Comfort Inn 2011 Annual Report Download - page 19

Table of Contents
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(1) Royalty rate is $31.00 per room per month with an estimated annual minimum fee between $12,500 and $25,000 per property.
(2) Combined marketing and reservation system fees are $19.00 per room per month with an estimated annual minimum fee between 12,500 and $20,000
per property.
As previously noted, the Company’s franchise agreements are individually negotiated and therefore actual fees may differ from those noted above. From
time to time, the Company may discount the standard royalty fees in the initial years of the agreement as a franchisee acquisition tactic. Typically, these
discounts expire as the contract matures until the contractual royalty fees reach the standard franchise fee in effect at the time the agreement was executed.
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Our operations are designed to improve RevPAR and lower operating and development costs for our franchisees, as these are the measures of
performance that most directly impact franchisee profitability. We believe that by helping our franchisees become more profitable we will enhance our ability to
both retain our existing franchisees and attract new franchisees. The key aspects of our franchise operations are:
Central Reservation System (“CRS”) . On average, approximately one-third of the gross room revenue booked at domestic franchised properties is
reserved through our central reservation system, which consists of our toll-free telephone reservation system, our proprietary internet site, mobile phone
reservation applications, interfaces with global distribution systems, and other internet reservations sites. Our toll-free telephone reservation system utilizes a
combination of company operated as well as third party call center service providers. Reservation agents trained on the reservation system can match each
caller with a Choice-branded hotel meeting the caller’s needs. Our CRS provides a data link to our franchised properties as well as to airline reservation
systems such as Amadeus, Galileo, SABRE and Worldspan that facilitate the reservation process for travel agents. We also offer our rooms for sale on our
own proprietary internet site (www.choicehotels.com) as well as those of other travel companies.
We also operate a call forwarding program through which our franchisees can leverage our central reservation system capabilities by forwarding
reservation calls received directly by the property to one of our reservation centers. Typically, this reduces the hotel’s front desk staffing needs, improves
customer service and results in a higher average daily rate than reservations booked directly through the property.
We continue to implement our integrated reservation and distribution strategy to improve reservations delivery, reduce franchisee costs and improve
franchisee satisfaction by enhancing our website, choicehotels.com. We also design our marketing campaigns to drive reservation traffic directly to our
proprietary channels to minimize the impact that third party reservation sites may have on the pricing of our inventory. In addition, we have introduced
programs such as our Best Internet Rate Guarantee program which has greatly reduced the ability of the travel intermediaries to undercut the published rates at
our hotels. We do selectively distribute our inventory to key third party travel intermediaries that we have established agreements with to drive additional
business to the Company and its brands. These agreements typically offer our brands preferred placement on these third party sites at reduced transaction
fees. We also continue to educate our individual franchisees about the unfavorable impact to their business of contracting with sites with which we do not have
preferred agreements. We currently have agreements with many but not all major online third party sites.
Property Management Systems. Our proprietary property and yield management systems, Profit Manager by Choice Hotels and choiceADVANTAGE,
are designed to help franchisees maximize profitability and compete more effectively by managing their room inventory, rates and reservations. These systems
synchronize each hotel’s inventory with our central reservation system, giving our reservation sales agents last room sell capabilities at every hotel. Our
property management systems include a revenue management feature that calculates and suggests optimum rates based on each hotel’s past performance and
projected occupancy. These tools are critical to business delivery and yield improvement as they facilitate a franchisees’ ability to effectively manage hotel
operations, determine appropriate rates, drive occupancy and participate in our marketing programs. As a pure web-based solution, the choiceADVANTAGE
system reduces each hotel’s investment in on-site computer equipment resulting in a lower total cost of ownership for property management systems. As a
result, new hotels to our system are utilizing choiceADVANTAGE and the Company is currently in the process of migrating all existing hotels utilizing the
Profit Manager system to choiceADVANTAGE. This process is expected to be completed over the next year.
Brand Name Marketing and Advertising. Our marketing and advertising programs are designed to heighten consumer awareness and preference for
our brands as offering the greatest value and convenience in the lodging categories in which we compete. Marketing and advertising efforts include national
television, internet and radio advertising, on-line advertising, print advertising in consumer and trade media and promotional events, including joint marketing
promotions with qualified vendors and corporate partners. We also actively seek to maximize our presence on the internet by purchasing key search related
terms
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