Comfort Inn 2011 Annual Report Download - page 18

Table of Contents
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Our standard domestic franchise agreements grant franchisees the non-exclusive right to use certain of our trademarks and receive other benefits of our
franchise system to facilitate the operation of their franchised hotel at a specified location. Each of our standard domestic franchise agreements is 20 years in
duration (excluding contracts for Suburban Extended Stay Hotel and MainStay Suites branded hotels and beginning in 2008 Comfort branded hotels which
run for ten years), with certain rights for each of the franchisor and franchisee to terminate their franchise agreement, such as upon designated anniversaries of
the agreement, before the 20th (or 10th, as applicable) year.
The Company may also enter into master development agreements with developers that grant limited exclusive development rights in geographical areas
and preferential franchise agreement terms for one-time, non-refundable fees. These agreements typically grant developers exclusivity in various markets and
favorable franchise agreement terms provided that they adhere to an agreed upon development schedule.
Either party to our standard domestic franchise agreement can terminate the agreement prior to the conclusion of the agreement’s term under certain
circumstances, such as upon designated anniversaries of the agreement. Early termination options give us flexibility in eliminating or re-branding properties
for reasons other than contractual failure by the franchisee. This allows us the opportunity to strengthen our brand portfolio in various markets by replacing
weaker performing hotels. We also have the right to terminate a franchise agreement if a franchisee fails to bring the property into compliance with contractual
or quality standards within specified periods of time. The franchise agreements also typically contain liquidated damage provisions which represent a fair
measure of compensation that our franchisee and we agree should be paid to us upon a specific breach of the franchise agreement. Master franchise agreements
typically contain provisions permitting us to terminate the agreement for failure to meet a specified development schedule.
When the responsibility for development is transferred to an international master franchisee, that party has the responsibility to develop and grow our
brands in the master franchise area. Additionally, the master franchisee generally must manage the delivery of certain necessary services (such as training,
quality assurance, reservations and marketing) to support the franchised hotels in the master franchise area. The master franchisee collects the fees paid by
the local franchisee and remits an agreed upon share to us. Master franchise agreements generally have a term of at least ten years. We have only entered into
master franchise agreements with respect to franchised hotels outside the United States.
Franchise agreements are individually negotiated and vary among the different Choice brands and franchises, but generally are competitive with the
industry average within their market group. Franchise fees usually have three primary components: an initial, one-time affiliation fee; a royalty fee; and a
marketing and reservation system fee. In prior years, the Company’s standard franchise agreements contained a separate marketing and reservation fee for the
Cambria Suites, Comfort, Quality, Clarion and Sleep Inn brands. Since 2007, the Company's standard franchise agreements has combined these two fees
into one System Fee which is used to fund both the Company’s marketing and reservation activities that support all of the Choice brands. Our standard
franchise fees are as follows:
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





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Cambria Suites 500/$60,000
5.00%
4.00%
Comfort Inn 500/$50,000
5.65%
3.85%
Comfort Suites 500/$50,000
5.65%
3.85%
Quality Inn 300/$35,000
4.65%
3.85%
Quality Suites 300/$50,000
4.65%
3.85%
Ascend Collection 375/$30,000
4.00%
2.50%
Clarion 300/$40,000
4.25%
3.25%
Sleep Inn 300/$40,000
4.65%
3.85%
MainStay Suites 300/$30,000
5.00%
2.50%
Econo Lodge 250/$25,000
4.50%
3.50%
Rodeway Inn 125/$10,000
(1 )
(2 )
Suburban Extended Stay Hotel 225/$30,000
5.00%
2.50%
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