Mr. Belmonte

Franchising

The New Roles of Franchising

By Steven Belmonte, CEO, Vimana Franchise Systems LLC

In today's trying economic times, all businesses are taking a hit - especially the lodging sector. As the environment gets more competitive, hotel executives are forced to become more creative business people. After making their mortgage payments, the next biggest expense hotel owners are dishing out are the fees to their franchise company. And that's causing them to take pause and reassess their business plans. In a play of a slight role reversal, the franchisees are now interviewing franchisors to decide which one has a better plan for their property.

This shift in focus has allowed emerging brands like the Lexington Hotels (full disclosure - I'm the President, CEO & Partner of this company) to take front and center stage in the minds of hoteliers because of our solid infrastructure, comprehensive resources, and lower franchising fees. In a nutshell, hoteliers are asking what measures they can implement during these hard economic times besides just reducing energy costs and payroll. They are re-evaluating their franchising contracts and looking to get involved with one that allows more freedom, has lower costs, have less binding contracts, and a Freestyle model.

In addition to the new hotel owner-friendly brands that are becoming more attractive to the staid and antiquated franchise model of yesteryear, the advent of new technologies and social networking sites has played a large role in franchising as well. Unlike a decade ago when size and name recognition really did matter in generating brand recognition that led to reservations - the Internet has offered a viable alternative to smaller brands and independent hotels - thus leveling the proverbial playing field for smaller and newer hotels. More importantly, the Internet has also created a shift in the booking habits of leisure and business travelers.

Nowadays smaller brands can create the same exposure and booking capabilities as the larger brands. When travelers go online to book accommodations they are no longer calling up the websites of a hotel chain but going instead to general booking sites like Travelocity, Expedia, HotWire, Orbitz, Priceline, and many others. The initial query is based on location and the second is for a price range. Once the online shopper has plugged in those two requests, they shop around and narrow down their choices by looking at property photos, customer reviews, and amenities offered. These are all tools that have allowed smaller brands to chip away at the dominance once held by the larger chains.

Changes are taking place inside the franchises' executive offices as well. Quickly disappearing are the days where the 'one size fits all' mentality was the norm in franchising. The standardized rulebook that each franchising company has been using across the board from New York City to Des Moines can no longer be justified. The amenities needed in New York City to be competitive in that very viable and fast-paced market are completely different from the ones needed in the Des Moines market to remain competitive. While it may be convenient for the franchisor to have one rulebook but it's unjust for the franchisee.

An example of the crazy inequity that has been happening over the years can be found in the loyalty programs. The basic premise of these programs was to build brand loyalty. Over the years, franchisors were trying to outdo the loyalty programs of other chains and eventually it got out of control, costing millions of dollars in liabilities and tens of thousands of dollars in program fees for franchisees. Sadly, the programs received lukewarm success, if any at all, as customers were growing frustrated at having accumulated points but unable to use them due to blackout dates. Interestingly enough, customers would have been loyal to the hotel even without a loyalty program because of the location and price.

As a result of all these components that I have mentioned (a leveled playing field courtesy of the Internet; franchisees revisiting their choices in hotel brands; the astronomical fees from inequitable programs; and a lack of choices to stay competitive in individual marketplaces due to a standardized rulebooks) franchisors are coming around to what I have always advocated - rolling up their sleeves and creating a targeted plan for individual hotels for their individual marketplace. I call this model Freestyle Lodging. And in my opinion it offers the key to survival - FLEXIBILITY. Flexibility is going to be imperative in order for the franchise base to be profitable within their individual markets. If franchising companies are not flexible, they are going to affect profitability of their franchisees. During the down turn, no one needs the 'my way or highway' attitude. Some of the more mature, long time brands like to offer reasons why flexibility won't work but at the end of the day, it's just that they don't want to give up an extremely high profit margin.

Bottom line is that the new roles in franchising are being led by the brands that are flexible and able to accommodate the needs of hotels on an individual basis in order to ensure they are successful and stay competitive in their respective markets. Quality hotel operators were a little reluctant at first to go with smaller, emerging franchisors but they are now taking a hard look at them. Like Lexington, they are offering all the support, a solid infrastructure, and comprehensive resources needs but at a much better value.

Vimana Franchise Systems LLC is a hotel franchise company owned by CEO Steve Belmonte, President Neal Jackson and Vice President Cory Jackson Jr. In May 2011, Vimana Franchise Systems launched the Centerstone brand as a three-segment franchise designed to create a fair and cost effective model for the hospitality industry. In November 2011, Key West Inns was re-launched under the Vimana Franchise ownership umbrella as a fun and uniquely themed leisure brand. For more information on Vimana Franchise Systems LLC, contact Steve Belmonte at (407) 654-5540 steve@vimanafs.com. Visit Vimana Franchise Systems online at www.VimanaFS.com. Visit Centerstone online at www.centerstonehotels.com, on Twitter at @Centerstonehtls, or on Facebook at www.facebook.com/Centerstonehotels. Visit Key West Inns online at www.staykeywesthotels.com, on Twitter at @StayKeyWest, or on Facebook at http://www.facebook.com/staykeywest. Mr. Belmonte can be contacted at 407-654-5540 or steve@centerstonehotels.com Extended Bio...

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