News Briefs

Capaldo is the executive director and CEO of the National Franchisee Association, which represents Burger King franchisees and is one of the founding members of the CFA. The other founding members are Brown Board Owners Association (UPS Stores), DD Independent Franchise Owners, Inc. (Dunkin' Donuts), Independent Hardee's Franchisee Association, Meineke Dealers' Association, National Association of Buffalo Wings Franchisees Inc., National Coalition of Associations of 7-Eleven Franchisees, and North American Association of Subway Franchisees.

CFA will focus on government affairs at the state and federal levels, education and training of franchisees, leadership development of franchise association executives, and collective buying opportunities. In the legislative and regulatory area, Capaldo said that while franchisees often share the same goals as franchisors, their interests do diverge at times, and franchisees' specific concerns are rarely heard in Washington, DC, and state capitals. 'Today, 15 franchise associations might be sending members independently to Capitol Hill on an issue ' working through their franchisor, which is a corporation,' said Capaldo. 'If the franchise operators go as business owners, they will be received differently. They are constituents of individual members of Congress, and they can tell their story.'

Capaldo said that the CFA has not yet defined which regulatory and legislative issues are priorities. 'In the early stages, we will probably deal with issues that already are out there ' like depreciation, the union card-check program, and the Fair Labor Standards Act ' and define our position,' he said. 'The idea is to have fly-in days and to put more franchisees in Washington to tell our story.'

The CFA also will try to develop programs for franchisee association directors and boards to share best practices and become more effective. 'I'd like to see the governance of franchisee associations improve'to raise the professionalism of the boards. This will help them be more strategic and effective,' he said.

In contrast to the International Franchise Association, which has franchisors and franchisees as members, Capaldo said the CFA will not adopt the 'big tent' approach. 'Our intent is to remain 'pure,' that is, solely for franchisee associations,' he said. 'The IFA is a fine organization, but we see a different need ' We are not trying to be all things to all people.'

Super 8^' Owners Create Independent Association

Frustrated by numerous operational changes and new financial obligations imposed on them by franchisor Wyndham Hotel Group, owners of more than 600 Super 8^' motels have launched an independent association, Owners 8 Association. The association has raised complaints about the franchisor's requirements for installing new technology, penalties for customer complaints or violations of quality assurance guidelines, and Wyndham's methods of calculating fees for use of the TripRewards loyalty program.

'The chain has been shrinking, which is different than most major motel chains in the last three to five years .' And we feel that management is trying to find other ways to make money on the side, instead of working together to raise our revenues and the royalties we pay,' said Jay Patel, owner of two North Carolina Super 8 motels, and the chairman of the new association. 'I don't understand why Wyndham is not trying to make the Super 8 brand more attractive.'

Some of the issues that the Owners 8 Association has raised are similar to complaints registered in a class-action lawsuit filed in South Dakota against Wyndham on behalf of some Super 8 franchisees (see FBLA, January 2008). However, Patel said that the association is not party to the lawsuit, and it is seeking to address a broader range of issues.

Wyndham franchisor executives have been in communication with the new association, but the parties appear to be far apart on the issues raised by Owners 8. 'John [Valletta, Super 8 president] acknowledges the organization's validity and its right to represent its Super 8 members,' wrote Rich Roberts, vice president, communications, Wyndham Hotel Group, in an e-mail to FBLA. 'Specifically, in the sixth paragraph [of a letter to all Super 8 franchisees] he says, 'Of course, we cannot prevent franchisees from organizing their own owners group and we would not try. In fact, Super 8 always supports any legitimate effort to promote dialogue and discussion.” Super 8's new UFOC identifies the new association, as is required under regulations that come into effect on July 1, Roberts added.

However, Patel said that the 13-page letter written by Valletta 'took our statements out of context' and tried to sway franchisees away from joining the association. Patel said that the association's law firm, Dady & Garner, P.A. (Minneapolis), is helping to prepare both a letter to all Super 8 franchisees and a response to the franchisor. Valletta's letter is posted at http://www.owners8association.org/ under the link 'Communications with Mr. Valletta.'

Wyndham's aggressive promotion of TripRewards seems to be one of the primary complaints by franchisees. Wyndham automatically extends applicability of TripRewards to Super 8 guests who signed up through another Wyndham brand (such as Days Inn, Fairfield Resorts, Howard Johnson, Knights Inn, Ramada, and Travelodge). When those guests stay at a Super 8, often they do not know that they are eligible to earn TripRewards points, said Patel, but Wyndham compares the contact information of guests with all TripRewards members in its database and later credits them with points.

