Negotiating Franchise Agreements In A Recession

Hotels Magazine:

As the current economic recession continues, with the hospitality industry being particularly hard hit, more and more hotel owners are recognizing the benefit of being associated with a strong brand. The value of a recognized flag and a well-run system are more important now than ever before as hotel owners take steps to increase their bottom line. Consequently, more hotel owners may be looking to change flags or convert their unbranded hotels to a recognized brand by entering into franchise agreements.

While these are certainly challenging times, a recession can often create opportunities. As hotel deals become fewer due to lending constraints and other negative circumstances such as lower RevPAR, brand companies may be more flexible in negotiating franchise deals than during robust economic times.

There are certain key elements that should be considered when negotiating a hotel franchise agreement. As these agreements are typically long term and involve an expensive asset, namely a hotel building, they should not be entered into lightly. Advice on negotiating a franchise agreement runs the gamut from, “They’re not negotiable – you just sign them as is” to “Negotiate everything, start high and be aggressive with an opening position. This way you have room to maneuver when the other side asks you for a concession.” The truth, of course, is somewhere in between and depends on a myriad of factors.

What Do You Want vs. What Do You Need? Read on.

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