Comfort Inn 2007 Annual Report Download - page 36

A summary of executed domestic franchise agreements by brand for 2007 and 2006 is as follows:
2007 2006 % Change
New
Construction
Conversion
Total
New
Construction
Conversion
Total
New
Construction
Conversion
Total
Comfort Inn ......................... 48 62 110 67 65 132 (28)% (5)% (17)
%
Comfort Suites..................... 114 4 118 98 3 101 16% 33 % 17%
Sleep.................................... 71 1 72 58 1 59 22% 0 % 22%
Midscale without
Food & Beverage .. 233 67 300 223 69 292 4% (3)% 3%
Quality................................. 11 153 164 6 143 149 83% 7 % 10%
Clarion................................. 6 42 48 2 26 28 200% 62 % 71%
Midscale with Food
& Beverage.......... 17 195 212 8 169 177 113% 15 % 20%
Econo Lodge........................ 3 77 80 1 80 81 200% (4)% (1)
%
Rodeway.............................. 2 99 101 3 105 108 (33)% (6)% (6)
%
Economy ................... 5 176 181 4 185 189 25% (5)% (4)
%
MainStay ............................. 22 2 24 9 1 10 144% 100 % 140%
Suburban.............................. 21 3 24 14 8 22 50% (63)% 9%
Extended Stay ........... 43 5 48 23 9 32 87% (44)% 50%
Cambria Suites .................... 29 — 29 30 — 30 (3)% NM (3)
%
Total Domestic System........ 327 443 770 288 432 720 14% 3 % 7%
Relicensing fees are charged to the new property owner of a franchised property whenever an ownership change
occurs and the property remains in the franchise system. During the year ended December 31, 2007, relicensings
increased 7% to 403 from 378 in 2006. The increase in relicensing contracts resulted in an increase of fees of
approximately 6% to $12.4 million for the year ended December 31, 2007 from $11.7 million for the same period of 2006.
Brand solutions revenue increased $2.3 million or 17% to $16.3 million primarily resulting from increased vendor
sponsorships of our annual franchisee convention.
Other income increased $1.0 million to $8.0 million for the year ended December 31, 2007 primarily due to an
increase in liquidated damage collections related to the early termination of franchise agreements.
Selling, General and Administrative Expenses: The cost to operate the franchising business is reflected in selling,
general and administrative expenses. Selling, general and administrative (“SG&A”) expenses were $101.6 million for
2007, an increase of $14.5 million from the 2006 total of $87.1 million. As a percentage of revenues, excluding marketing
and reservation fees and hotel operations, total SG&A expenses were 34.6% for 2007 compared to 33.2% for 2006.
Expenses as a percentage of franchise revenues increased primarily due to an additional $3.3 million in expenses related
to the commencement of direct franchising operations in continental Europe and $3.7 million in termination benefits
related to the termination of certain executive officers.
Depreciation and Amortization: Expenses declined $1.1 million to $8.6 million for 2007 due to the 2006
acceleration of depreciation resulting from the renovation and replacement of furniture, fixtures and equipment at two of
the Company-owned Mainstay Suites.
Marketing and Reservations: The Company’ s franchise agreements require the payment of franchise fees, which
include marketing and reservation fees. The fees, which are based on a percentage of the franchisees’ gross room
revenues, are used exclusively by the Company for expenses associated with providing franchise services such as central
reservation systems, national marketing and media advertising. The Company is contractually obligated to expend the
marketing and reservation fees it collects from franchisees in accordance with the franchise agreements; as such, no
income or loss to the Company is generated.
Total marketing and reservations revenues were $316.8 million and $273.3 million for 2007 and 2006, respectively.
Depreciation and amortization attributable to marketing and reservation activities was $8.3 million and $7.9 million for
the years ended December 31, 2007 and 2006, respectively. Interest expense attributable to reservation activities was $0.5
million and $0.9 million for 2007 and 2006, respectively. Marketing and reservation activities provided positive cash flow
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