Hotel Franchising Continues to Expand
According to a recent interview with a large hospitality real estate investment trust, hotel owners now prefer franchise relationships over brand management of their hotels. This is what we are seeing as well. All of the large international branded hotel operating companies have added a large number of hotels and guest rooms to their portfolios in 2014, with the majority of this growth through franchising rather than management in any location where the hotel company, acting as the franchisor, can find an acceptable business partner to be the franchisee. In the franchise relationship, the hotel company does not require that it provide day to day management of the hotel. Instead, the franchisee can self-manage the hotel or can hire an independent, but professional, third-party manager to manage the hotel in accordance with the standards of the franchise agreement. Franchising brings greater uniformity in documentation than hotel management, even allowing for regional and local variations as may be required by law. In the United States and in a growing number of countries around the world, there is a higher level of standardization in the franchise agreement. It is helpful for parties to a franchise relationship to recognize that standardization of documents does not mean that negotiation and compromise are lost. They are simply in a finer context and require greater precision and focus. The execution of these deals and even much larger transactions will remain achievable only through experienced and capable principals, advisors and lawyers being present at each phase of the transaction.