Exploitation In Hotel Franchising Industry – Imposing Unreasonable Standards

Franchisors in the hotel industry may exploit franchisees by imposing overly stringent or unreasonable operating standards. While franchise agreements typically include certain standards to maintain brand consistency and quality, there are cases where these requirements become burdensome or disproportionate. Here are ways in which franchisors may exploit hotels through such standards:

1. Excessive Costs: Franchisors may mandate specific equipment, amenities, or services that come with a high cost of implementation and maintenance. These requirements can place a significant financial burden on franchisees, particularly those with limited resources.
2. Continuous Upgrades: Some franchisors may demand frequent renovations, upgrades, or refurbishments that exceed what is reasonable for the hotel’s location or market demand. These constant demands for capital investment can strain a franchisee’s financial stability.
3. Strict Design Guidelines: Imposing rigid design standards that require costly renovations or building modifications can be a form of exploitation. Franchisees may find it challenging to comply with these standards, especially if the property has historical significance or zoning restrictions.
4. Unrealistic Staffing Requirements: Franchisors may set staff-to-guest ratios or demand a certain level of employee training that is impractical or unnecessary for the hotel’s size or location. This can result in increased labor costs without a corresponding increase in revenue.
5. Exclusive Suppliers: Requiring franchisees to purchase goods and services exclusively from designated suppliers, often affiliated with the franchisor, can limit competition and lead to inflated prices. This practice may benefit the franchisor or its affiliates at the expense of the franchisee.
6. Penalties for Non-Compliance: Franchisors may impose punitive measures or penalties for perceived non-compliance with operating standards. This can include fines or even termination of the franchise agreement, putting additional pressure on franchisees to meet stringent requirements.
7. Unreasonable Performance Metrics: Setting unattainable performance metrics or benchmarks may force franchisees to engage in aggressive marketing or pricing strategies that are not sustainable in their specific market conditions.
8. Inadequate Support and Training: Some franchisors may exploit franchisees by providing insufficient support, training, or assistance. This lack of assistance can make it challenging for franchisees to meet operating standards and maintain the desired level of quality.

It’s important to note that not all franchisors engage in these malpractices, and many reputable franchisors prioritize fair and mutually beneficial relationships with their franchisees. One such brand is the StayExpress brand which believes in fair franchising practices and was started in order to address these currently prevalent malpractices within the industry. Contact us for more details!