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Steve Shapiro, director of the hospitality and tourism law program at American University Washington College of Law
franchise agreement, which can run as long as 150 pages.“ I’ ve counted somewhere around 133 clauses that are in an agreement that could possibly be negotiated. You probably wouldn’ t want to negotiate all of them,” Rushmore said.“ You should be aware of the impact of each one of those clauses and probably focus on 10 that really make a difference.”
One of the harder to haggle over is the loyalty program fee, which amounts to the cost and value of participating in the brand’ s loyalty ecosystem. And it matters: According to Marriott’ s 2025 Form 10-K filing, approximately 75 % of its U. S. hotel room nights were booked by loyalty program members. It delivers business, but at a cost, and not at the same pace across the system.“ One of the big problems that a lot of hotels have with the loyalty program is that if you have a great location or are in a resort destination, you have a lot of people that burn their points with you,” Rushmore said. Typically, unless the hotel is running at a very high occupancy, it is compensated
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at a highly reduced rate.“ Whenever a loyalty guest stays at your hotel, you pay for that privilege,” Maggan said.“ They think that brand loyalty drives revenue. I see a lot of that shifting.”
THE FINE PRINT Why franchise agreements are difficult to negotiate has as much to do with procedure as parley, said Steve Shapiro, director of the hospitality and tourism law program at American University Washington College of Law. Each year, lodging companies must file what are known as franchise disclosure documents, legal documents a franchisor must provide to a prospective franchisee before the franchisee signs a franchise agreement or pays certain fees. The FDD is essentially the franchisor’ s financial, legal and operational disclosure package. The very reason it’ s tough to negotiate a franchise agreement is because it would alter the FDD, Shapiro said, and“ why they tend to favor the franchisor.”
Negotiating is one thing; enforcement is another; and being laxer on certain elements of a franchise agreement is one more.“ There is some pushback,” he said. Part of it deals with brand standards that are built into an agreement— the category of mattress and pillow; choice of hairdryer; TV type— that are meant to be adhered to. Shapiro suggests some flexibility.“ We’ re hyper local. We know what we’ re doing. We’ re going to keep the integrity of the brand, but we’ re
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going to try new things,” Shapiro said, mimicking the franchisee mindset.
Brands are brands for a reason: They represent dependability and promise. It’ s why franchise agreements have a certain rigidity. Franchising helped create the economic model that allowed the modern-day hotel industry to scale, powering the American Dream for many.“ The franchise model has been one of the most successful business models in hospitality because it combines the strengths of entrepreneurship with the power of scale,” said David Pepper, chief development officer for Choice Hotels International, which franchises hotels through numerous brands, including Comfort, Sleep Inn and WoodSpring Suites. He looks at the relationship as a complementary partnership.“ Independent owners bring local market expertise and a personal investment in the success of their hotels, while franchisors provide the brands, technology, distribution, loyalty programs and support systems that help those hotels compete and grow.”
The model ultimately works when the interests of the franchisee and franchisor are aligned, and vice versa, argued Matthew Campbell, the COO of My Place Hotels, a franchisor of upper-midscale, extendedstay hotels.“ It is a long-term partnership built around shared accountability and shared success,” he said.
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Matthew Campbell, COO, My Place Hotels
Don’ t expect an exodus from the brands. Owning and operating an independent hotel comes with its own risks and challenges. One of the biggest is getting it financed. Many banks require not only a strong sponsor, but a brand in place before making a loan or one under favorable terms.
The larger concern is filling the hotel without brand distribution. And that means higher reliance on online travel agencies, which can charge as much as 25 % commission on a room sale.“ All of these things need to be taken into consideration over and above what a franchise and what the engine behind that franchise can provide,” said HVS’ Flavin.
It’ s a lot to deliberate over. At the end of the day, the franchisee must decide where to deploy capital. Maggan said more hoteliers are becoming disenchanted.“ We’ re coming to an inflection point where investors are really starting to think,‘ Is this the investment space that I want to deploy capital in?’” he said.“ It’ s becoming tougher to make a return.”
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10 hotelsmag. com September 2026 |