The Hotel Times - September 2008 - (Page 30)

FRANCHISE OUTLOOK » BY STEVEN J. BELMONTE Common negotiating mistakes Avoid these missteps for successful franchise agreements I have had the good fortune of viewing the hospitality industry as CEO of a major management company, as a franchisor, as a franchisee and as CEO of Hospitality Solutions. With that kind of experience, I have seen the good, the bad and the ugly. Negotiating a long-term agreement that will be advantageous may seem simple enough, but there are a number of possible and common mistakes that could be made. Selecting a franchise based on your personal desires versus market demand. This will often result in aware they are the ﬂag you are seeking, you have essentially given up your ability to favorably negotiate. Rather, you should tell the franchise company you are entertaining proposals and are in conversations with several franchise companies relative to the project. 4 Often, many of the old-timers and lending institutions are You can’t succeed without a major name brand. 1 negative consequences. Before a hotel is built, proper market and feasibility studies need to be done to determine speciﬁc market demands. To this day, I continue to be amazed by projects that are based on someone’s dream and ego alone. under the impression that without a major and mature brand name, a property has little chance of success. Today, nothing is further from the truth. With the advent of Internet marketing, electronic distribution channels combined with the selection and booking habits of the traveling public, the playing ﬁeld has been leveled. Many emerging brands can do a remarkable job of putting heads in beds for a fraction of what some of the mature brands are charging. Your agreement didn’t work out with the franchise company and now you are being sued for liquidated damages. You may believe that you have 2 Remember that there are a variety of franchise and membership Any major brand will do. 5 Steven J. Belmonte is founder and CEO of Hospitality Solutions LLC based in Randolph, N.J. Hospitality Solutions provides franchisees support with new franchise agreement negotiations and professional termination negotiating assistance. afﬁliations from which to choose. These companies provide different types of agreements relative to the length, fees, liquidated damages, transfers and issues of impact. However, regardless of your selected franchise company, a boilerplate franchise agreement is always one-sided and in favor of the franchisor, so be sure to hire a professional who can negotiate that agreement. Terms to consider are length of the agreement, fee structures, windows, liquidated damages, transfers, encroachment or impact issues, dispute resolution, the default process and many others. Telling a franchise company that they are the franchise of your choice. This can be “the kiss of 3 death.” Once a franchise company is to pay the company or hire an attorney to contest it, but that is not true. Most major franchise companies don’t want the added expense of outside counsel and the frustration of long-term litigation. While mediation is an option that typically is provided in most franchise agreements, we at Hospitality Solutions have successfully negotiated hundreds of cases with reduction in liquidated damages for a fraction of what attorneys charge. With just a little planning and some help from industry professionals, you can be well on your way to a successful agreement with one of the many outstanding brands available today. Avoiding these mistakes is your ﬁrst step to success. hmm@questex.com 30 The Hotel Times September 2008 www.TheHotelTimes.com http://www.TheHotelTimes.com

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The Hotel Times - September 2008 Business Outlook Editorial Outlook Contents In The News Transactional Facts Hurry Up and Wait Capital Outlook Development Outlook Brokerage Outlook International Litigation: Who gets sued? Insurance Outlook Economic Crisis: Stress or Opportunity for Franchisees? Franchise Outlook Ad/Edit Index In Closing

The Hotel Times - September 2008

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