ATLANTA, Ga., June 30 – The Asian American Hotel Owners Association (AAHOA), which represents the majority of U.S. hotel owners, communicated its concerns about one-sided franchising practices in response to the Federal Trade Commission (FTC)’s Solicitation for Public Comments on Provisions of Franchise Agreements and Franchisor Business Practices.
AAHOA has long been committed to advocating for adequate protections for its Franchisee members in their relationships with hotel brands. Beginning in March, the FTC, citing reports of “unfair and deceptive practices” that harm Franchisees, solicited comments from business owners regarding how Franchisors “disclose certain aspects and contractual terms of the Franchise relationship, as well as the scope, application, and effect of those aspects and contractual terms.”
AAHOA’s submitted response channels the momentum generated by more than a year of member advocacy for sustainable franchising practices. This includes 25 in-person and virtual meetings with hotel brands and their leading executives, six with the American Hotel & Lodging Association (AHLA), and more than 50 documented calls and emails since March 2022. AAHOA always has sought to discuss the franchising relationship directly with Franchisors. While many Franchisors have maintained open and productive dialogue, others disengaged from AAHOA for exercising its First Amendment right to support legislation in New Jersey that advances many of the association’s Fair Franchising principles.
In a collective action, five national hotel chains withdrew their support for AAHOA and declined to appear at the association’s annual convention, held this year in Los Angeles in April. Several then hosted competing events within walking distance of AAHOA’s convention.
AAHOA Members own 60% of U.S. hotels, accounting for $368.4 billion in annual economic output, according to Oxford Economics, about 1.7% of the U.S. GDP. With hotels still recovering from the pandemic, dealing with workforce shortages and competition from home-based rental apps, the hospitality sector – and the economy as a whole – benefit from a mutually productive relationship between Franchisors and Franchisees. The hotel brands’ positions stand in the way of that relationship, as well as the overall health and growth of the hospitality sector. Given those stakes and the refusal on the part of some brands to discuss Franchising challenges directly with AAHOA, especially the specific provisions of the New Jersey legislation, the association has relayed the concerns of its member hoteliers to the FTC as part of its recent request for comments.
AAHOA’s comments touched on issues including, but not limited to:
- The exploitation of market power by Franchisors;
- Rebates and arbitrary mandates that increase Franchisee costs; and
- Limited or zero ability of Franchisees to negotiate means that Franchisors insist on exploitative terms.
In its comment, AAHOA highlighted its 12 Points of Fair Franchising, an educational tool for AAHOA-Member Franchisees. AAHOA uses its 12 Points in an effort to implement sustainable practices that recognize and safeguard the contributions of small business owners and entrepreneurs. AAHOA also emphasized its Four Core Pillars of Franchise Advocacy, which guide its advocacy efforts:
Fully disclosing the tens of millions of dollars in vendor rebates derived from hotelier Franchisee purchases, and returning them to the Franchisees for the betterment of the system;
- Reasonably compensating hotel owner Franchisees when the brand sells guest loyalty points but keeps the profits;
- Limiting mandated vendors for non-trademarked products to encourage fair pricing and competition; and
- Avoiding unilaterally imposed and arbitrary Franchise fees without proper disclosure and approval.
“On behalf of our nearly 20,000 AAHOA Members who are responsible for 1.7% of the nation’s GDP, we voiced our concerns and highlighted the importance of ensuring fair treatment of Franchisees, because this impacts the U.S. economy,” said AAHOA President & CEO Laura Lee Blake. “We commend FTC Chair Lina Khan and the rest of the Commission for providing this opportunity. It is critical that the FTC use its influence and enforcement powers to ensure a more equitable Franchising industry that protects the investments of hard-working small-business owners.”
“We look forward to the FTC’s anticipated efforts to identify and rein in certain practices of the hospitality Franchisors that take advantage of their extensive market power to the detriment of our members,” AAHOA Chairman Bharat Patel added. “AAHOA Members are ready and willing to assist the FTC in its work to ensure fairness and transparency are hallmarks of the franchise industry.”
By submitting this comment, AAHOA is pushing for increased disclosures and accountability to protect the future of the Franchise business model. AAHOA’s goal is to always represent the frustrations and challenges expressed by the thousands of small business owners in its membership.
“In identifying an array of problematic, unfair practices and provisions within hospitality franchising, AAHOA aspires to advance the interests of its Franchisee members and advocate for both enforcement and reform,” AAHOA’s letter to the FTC states. “The FTC has a critical role in regulation of the Franchise industry, including by ensuring adequate protections are in place and that Franchisors are operating in compliance with the FTC’s legal requirements – both as they currently exist and are apt for modernization.”