Comfort Inn 2007 Annual Report Download - page 14

The following is an excerpt from Choice Hotels International, Inc. Form 10-K filed with the Securities and
Exchange Commissions ("SEC") on February, 29, 2008. Throughout this report, we refer to Choice Hotels International,
Inc., together with its subsidiaries as “we”, “us” or “the Company”.
Certain matters discussed in this report constitute forward-looking statements within the meaning of the federal
securities law. Generally, our use of words such as “expect,” “estimate,” “believe,” “anticipate,” “will,” “forecast,”
“plan,” project,” “assume” or similar words of futurity identify statements that are forward-looking and that we intend to
be included within the Safe Harbor protections provided by Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements are based on management’s current beliefs,
assumptions and expectations regarding future events, which in turn are based on information currently available to
management. Such statements may relate to projections for the Company’s revenue, earnings and other financial and
operational measures, Company debt levels, payment of stock dividends, and future operations. We caution you not to
place undue reliance on any forward-looking statements, which are made as of the date of this report. Forward-looking
statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.
Several factors could cause actual results, performance or achievements of the Company to differ materially from
those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, changes
to general, domestic and foreign economic conditions; operating risks common in the lodging and franchising industries;
changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination
of our contracts with franchisees; our ability to keep pace with improvements in technology utilized for reservations
systems and other operating systems; fluctuations in the supply and demand for hotels rooms; and our ability to manage
effectively our indebtedness. These and other risk factors are discussed in detail in Item 1A “Risk Factors” in our Form
10-K filed February 29, 2008. We undertake no obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise.
Business.
Overview
Choice Hotels International, Inc. and subsidiaries is one of the largest hotel franchisors in the world with 5,570
hotels open and 1,093 hotels under development as of December 31, 2007, representing 452,027 rooms open and 87,982
rooms under development in 49 states, the District of Columbia and 39 countries and territories outside the United States.
Choice franchises lodging properties under the following proprietary brand names: Comfort Inn®, Comfort Suites®,
Quality®, Clarion®, Sleep Inn®, Econo Lodge®, Rodeway Inn® , MainStay Suites®, Suburban Extended Stay Hotel®,
Cambria Suites® and Flag Hotels® (collectively, the “Choice brands”). We operate in a single reportable segment
encompassing our franchising business.
The Company conducts its international franchise operations through a combination of direct franchising and master
franchising relationships which allow the use of our brands by third parties in foreign countries. The Company has made
equity investments in certain non-domestic lodging franchise companies that conduct franchise operations for the
Company’ s brands under master franchising relationships. As a result of our use of master franchising relationships and
international market conditions, total revenues from international franchising operations comprised only 7% and 6% of
our total revenues in 2007 and 2006, respectively while representing approximately 20% and 22% of our franchise system
hotels open at December 31, 2007 and 2006, respectively.
Our direct lodging property real estate exposure is limited to three company-owned MainStay Suites hotels.
With a focus on hotel franchising instead of ownership, we benefit from the economies of scale inherent in the
franchising business. The fee and cost structure of our business provides opportunities to improve operating results by
increasing the number of franchised hotel rooms and effective royalty rates of our franchise contracts resulting in
increased initial fee revenue, ongoing royalty fees and brand solutions revenues. In addition, our operating results can also
be improved through our company wide efforts directed towards improving the property level performance of our
franchisees. We also collect marketing and reservation fees to support centralized marketing and reservation activities for
the franchise system. As a lodging franchisor, Choice has relatively low capital expenditure requirements.
Our capital allocation decisions, including capital structure and uses of capital, are intended to maximize our return
on invested capital and create value for our shareholders. We believe our strong and predictable cash flows create a strong
financial position that provides us a competitive advantage. Currently, our business does not require significant capital to
operate and grow. Therefore, we can maintain a capital structure that generates high financial returns and use our excess
cash flow to increase returns to our shareholders. Historically, we have returned value to our shareholders in two primary
ways: share repurchases and dividends. In 1998, we instituted a share repurchase program which has generated substantial
value for our shareholders. Through December 31, 2007, we have repurchased 38.6 million shares (including 33.0 million
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