At last week’s AAHOACON24, AAHOA announced a revision to its 12 Points of Fair Franchising. The revision specifically targeted Point Number 12: Sale of the Franchise System Hotel Brand(s).

Best practices related to Point 12 now recommend that each franchise agreement include a “Change of Control” clause to protect the franchisees in the event of a purchase, sale, acquisition or merger of one or more hotel brands between franchisors.

In a statement, the Association said that the updates “reflect the current industry landscape and are in response to the several noted acquisitions and mergers of one or more hotel brands between franchisors in recent years.”

Notably, Marriott International ended its relationship with AAHOA in the summer of 2022, officially in response to the 12 Points of Fair Franchising. At the time, the company claimed the 12 Points ran “counter to its business model and interests.”

On the first day of AAHOACON24, Liam Brown, group president at Marriott International, greeted attendees and said the relationship between the association and the company has been “mutually beneficial,” echoing the phrase the company used when it disengaged from the association two years ago. Brown did not officially state the reason for the company’s return during his address.

Changes of Control

Under the updates, AAHOA encourages each franchise agreement to include a “Change of Control” clause to protect the franchisees in the event of a purchase, sale, acquisition or merger of one or more hotel brands between franchisors.

AAHOA explained the rationale for the changes:

“In recent years, there have been several noted acquisitions and mergers of one or more hotel brands between franchisors. Each time a franchisor has acquired one or more brand hotels of another franchisor, the hotelier franchisees have been the most impacted. The franchisees generally have not been afforded an opportunity to exit their franchise agreements unless they pay high liquidated damages, sometimes costing hundreds of thousands of dollars or more, as mandated in their respective franchise agreements. Regrettably, for franchisees in the hotel industry, there is no standard ‘change of control’ clause in their franchise agreements, meaning they are not afforded a fair or equitable opportunity to decide their future options if their hotel brand is acquired by a different franchisor—unless they pay the LDs.

“Consequently, AAHOA submits that each franchise agreement should include a ‘change in control’ clause that will permit all hotelier franchisees to give 30 days’ prior written notice to voluntarily terminate their franchise agreements at any time within one year after a 'change in control' event has been finalized.”

“The revision of Point number 12 speaks to the ongoing and ever-evolving landscape of hospitality mergers and acquisitions,” AAHOA Immediate Past Chairman Bharat Patel said in the statement. “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,” AAHOA President & CEO Laura Lee Blake added. “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.”

AAHOA’s 12 Points of Fair Franchising serve as an educational primer for hospitality franchisors and AAHOA members (current and future hospitality franchisees) to discuss and use to continue designing, developing and implementing best-in-class, mutually beneficial franchise systems.

By Jena Tesse Fox