For each TripRewards stay, Wyndham collects a fee of five percent of the room rate from the franchisee. 'Collecting the percentage from a franchisee for a guest who doesn't know he is in TripRewards
is not on the up-and-up. He didn't come to Super 8 because of TripRewards,' Patel said.

In his letter, Valletta disagreed with that perspective, noting that no motel chain can compete today without a popular rewards program. He challenged the association's claims about the rates at which Super 8 motel owners are reimbursed when a guest uses TripReward points for a free stay.

The franchisees also are unhappy with Wyndham's requirement that they install a new property management system at a cost of $15,000-$18,000 per motel. 'About $7,000 to $9,000 of that charge is for a week of training,' Patel said. 'You can send someone to college for a year for $9,000. Last time we had training on a new system, it was about $2,000. We think we are being overcharged'and Wyndham is taking the extra money.'

In addition, franchisees feel that Wyndham is padding its bottom line by raising its Quality Assurance program standards to the point at which it can levy fines and charges too easily. Fines for failing a site inspection are $1,000, said Patel, which is money the franchisee could put to better use fixing the property.

Similarly, charges for customer complaints include extra penalties if the complaint is unresolved by the franchisee. 'Maybe we have a guest who says the bathroom is dirty, and then says that he wants the charge removed, instead of a discount on a room the next time. I would be charged for the room, plus a fine and processing fee by the company. The total could be $200 for a room that was only $54.95,' Patel said.

But in his letter, Valletta wrote that Super 8's Customer Satisfaction program gives franchisees more leeway than is offered by many competing brands. He also wrote that some franchisees seem to misunderstand that Super 8 is an 'economy' chain, not a 'budget' chain. Economy chains provide greater services and are held to higher standards, Valletta wrote.

New Coalition of Franchisee Associations Launched

Some of the world's largest independent franchisee associations are banding together in a new organization, the Coalition of Franchisee Associations, Inc. ('CFA').

'Many of the leaders of franchisee associations had been discussing this informally for three or four years. All of us saw the need for one entity that would speak just for franchisees from the perspective of franchisee association directors,' said Frank J. Capaldo, who has been named CFA's chairman.

Capaldo is the executive director and CEO of the National Franchisee Association, which represents Burger King franchisees and is one of the founding members of the CFA. The other founding members are Brown Board Owners Association (UPS Stores), DD Independent Franchise Owners, Inc. (Dunkin' Donuts), Independent Hardee's Franchisee Association, Meineke Dealers' Association, National Association of Buffalo Wings Franchisees Inc., National Coalition of Associations of 7-Eleven Franchisees, and North American Association of Subway Franchisees.

CFA will focus on government affairs at the state and federal levels, education and training of franchisees, leadership development of franchise association executives, and collective buying opportunities. In the legislative and regulatory area, Capaldo said that while franchisees often share the same goals as franchisors, their interests do diverge at times, and franchisees' specific concerns are rarely heard in Washington, DC, and state capitals. 'Today, 15 franchise associations might be sending members independently to Capitol Hill on an issue ' working through their franchisor, which is a corporation,' said Capaldo. 'If the franchise operators go as business owners, they will be received differently. They are constituents of individual members of Congress, and they can tell their story.'

Capaldo said that the CFA has not yet defined which regulatory and legislative issues are priorities. 'In the early stages, we will probably deal with issues that already are out there ' like depreciation, the union card-check program, and the Fair Labor Standards Act ' and define our position,' he said. 'The idea is to have fly-in days and to put more franchisees in Washington to tell our story.'

The CFA also will try to develop programs for franchisee association directors and boards to share best practices and become more effective. 'I'd like to see the governance of franchisee associations improve'to raise the professionalism of the boards. This will help them be more strategic and effective,' he said.

In contrast to the International Franchise Association, which has franchisors and franchisees as members, Capaldo said the CFA will not adopt the 'big tent' approach. 'Our intent is to remain 'pure,' that is, solely for franchisee associations,' he said. 'The IFA is a fine organization, but we see a different need ' We are not trying to be all things to all people.'

