void.

Default; Franchise Termination Rights: Prior to franchise agreement termination, the franchisee shall be given detailed reasons for alleged default and reasonable time to cure. Termination shall not occur without good cause, and termination shall not compel payments of liquidated damages or early termination fees. All franchise agreement rights shall remain in full effect for any franchisee not in default or that cured a default. A default under one franchise agreement shall not constitute a default under a different franchise agreement.

Fairness in Dispute Resolution: A franchisee may elect to have all dispute resolution proceedings and legal action occur in the local venue of the franchisee and shall not be required to submit to mandatory binding arbitration.

In support of this Universal Franchisee Bill of Rights, C.K. Patel wrote, "Any franchise agreement requires a delicate balance of good faith, fair dealing and power used responsibly. For the franchisor- franchisee relationship to thrive, the franchisor must live up to certain principle and the franchisee must follow certain guidelines…. This document carefully outlines how the unique franchise partnership can best succeed for mutual benefit."

3. HomeSpun: The Indian American Heritage Project

In 2009, the Asian Pacific American Program established HomeSpun: Smithsonian Indian American Heritage Project, which will chronicle the story of immigrants from India and their descendants in America. This is the first Smithsonian initiative focused on the Indian-American experiences. There are nearly 3 million Indian Americans living in the U.S. today and HomeSpun is the Smithsonian's opportunity to convey their history, contributions, challenges, and signal their place within the nation.

The HomeSpun curator is Pawan Dhingra, Ph.D, Associate Professor, Department of Sociology, Oberlin College, Oberlin, Ohio. Sameen A. Piracha, Esq. is the Development Specialist who will lead the fundraising activities.

4. Quote of the Month

"New York is simply a distillation of the entire United States, the most of everything, the conclusive proof that there is an American civilization. New York is casual, intellectual, subtle, effective and devastingly witty. But her sophisticated appearance is the thinnest of veneers. Beneath it there is power, virility, determination and a sense of destiny."
Raymond Loewy

PLEASE TAKE NOTE:
My new book "Built To Last: 100+ Year-Old Hotels in New York" will be published before the end of the year. The circumstances that enabled many of the thirty-three hotels featured in this book to survive more than one hundred years are both surprising and unexpected.

If you want to reserve an autographed copy, send me an email with your mailing address. I will notify you the when the book is published and available. Stanley Turkel, CMHS, ISHC recently published his new book, Great American Hoteliers: Pioneers of the Hotel Industry. It contains 359 pages, 25 illustrations and 16 chapters. It also has a foreword (by Stephen Rushmore), preface, introduction, bibliography and index.

Ed Watkins, Editor of Lodging Hospitality wrote, "The lodging industry typically doesn't spend a lot of time considering its past. Some may find that odd since compared to many other businesses (computers, automobiles aircraft), the hotel business is one of oldest if not the oldest, in the history of man. That changed recently with the publication of.... Great American Hoteliers: Pioneers of the Hotel Industry, a fascinating and entertaining series of profiles of 16 men who author Stanley Turkel argues were the builders of the modern American hotel industry. That's significant because due to the efforts of these titans (and others, of course), the American style of hotelkeeping long surpassed the European tradition that reigned for centuries.

Some of the profiles contain cover names (Hilton, Marriott, Johnson, Wilson) familiar to even casual students of hotel or U.S. history. Sadly, just one of the pioneers covered the book (John Q. Hammons) is still alive and active in the industry. To me, the more interesting tales cover hoteliers about whom I knew little before reading his book but now have a greater appreciation for their contributions.

The most compelling story focuses on Kanjibhai Manchhubhai Patel who Turkel identifies as the first Indian-American hotelier. K.M. Patel arrived in San Francisco in 1923 and soon began operating a small residential hotel in the city. The rest, as they say, is history; Today, Indian-American hoteliers dominate the industry with their trade association, AAHOA, recently surpassing 10,000 members. As Turkel says, this community represents a true American success story.

To order the book, go to www.greatamericanhoteliers.com. I heartily recommend it."

Stanley Turkel

Stanley Turkel was designated as the 2014 and the 2015 Historian of the Year by Historic Hotels of America, the official program of the National Trust for Historic Preservation. This award is presented to an individual for making a unique contribution in the research and presentation of hotel history and whose work has encouraged a wide discussion and a greater understanding and enthusiasm for American History.

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