The franchise agreement is a licensing agreement between the hotel owner and the hotel brand, which defines the owner`s rights and obligations to operate the hotel under the brand or “flag” for a fee. Franchise agreements are essentially licenses, which means they are personal and cannot be awarded by the current owner. These agreements are developed by hotel brand companies and are very one-sided. The franchisee wants protection to maximize the franchise`s commercial potential. This protection may apply to both the geographic markets and the product markets in which the franchise is located. The franchisor will want to be concerned about the future expansion strategy of the brand as a whole and ensure that unexplored markets are not included in a single franchise. In addition, the franchisor wants to maintain maximum flexibility for sister brands franchised in the same market. Whatever the application of these obligations, all necessary attention should be paid to compliance with the relevant legislation, particularly with regard to non-competition clauses and geographical restrictions. In a franchising paradigm, the franchisee would have unlimited access to the central reservation system, customer information, marketing and pricing, both from the brand owner and other third-party companies, while the franchisor would have real-time access to the franchisee`s PMS system and its performance data produced by the franchisee, allowing it to monitor performance and advise on improving performance and occupancy. On the other hand, the benefits to the franchisor are an alternative to the construction of “chains/hotels” to distribute their products. It avoids investments and the responsibility of a chain. However, the success of the franchisor depends on the success of the franchisees. The franchise agreement is a legal licensing agreement between the hotel brand and the hotel owner, which gives the hotel owner the rights and obligations to operate the hotel under the franchiser`s brand for a fee.
The owner`s ability to obtain trademark concessions depends largely on (1) the owner`s leverage (i.e., the owner develops a new hotel or accepts a major renovation; the owner owns several other hotels within the brand`s family); and (2) the owner`s knowledge of the problems. If an owner does not have extensive experience in franchising negotiations, the owner should hire an experienced lawyer and/or hotel advisor to guide the owner through the negotiations. According to the 2015 HVS study, the franchise agreement represented a juicy part of the portfolio of major hotel chains more than in Europe, as shown in the table of the cake below. HVS also indicated that the franchise agreement will continue to increase due to the many reasons why “franchising will likely continue to gain ground as a preferred operating model for a number of reasons: large chains have increasingly focused on franchising to achieve their desired pace of expansion; Third-party suppliers have been competent to bridge the gap between owners and branded businesses; and small, independent hotels in secondary locations are aimed at flexible, less standardized franchisors to remain competitive. In fact, this level of access and interdependence is unusual, as it is likely that hotels are competing for the same customers and, particularly in the conference and function market, hotels in different locations will compete for the same deal.