Comfort Inn 2013 Annual Report Download - page 19

Table of Contents
Franchise Agreements
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. Our standard domestic franchise agreements generally have terms
ranging between 10 and 20 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 20 th (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, subject to applicable law. 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 10 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.
Our standard franchise fees are as follows:
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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%
Ascend Hotel 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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(1) Royalty rate is $33.00 per room per month.
(2) Marketing and reservation system fees are $13.00 per room per month.
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