Super 8^' Owners Create Independent Association

Frustrated by numerous operational changes and new financial obligations imposed on them by franchisor Wyndham Hotel Group, owners of more than 600 Super 8^' motels have launched an independent association, Owners 8 Association. The association has raised complaints about the franchisor's requirements for installing new technology, penalties for customer complaints or violations of quality assurance guidelines, and Wyndham's methods of calculating fees for use of the TripRewards loyalty program.

'The chain has been shrinking, which is different than most major motel chains in the last three to five years .' And we feel that management is trying to find other ways to make money on the side, instead of working together to raise our revenues and the royalties we pay,' said Jay Patel, owner of two North Carolina Super 8 motels, and the chairman of the new association. 'I don't understand why Wyndham is not trying to make the Super 8 brand more attractive.'

Some of the issues that the Owners 8 Association has raised are similar to complaints registered in a class-action lawsuit filed in South Dakota against Wyndham on behalf of some Super 8 franchisees (see FBLA, January 2008). However, Patel said that the association is not party to the lawsuit, and it is seeking to address a broader range of issues.

Wyndham franchisor executives have been in communication with the new association, but the parties appear to be far apart on the issues raised by Owners 8. 'John [Valletta, Super 8 president] acknowledges the organization's validity and its right to represent its Super 8 members,' wrote Rich Roberts, vice president, communications, Wyndham Hotel Group, in an e-mail to FBLA. 'Specifically, in the sixth paragraph [of a letter to all Super 8 franchisees] he says, 'Of course, we cannot prevent franchisees from organizing their own owners group and we would not try. In fact, Super 8 always supports any legitimate effort to promote dialogue and discussion.” Super 8's new UFOC identifies the new association, as is required under regulations that come into effect on July 1, Roberts added.

However, Patel said that the 13-page letter written by Valletta 'took our statements out of context' and tried to sway franchisees away from joining the association. Patel said that the association's law firm, Dady & Garner, P.A. (Minneapolis), is helping to prepare both a letter to all Super 8 franchisees and a response to the franchisor. Valletta's letter is posted at http://www.owners8association.org/ under the link 'Communications with Mr. Valletta.'

Wyndham's aggressive promotion of TripRewards seems to be one of the primary complaints by franchisees. Wyndham automatically extends applicability of TripRewards to Super 8 guests who signed up through another Wyndham brand (such as Days Inn, Fairfield Resorts, Howard Johnson, Knights Inn, Ramada, and Travelodge). When those guests stay at a Super 8, often they do not know that they are eligible to earn TripRewards points, said Patel, but Wyndham compares the contact information of guests with all TripRewards members in its database and later credits them with points.

For each TripRewards stay, Wyndham collects a fee of five percent of the room rate from the franchisee. 'Collecting the percentage from a franchisee for a guest who doesn't know he is in TripRewards
is not on the up-and-up. He didn't come to Super 8 because of TripRewards,' Patel said.

In his letter, Valletta disagreed with that perspective, noting that no motel chain can compete today without a popular rewards program. He challenged the association's claims about the rates at which Super 8 motel owners are reimbursed when a guest uses TripReward points for a free stay.

The franchisees also are unhappy with Wyndham's requirement that they install a new property management system at a cost of $15,000-$18,000 per motel. 'About $7,000 to $9,000 of that charge is for a week of training,' Patel said. 'You can send someone to college for a year for $9,000. Last time we had training on a new system, it was about $2,000. We think we are being overcharged'and Wyndham is taking the extra money.'

In addition, franchisees feel that Wyndham is padding its bottom line by raising its Quality Assurance program standards to the point at which it can levy fines and charges too easily. Fines for failing a site inspection are $1,000, said Patel, which is money the franchisee could put to better use fixing the property.

Similarly, charges for customer complaints include extra penalties if the complaint is unresolved by the franchisee. 'Maybe we have a guest who says the bathroom is dirty, and then says that he wants the charge removed, instead of a discount on a room the next time. I would be charged for the room, plus a fine and processing fee by the company. The total could be $200 for a room that was only $54.95,' Patel said.

But in his letter, Valletta wrote that Super 8's Customer Satisfaction program gives franchisees more leeway than is offered by many competing brands. He also wrote that some franchisees seem to misunderstand that Super 8 is an 'economy' chain, not a 'budget' chain. Economy chains provide greater services and are held to higher standards, Valletta wrote.