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AAHOA Member Petition Regarding Choice Hotels Franchisor Relations

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Asian American Hotel Owners Association, Inc. (AAHOA)

Attn: Mrs. Jagruti Panwala, Chairwoman

Dr. Cecil Staton, President & CEO

AAHOA Board of Directors

1100 Abernathy Road, Suite 275

Atlanta, GA 30328

February 11, 2020

AAHOA MEMBER PETITION REGARDING STATE OF CHOICE HOTELS INTERNATIONAL (CHOICE) FRANCHISOR RELATIONS & RECALL OF 1/1/2020 JOINT AAHOA/CHOICE ANNOUNCEMENT

Dear Mrs. Panwala, Dr. Staton, and AAHOA Board of Directors:

When considering the state of affairs in any major organization, frequent reflection and a keen awareness of history are important factors to ensure the fundamental mission is adhered to with consistency. Unfortunately, a self-inflicted deviation from the inherent objectives of protecting our membership is causing internal strife with a fractured member body that is slowly losing hope. Our organization’s rich entrepreneurial history epitomizes the American Dream. Through humble beginnings and faced with a painstakingly intolerant operating environment, the founding fathers of AAHOA strived to combat issues such as insurance discrimination and fair franchising in the late 80’s and early 90’s. This was the foundation on which AAHOA would grow upon, to become one of the most respected and influential organizations the hospitality industry ever witnessed; 19,500 members-strong with billions of dollars in collective member owned assets and staggering statistics such as owning nearly one in every two hotels in the United States.


AAHOA’s mission statement asserts that it aims “to advance and protect the business interests of hotel owners through advocacy, industry leadership, professional development, member benefits, and community engagement”. The underlying question that must be posed is, “Are the organization’s executive leadership and corporate staff staying true to this mission?” Hotel franchises and brands have grown largely on the backs of our members. At the sidelines of our industry and organization events, our members constantly execute new franchise license deals, and multi-unit development agreements when new brands enter the marketplace. Franchise companies have woven themselves into AAHOA’s fabric, but this would not be possible without our membership’s massive capital infusions, strong hotel-asset class risk tolerance, and their entrepreneurial spirit.

In order to safeguard the fundamental principles of our organization, we have a duly elected board of directors. One of the many responsibilities of this board is to maintain oversight and supervise the activities of the organization. Additionally, they set the tone for the overall strategic direction that executive leadership and ultimately staff, must adhere to. Fair franchising is certainly a foundational bedrock of AAHOA. Unfortunately, with the present state of affairs, uttering the words “fair-franchising” has become almost offensive and off-limits, maybe even taboo. Members who have called upon AAHOA’s legal and franchise relations teams to take on pressing fair-franchising concerns are met with impotence at best and inaction at worst due to conflicts of interest with franchisors. This begs the underlying question, why isn’t AAHOA negotiating with franchisors from a position of strength and solidarity with our membership?

We are at a crossroads with Choice Hotels exerting undue influence to the detriment of our membership’s franchisees. Reports of unfair business policies and practices is nothing new with this franchisor. In September 2011, AAHOA’s then leadership penned a letter to Mr. Stewart Bainum, Jr., Choice’s Chairman of the Board, requesting an urgent meeting with then President and CEO, Steve Joyce. The key practices that AAHOA’s board members claimed were the most egregious and unjust, included Choice’s Impact Policy with impractical mandates, then CHOC (Choice Hotels Owners Council) Chairman Todd Winkler’s provocative and discriminatory remarks about the negative influence of AAHOA and AAHOA affiliated franchisees, and the relationship between Choice and its owner’s council, CHOC, precluding AAHOA from educating and further encouraging their member franchisees from serving on the board. While these issues were ultimately remedied to a certain extent, the fact still remains that continuously onerous and franchisor-favorable mandates continue to impact our members to this day.

Existing issues of concern to our Choice franchisee members includes areas such as LTR (Likelihood to Recommend) score mandates which are fraught with steep penalties, irrespective of extenuating circumstances. Onerous vendor, credit card, and rewards enrollment mandates continue to plague AAHOA members, especially those in secondary and tertiary markets. The ability of hotel owners to make fiscally sound decisions for the sake of their livelihoods has become impeded under the guise of brand standardization. To their further dismay, owners are then confronted with predatory liquidated damages, in some cases penalizing hotels even when they intend to scale down to a more fitting brand choice for their market.

The Choice/AAHOA joint announcement made on January 1, 2020 failed to acknowledge the vast majority of the above issues and instead touted the AAHOA organization as “committed to being the voice of America’s hotel owners when it comes to the franchising relationship”. This claim lacks muster because the above concerns were brought to Choice’s attention during AAHOA’s one-on-one meeting which notably included AAHOA-affiliated Choice franchisees as part of the discussion.

