Asian American Hotel Owners Association Updates Point Number 12 for Franchise Sales at AAHOACON24

Monday, April 8, 2024

At AAHOACON24 this week, AAHOA (Asian American Hotel Owners Association) unveiled the updated Point Number 12, Sale of the Franchise System Hotel Brand(s), as part of its 12 Points of Fair Franchising. These revisions, grounded in recent industry shifts, address the numerous acquisitions and mergers among hotel brands by various Franchisors in recent times.

The enhanced best practices concerning Point 12 now advocate for the inclusion of a “Change of Control” clause in every Franchise Agreement. This clause aims to safeguard Franchisees in scenarios involving the purchase, sale, acquisition, or merger of one or more hotel brands by Franchisors.

In line with AAHOA’s dedication to educating its members, these recommendations serve the mission of empowering AAHOA Members, aligning with the vision of being the primary advocate and resource for America’s hotel owners.

Key revisions to Point 12 encompass:

• Each Franchise Agreement should incorporate a “Change of Control” clause, ensuring protection for Franchisees amidst changes in ownership or brand affiliation.
• “Change of Control” Clause: Given recent industry dynamics involving Franchisor acquisitions and mergers, Franchisees have often borne the brunt of such transitions. Typically, Franchisees lack the option to exit their agreements without hefty liquidated damages (LDs), often reaching exorbitant sums. The absence of a standardized “change of control” clause deprives Franchisees of a fair chance to determine their course of action if their hotel brand undergoes acquisition by a different Franchisor—unless they fulfill LD obligations.
• Consequently, AAHOA advocates for the inclusion of a “change in control” clause in every franchise agreement. This clause would empower all hotelier Franchisees to provide thirty (30) days’ prior written notice for voluntary termination of their Franchise Agreements within one (1) year following the finalization of a “change in control” event.

“The revision of Point number 12 speaks to the ongoing and ever-evolving landscape of
hospitality mergers and acquisitions,” said AAHOA Immediate PastChairman Bharat Patel.
“AAHOA takes great pride in educating and informing our members of best practices related
to their Franchise Agreements, and updates to Point 12 showcase how the needs for AAHOA
Members continue to evolve in light of changing industry dynamics.”

“As we have long held, Fair Franchising is at the heart of AAHOA’s efforts to ensure fairness in
the Franchise/Franchisee relationship,” said AAHOA President & CEO Laura Lee Blake.
“Revision of Point Number 12 underscores the fact that when mergers or acquisitions take
place in our industry, they most notably affect hotel owners and Franchisees. It’s our hope
that updates to Point 12 serve as clear-cut guidance for AAHOA Member Franchisees in the
event of a purchase, sale, acquisition, or merger of one or more hotel brands between
Franchisors.”

The 12 Points of Fair Franchising by AAHOA serve as a foundational resource for both hospitality Franchisors and AAHOA Members, including current and prospective hospitality Franchisees. They provide a framework for discussion and implementation of top-tier franchise systems that benefit all parties involved.

Recognizing the integral role of brands as business partners, AAHOA continually updates the 12 Points of Fair Franchising to foster open dialogue, collaboration, and mutual understanding of franchise best practices. These points serve as a tool not only for Franchisees but also for Franchisors to gain insights into the needs of their industry partners and enhance their relationships.

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