1. Alleged Franchise Kickback Scheme

20 franchisees of Michigan- based Tubby’s Sub Shop accused Tubby’s of creating a subsidiary, SDS, from which franchisees were required to buy their supplies.  In the January 2008 Franchise Times, the scheme was described as follows:

“Management convinced the vendors to charge 130 to 150 percent of their normal charges, according to the complaint.  Vendors passed on the extra funds to Tubby’s.”

The franchisees found out that Tubby’s also received 35% of the distribution fees from SDS even thought the UFOC and the franchise agreement stipulated that they were entitled to only 2%.  Tubby’s was found liable for failing to disclose the distribution scam and settled the case.

2.  Tony Marshall Would Be Pleased

The Anne Arundel, MD, County Council has upheld the requirements that lifeguards be posted at small pools in hotels.  Council members said they were inclined to maintain the requirement that all community pools must have lifeguards while exempting hotel pools less than 5 feet deep.  The county averages seven to eight drownings a year, including two or three suicides.

3.  Impertinent Question in Search of a Pertinent Answer:

Why is it that the advertisements for the largest hotel franchise companies never mention:

areas of protection and encroachment
termination and liquidated damages
arbitration vs. litigation
transferability of the license agreement
reservation productivity
venues for law suits 

4.  Isn’t Paying a Living Wage the American Way?

Nationwide, 145 cities and counties have enacted living-wage bills which generally require businesses that receive government contracts to pay an amount above the state or federal minimum wages.  The highest living wage in the country is $14.75 per hour in Fairfax, Ca.

In May 2007, Maryland became the first state to approve a living wage bill which requires employers with state contracts to pay a minimum of $11.30 an hour.  Maryland’s state minimum wage is $6.15 an hour, one dollar above the federal minimum.

Meanwhile, a controversial living wage law was upheld by a California state appeals court which requires hotels at the Los Angeles International Airport to pay salary and benefits equal to $10.64 an hour.

5.  Here Are Some Surprising Statistics

San Juan, capital city of the Commonwealth of Puerto Rico, has hotel occupancies and average rates much higher than the United States.  HVS International reports the following historical performance:

    Occupancy %                    San Juan                 United States
          2004                84%                60%
          2005                79%                63%
          2006                 78%                64%
          2007 (est.)                77%                65%

    Average Rates
           2004                      $170                      $87
           2005                172                90
           2006                191                98    
           2007                203                      103

6.  How Do You Measure Hotel Brand Value?

In a world gone brand mad, creating yet one more hotel brand is a relatively simple process.  But there is a wide gap between creation and value.  The only measurable benefit to brand value is the number of reservations produced at a satisfactory average daily rate.  Everything else is peripheral, cosmetic and unimportant.  If a new hotel franchise is clearly positioned, forcefully marketed and provides a fair franchise agreement, then it can be beneficial to hotel owners.  If, however, it is undistinguishable from its competitive set, unknown to the traveling public and poorly promoted, it will not be successful.  As it stands right now, the eight major hotel companies market 60 different brand names.  No wonder consumers are confused and bewildered by the proliferation of new hotel brands.

7.  Quote of the Month

“If at first you don’t succeed, try again. Then quit. No use being a damn fool about it.”

W.C. Fields

Stanley is available as a featured speaker on the following subjects:

Fair Franchising is Not an Oxymoron
Great American Hotels and Hoteliers
Are Exterior Corridor Hotels Obsolete?
Impertinent Questions in Search of Pertinent Answers
Compliance with AAHOAs 12 Points of Fair Franchising

Stanley Turkel, MHS, ISHC operates his hotel consulting office as a sole practitioner specializing in franchising issues, asset management and litigation support services. Turkel’s clients are hotel owners and franchisees, investors and lending institutions.  Turkel serves on the Board of Advisors and lectures at the NYU Tisch Center for Hospitality, Tourism and Sports Management.  He is a member of the prestigious International Society of Hospitality Consultants.  His provocative articles on various hotels subjects have been published in the Cornell Quarterly, Lodging Hospitality, Hotel Interactive, Hotel Online, AAHOA Lodging Business, etc.  If you need help in negotiating a franchise agreement or with a problem such as encroachment/impact, termination/liquidated damages or litigation support, call Stanley at (+1) 917-628-8549 or email stanturkel[at]aol.com.