Asian American Hotel Owners, who own more than 60% of total hotel rooms in the USA, say paying franchise corporations up to 20% of the room sales is not sustainable in today’s economy.
The group, which employs 4.2 million US workers and is responsible for 1.7% of the US GDP, states that today’s generation of hotel owners cannot be profitable under the current US hotel franchise pricing and requirement structure, most of which was initiated in the 1990s.
This week, Choice Hotels joined Marriott in dropping support of the Asian American Hotel Owners Association, distancing themselves from rising calls for hotel franchise reform, class action lawsuits filed against franchisors by hotel owners, and franchise reform legislation filed in New Jersey.
Fair Franchising Reform issues being sought include removal of mandatory brand standardization renovations, which can cost a midscale owner $20,000 per room; move from 10 – 20 year contracts to shorter fluid agreements; complete fee transparency; removal of brand procurement mandates which require hotel furnishings, suppliers and vendors be purchased through franchise networks at significant markups.
An example would be a hotel owner in Texas being forced to buy specific TV sets from a mandatory franchise supplier at close to double the cost of purchasing the same model from a local store. The Texan hotel owner would risk default on a multiple-year franchise agreement along with crippling liquidated damage fees if he purchased the same TVs locally at nearly 50% savings.
“Franchise reform cannot be solved by major corporations turning their backs,” stated Thomas Magnuson, CEO of Magnuson Hotels. “Hotel franchise corporations need to embrace franchise reform to ensure an economically sustainable future for US hotel owners and the thousands of small businesses, families, and communities who helped build these chains into the success they are today.”
A significant share of the Magnuson Hotels’ portfolio is owned by the Asian American community and they have been supportive of the Magnuson business model, fighting together against systemic exploitation by big corporates. Magnuson Hotels has maintained a strong stance in support of fair franchising since launching the company in 2003.
Magnuson adds, “If you have fairness at the heart of things, a circle of kindness and mutual prosperity emerges. When families and small businesses in thousands of communities prosper instead of struggle, franchisors will also grow further.”
Watch Magnuson Hotels video statement on Fair Franchising here.
Sanjay Patel, owner, Magnuson Hotel Wildwood Inn, member of AAHOA, and past member of AAHOA Board of Directors, said, “Magnuson Hotels understands the owner perspective very well. Their fee structure and No-PIP policy ensure I don’t have to sacrifice my profits in the name of standardization. Corporate franchisors who are afraid of having difficult conversations about fairness, profitability, and owner-benefits, are playing a losing game in today’s highly competitive environment.”
Unfairness is the greatest threat to a community built on the principles of warmth and service. It cuts to the core of who we are and what we believe in. In the face of strong competition and against economic headwinds, Magnuson Hotels remains 100% dedicated to advocating for the owners’ community and laying the groundwork for a fair and just future for the industry.
