Franchising in a high profile accommodation chain – a good idea or not?

AMG27-Franchising-ChoiceHotels-Comfort_Inn_Drouin_2_300x225 Franchising in a high profile accommodation chain – a good idea or not?In both New Zealand and Australia, the conundrum for administrators of hotels or motels of whether to become a member of a recognised accommodation chain or to remain independent, has aroused vigorous debate in recent years.


Those owning or managing an accommodation business can usually see advantages on both sides. On one side, franchising has proved to be one of the most dynamic business methods of the past half-century, especially in the accommodation industry. Becoming a franchisee of a well-known brand can undoubtedly deliver several benefits of size and strength that will always be a struggle for independents to achieve.

But that necessarily means largely adapting to the group requirements, which some regard as unwanted loss of independence. And of course, with franchising, there is a financial cost involved in obtaining membership. There will always be those who prefer to go their own way, saving their membership fee to market their property as they see fit and perhaps relying much more on word of mouth about their own particular brand of service to their customers.

Particularly in isolated areas where there is little or no competition from the big players, some property administrators might see few advantages in becoming part of a major chain. Alternatively, in areas where the competition is fierce, it might well be a case of ‘join a chain or die.’

Whatever they decide, there is no doubt that since the 1960s, franchising has become a global phenomenon. In the USA alone, it is a US$2 trillion industry while in Australia, sales by franchised businesses now exceed $130 billion per annum.

But nowhere has franchising proved more popular than in New Zealand which is served by around 430 franchise systems operating more than 450 brands, giving it the highest proportion of franchises per capita in the world. It has been growing rapidly. Despite recessionary times, the total number of franchised units increased by 5.3 per cent in this country from 2009 to 2010. At least in part, this was probably prompted by the recession itself and the resulting demand from travellers, especially corporates, for lower-cost accommodation.

Franchising boom

In the accommodation industry, the need to be part of a brand and all the additional benefits that accrue from it has seen franchising in Australia and New Zealand boom, the increased interest largely driven by the success and calibre of the brands themselves.

It gives those who wish to be self-employed the ability to go into business properly trained and equipped, with the security of a well proven product and system behind them. A franchise chain provides an automated central reservation system and a nationally recognized brand which assures consumers that rooms and amenities meet a consistent minimum standard.

AMG27-Franchising-ChoiceHotels-AU387_QH_Bayside_Appartment2_300x225 Franchising in a high profile accommodation chain – a good idea or not?For the operators, joining a well-known brand helps them capture travellers through international advertising and marketing. This is particularly important in smaller travel markets, such as Australia and New Zealand where overseas guests make up a major part of their business.
So, what are the options for becoming a franchisee of a recognised accommodation chain in Australia and New Zealand?

Chief executive officer of Choice Hotels Australasia, Trent Fraser, says there are a wide variety of options for independent operators looking to partner with a franchisor.

“Whilst there are various strengths to many of these operators, we believe Choice Hotels has two main points of difference; the variety of branding options and our experience in operating as a pure play franchisor.”

Choice Hotels offers five different options for branding ranging from economy to premium brands. These are: Econo Lodge, Comfort, Quality, Clarion and the Ascend Hotel Collection. “Choice offers brands to suit every type of operator,” said Mr Fraser.

“We don’t own or manage any of our properties, instead being 100 per cent committed to franchising. This gives our franchisees confidence that every property in the network receives constant attention and support. With all properties being independently owned and operated, every property is on the same playing field and this provides real transparency for our franchisees. I believe we have the most committed and engaged support team in the region and provide a superior return on investment for our hotel owners.”

Mr Fraser says the benefits of becoming a Choice Hotels franchisee are many and varied. “Every hotel will have its own reasons for considering a partnership with Choice Hotels but the main reasons are:

• Access to a powerful global distribution network
• Global brand presence and exposure
• Experienced state based operational field support team
• Purchasing power through our preferred supplier network
• Frequent educational and training opportunities
• Extensive marketing through advertising, public relations, social media and brand partnerships
• Market leading technology and initiatives, e.g. cloud-based Property Management System (PMS)
• 200,000 local members (and 20 million internationally) in the global Choice Hotels loyalty program, Choice Privileges
• Local area marketing campaigns and initiatives
• Peer networking opportunities at regional meetings and conferences
• Australian-based reservations contact centre.

Finance opportunities:

Most in the accommodation industry considering the decision as to whether to become a franchisee are likely to be interested in the finance options available – if any actually exist:

Mr Fraser says Choice Hotels is a proven system for success in the accommodation sector. “The major banks are all familiar with our brands and our operators. Individuals seeking finance are supported by the world’s third largest hotel operator.”

AMG27-Franchsing-ChoiceHotels-AU440_CI_PortFairy_ExteriorStreetView_300x225 Franchising in a high profile accommodation chain – a good idea or not?Another important consideration for prospective franchisees will be which brand will best suit their property style? Choice Hotels has five brand options in the Australasia market, said Mr Fraser.

“The branding process begins when a Choice Hotels representative arrives at the hotel to meet with the property owner, to assess the property and present options of branding. Together they will discuss the property owner’s goals, ambitions, and expectations and decide which brand suits the property best according to various indicators including location, price, facilities etc.”

In New Zealand, there is no separate law covering franchises, so they are covered by normal commercial law. This includes law as it applies to contracts, restrictive trade practices, intellectual property and the law of misleading or deceptive conduct.

The Franchise Association of New Zealand introduced a self-regulatory code of practice for its members in 1996. This contains many provisions similar to those of the Australian Franchising Code of Practice legislation, although only around a third of all franchises are members of the association and therefore bound by the code.


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