Here is a copy of AAHOA’s letter to Choice. AAHOA sent copies of the letter to Choice President and CEO Steve Joyce and two other top executives, Bruce Haas, executive vice president, global brands, marketing and operations, and Tim Shuy, vice president owner relations and franchise management.  The AAHOA letter is signed by Hemant Patel, AAHOA chairman, Alkesh Patel, vice chairman, Mehul Patel, treasurer, Pratik Patel, secretary, and Fred Schwartz, president.

September 27, 2011
Stewart Bainum, Jr.

Chairman, Board of Directors
Choice Hotels International
10750 Columbia Pike
Silver Spring, Maryland 20901

Re:  Request To Address Significant Concerns Involving Choice Hotel’s Alleged Unfair Business Practices In Its Relationship With Asian Indian Franchisees Affiliated with AAHOA

Dear Mr. Bainum,

On behalf of the Asian Indian franchisees who are members of AAHOA and who own more than fifty percent (50%) of all brand hotels of Choice Hotels International (Choice), we request an immediate meeting to discuss our serious concerns with Choice arising from perceived unfair business policies and practices which underscore an apparent lack of good faith towards the franchisee relationship.

Over the past years, we have been identifying what we believe to be a host of unfair business practices by Choice, and sharing them with your Choice executive team, namely Steve Joyce, Bruce Haase and Tim Shuy.  Despite the numerous letters, emails, discussions and meetings, we feel that very few of our concerns have been addressed, or much less resolved.  In our opinion, the three (3) most egregious and unfair policies and practices identified below have clearly violated the established and legally-required principles of good faith and fair dealing.  Since we believe that they have not been addressed in a fair and timely manner, our AAHOA Board has voted unanimously to notify you that if these issues cannot be negotiated and satisfactorily resolved within the next ninety (90) days, AAHOA will be compelled to take further action which will impact AAHOA’s relationship with Choice.

Specifically, based on these unfortunate circumstances, our AAHOA Board has decided that it would be best to go our separate ways and not renew Choice’s membership for 2012.  This means that AAHOA would not accept any membership, sponsorship or related funds from Choice, and would not invite or authorize your Choice representatives to appear on any panels, exhibit at our Trade Shows, or otherwise have access to our AAHOA members through our Annual Convention, Regionals or any other AAHOA-related events or periodicals, including advertising in our AAHOA Lodging Business (ALB) magazine.  Further, during this upcoming 90-day "negotiation" period through December 2011, in an attempt to avoid any issues or concerns that might arise as a result of the current tension that exists between AAHOA members and Choice representatives, we request and recommend that Choice agree to not appear at any AAHOA Regional meetings.  We will refund your membership dues for such meetings on a pro rata basis if you will comply with this request.

Please understand that we are addressing this letter directly to you in an effort to underscore the significance of our request.  We are hoping that during this 90-day negotiation period, we can meet with you and your Choice leadership team to reach a resolution for the mutual benefit of the Choice franchisees and the franchise system overall. 

The three (3) policies and activities of Choice which we believe violate the covenant of good faith and fair dealing are as follows:

1.       Choice’s Impact Policy:  It is our opinion that Choice’s Impact Policy offers little or no protection to Choice’s franchisees.  The Impact Policy includes, for example, unworkable mandates that many believe operate as "gotcha" clauses, such as the "good standing" qualifier and the eighty percent (80%) Rev Par requirements that in our opinion should never preclude a franchisee from protection against encroachment.

Significantly, even when a franchisee has fully satisfied these requirements, the Impact Policy further provides Choice with opportunities in its sole discretion to encroach on the territories of its long-standing franchisees who have been loyal to the brand.

In short, we believe that the Impact Policy removes the fundamental rights of franchisees to be fairly protected against having their own franchisor (i.e., Choice) operate or license a same brand hotel in the market segment because Choice unilaterally and arbitrarily decides that the designated market is not adequately served in that area.  Rather than protecting the franchisees, we feel that this Impact Policy promotes unfair competition and destroys the rights of Choice franchisees to reap the benefits and fruits of their franchise agreements.

2.       Inflammatory Statements of Then CHOC Chairman Todd Winkler Against AAHOA And Asian Indian Hoteliers:  As you are undoubtedly aware, during the Choice Hotels Owners Council (CHOC) Summit on March 21-23, 2010, it has been reported that the then CHOC Chairman Todd Winkler made inflammatory and derogatory remarks against AAHOA members and Asian Indian hoteliers serving on the CHOC Board.  These discriminatory statements raise concerns that Asian Indian franchisees are considered to be unqualified to serve as leaders, and incapable of being good operators, of the Choice brands.

Even though Mr. Winkler resigned a few days after making his statements, this matter remains unsettled for many AAHOA members.  It is our belief that Choice did not provide a full explanation of the events and discussions it had with Mr. Winkler both prior to or after he made the highly troubling and inflammatory discriminatory remarks.  Choice also did not reach out to the Asian Indian franchisees to reassure them that Choice was outraged by this conduct and would strive to "right the wrong." Consequently, many believe that Mr. Winkler’s statements might be reflective of Choice’s internal corporate policy.  This would be a violation of good faith principles and is an example of one of several unfair practices being carried out by Choice.  AAHOA deserves to know the truth behind this matter.

3.       The Current Relationship Between Choice and CHOC, And The Impact on Asian Indian Franchisees Who Wish to Serve on the CHOC Board:  It has been reported that Choice is one of the only (and, in fact, might be the only) franchisor(s) that requires all of its franchisees who own Comfort Inn, Comfort Suites and Quality Inn brands to be dues-paying members of the advisory council known CHOC.  It is our opinion and belief that Choice controls all activities of CHOC through the Bylaws and election process, and is seeking to preclude AAHOA from educating and encouraging our member franchisees to participate and actively serve on the CHOC Board.  This is based on the recent proposed changes to the CHOC Bylaws.  Indeed, after AAHOA challenged these unfair Bylaws changes, Choice did not agree to completely eliminate them.  Rather, Choice recently announced that it would delay making further Bylaws changes until an unspecified future time.

In light of these significant concerns, we request an opportunity to meet with you to discuss them further, and determine how best to ensure that Choice’s ongoing business practices and policies comply with the principles of good faith and fair dealing for the benefit of all.  Our membership considers these among the most important issues that are creating anxiety and tension in the AAHOA / Choice relationship.  However, there are many other issues that must be addressed as well in due time.  Please contact our President Fred Schwartz (REDACTED) or e-mail at (REDACTED) with any questions regarding this letter and to arrange a time to meet within the next 90 days.

 

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