Comfort Inn 2007 Annual Report Download - page 22

International Franchise Operations
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. The use of our brands by third parties in foreign countries are
governed by master franchising agreements which generally provide the master franchisee with the right to use our brands
in a specific geographic region, usually for a fee.
In some territories outside the United States hotel franchising is less prevalent, and many markets are served
primarily by independent operators. We believe that chain affiliation will increase in certain international markets as local
economies grow and hotel owners seek the economies of centralized reservations systems and marketing programs.
As of December 31, 2007, we had 1,125 franchise hotels open and operating in over 30 countries and territories
outside of the United States. The following chart summarizes our franchise system outside of the United States.
COMBINED INTERNATIONAL FRANCHISE SYSTEM(1)
As of and For the Year Ended December 31,
2003
2004
2005 2006 2007
Number of properties, end of period.............................................. 1,174 1,143 1,162 1,165 1,125
Number of rooms, end of period.................................................... 94,350 94,220 97,703
97,944 97,888
Royalty fees ($000)........................................................................ $ 9,237 $ 10,071 $ 10,971
$ 16,183 $ 22,234
(1) Reporting of operating statistics (e.g. average occupancy percentage and average daily room rate) of international franchisees is
not required by all master franchise contracts, thus these statistics and RevPAR are not presented for international franchisees.
Scandinavia. We conduct our operations in Denmark, Norway, Sweden, Finland and Lithuania through our
relationship with Choice Hotels Scandinavia (“CHS”). As of December 31, 2007, CHS had 149 open properties. The
master franchise agreement with CHS expires in November 2014, but may be terminated in November 2009 by either
CHS or Choice.
Continental Europe. During the fourth quarter of 2006, the Company acquired from The Real Hotel Company PLC
(“RHC”), formerly known as C.H.E. Group PLC the franchising operations conducted by RHC in the European countries
of Austria, Germany, Italy, the Czech Republic, Switzerland, France, Belgium, Portugal and Spain and simultaneously the
master franchise agreement between Choice and RHC covering these countries was terminated and we began direct
franchising operations in these countries. At December 31, 2007, the Company had 185 properties open and operating in
continental Europe.
Ireland. In August 2007, the Company entered into a ten year master franchising agreement with Ireland-based
Cordelle Enterprises, doing business as Choice Hotels Ireland, for the right to license and develop our Clarion, Quality
and Comfort brands in Ireland. Prior to acquiring the master franchising rights directly from the Company, Choice Hotels
Ireland operated the Company’ s brands under an area representative agreement with RHC, which previously held the
master franchise rights in Ireland. As of December 31, 2007, Choice Hotels Ireland had 21 open properties.
United Kingdom. At December 31, 2007, the master franchise agreement with RHC remained in place with respect
to operations in the United Kingdom. In December 2007, the Company announced that it had reached a definitive
agreement with RHC to transfer United Kingdom franchising operations to the Company on January 31, 2008. On that
date, the master franchise agreement was terminated and the existing franchise agreements were assigned to the Company.
At December 31, 2007, RHC had 86 properties open and operating in the United Kingdom.
Canada. We conduct our operations in Canada through Choice Hotels Canada, Inc. (“CHC”) a joint venture owned
50% by us and 50% by InnVest Real Estate Investment Trust. CHC is one of the largest lodging organizations in Canada
with 273 franchised properties open and operating as of December 31, 2007.
Australasia. The Company conducts direct franchising operations in Australia, Singapore, New Zealand and Papua
New Guinea through a wholly owned subsidiary, Choice Hotels Australasia Pty. Ltd. (“CHA”). As of December 31, 2007,
CHA had 260 franchised properties open under the Choice brands and 1 franchised hotel under the Flag brand in New
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