The marginal changes being peddled as a success is nothing more than a thinly-veiled rebuke of AAHOA’s integrity and respect. We, the undersigned members, are genuinely alarmed and extremely concerned that our organization is standing behind this announcement supporting Choice and claiming this outcome is something to be applauded. By jointly announcing these changes, what we have effectively achieved is giving AAHOA’s stamp of approval on associated Choice penalties to franchisees, irrespective of whether they are just or not. Members feel cheated and misrepresented by their organization. It appears the real negotiations that occurred behind the scenes did not take member’s narratives into account, but instead served as a smoke screen whereby true negotiations occurred without member involvement, perhaps via AAHOA staff that is not truly vested in our collective financial burden.

We have serious questions surrounding the nature of this announcement, the negotiations that took place after the initial meetings, and whether appropriate bylaw mechanisms were followed. We wonder if the AAHOA Board of Directors approved this announcement with unanimous consent, and whether it was sent using proper approval channels. We mull over the fact that AAHOA has a dedicated Franchise and Industry Relations Committee, and whether or not they were consulted throughout this process, and what their collective views may have been. We consider that votes may have been taken prior to releasing this joint statement in agreement with Choice, and what the overall sentiment of the board of directors was at that point. Since the meetings with Choice appear to have achieved so little, our legitimate concerns then shift to the negotiating team that was responsible for this outcome. Who was a part of the team navigating these issues with Choice? Active Choice franchisees also had an opportunity to voice their concerns for pertinent, on-the-ground intelligence. Were these individuals simply invited as figureheads to help extinguish a brushfire with potentially farther reaching repercussions for Choice? What was the engagement level of Choice’s leadership team negotiating on behalf of the franchisor?

The undersigned members of AAHOA eagerly await answers to the above concerns. The collective feeling of the undersigned members is that AAHOA has shifted from being an advocacy group rallying for its member’s rights and protection to simply offering a rubber stamp and free reign for franchisors to take advantage of the membership.

We humbly request that AAHOA retract the joint announcement and bring Choice Hotels back to the negotiation table for an emergency meeting to concentrate on the matters most important to the membership, and those that are impacting them every day. We will continue to demand accountability from AAHOA board members, executive leadership, and staff. Legal instruments for transparency such as Freedom of Information Act (FOIA) requests shouldn’t have to be utilized, but certainly can be. This group of concerned members is united to pursue change and remains committed to a structural overhaul, if conditions warrant it.

Let’s not plead ignorance and make the detrimental mistake of overlooking the true mission of our association. Continuing down this path will inevitably lead to further institutional decay. Importantly, a failure to act is not paying homage to those who paved the way for our organization to exist and simply does not represent the best interests of our beloved membership.

Sincerely,

Concerned Members of AAHOA

CC: Biran Patel, Vice Chairman

Hitesh Patel, Immediate Past Chairman

Vinay Patel, Treasurer

Nishant Patel, Secretary

Rachel Humphrey, COO & VP of Franchise Relations

Kathryn Stone, Chief of Staff

Sheetul Rayeed, Staff Attorney

Sanjay M. Patel, Alabama Regional Director

Girish Patel, Arkansas Regional Director

Hitesh Patel, Central Midwest Regional Director

Bharat Patel, Florida Regional Director

Kapil Patel, Georgia Regional Director

Nick Zaver, Gulf Regional Director

Sanjay Patel, Mid-Atlantic Regional Director

Sunil Patel, Mid-South Regional Director

Akshat Patel, North Carolina Regional Director

Bhavesh Patel, North Central Regional Director

Kamalesh Patel, North Pacific Regional Director

Mayur Patel, North Texas Regional Director

Jayesh Patel, Northeast Regional Director

Hiten Patel, Northwest Regional Director

Chetan Patel, South Carolina Regional Director

Mike Patel, South Central Texas Regional Director

Mike Riverside, South Pacific Regional Director

Sawan Patel, Southeast Texas Regional Director

Imesh Vaidya, Southwest Regional Director

Kalpesh Joshi, Upper Midwest Regional Director

Sandip Patel, Washington, D.C. Regional Director

Jayesh Patel, Director at Large

Piyush Patel, Director at Large

Prashant Patel, Director at Large

Purvi Panwala, Young Professional Director – Eastern Division

Miraj Patel, Young Professional Director – Western Division

Nimisha Patel, Female Director – Western Division

Lina Patel, Female Director – Eastern Division

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