Hotel franchise agreements

New entrants as well as established hotel franchisors at some point or another have to make agreements with either franchise companies or affiliates in their business operations. These hotel franchise agreements dictate the operations between franchise companies and their business affiliates. Take, for instance, an agreement between franchise tenants and landlords.

Many landlords view franchises as either chain store tenants or independent operators. This perception can lead to conflicts in hotel franchise agreements. To clearly understand key issues in these agreements, begin with examining the franchising concept.  Lack of clear of hotel franchise agreements has really caused conflicts in the franchising industry. The International Franchising Association has reported that 35 percent of total retail sales come from franchises. Below are the reasons behind the success of franchising:

1. Intense marketing that enables franchises penetrate as well as dominate target markets. It involves all sorts of marketing efforts including e-franchising.
2. Brand loyalty that sees consumers purchase heavily from franchising businesses. This is because these companies act in collaboration hence one brand can be used across the board.
3. The operating system of these franchises is consistent in addressing the needs of its consumers.
4. Affiliate franchises get support from mother companies hence improving operational effectiveness and efficiency. This generates high profits for each unit as well as the whole system.
5. Franchisee motivation

The reasons why franchises have been successful are the same reasons why chain stores have been successful; the two are similar from their functional perspective and structural perspective. The only major difference is the reason ‘franchisee motivation’.

In the agreement between tenants and landlords, the franchisee is more motivated to succeed as compared to even the store manager. Franchising agreements need third party intervention for them to serve the interests of the parties involved. This is because franchising is a business that is mutual and derives its basis on a legal structure. Franchisors have to follow federal as well as state regulations; this makes it irrational negotiating terms of franchise agreements.