Key Items to Watch out for in the HOLIDAY HOSPITALITY FRANCHISING, LLC 2020 FDD
Certain states require that the following risk(s) be highlighted: 1. Out-of-State Dispute Resolution. The license agreement requires you to resolve disputes with the franchisor by litigation. You are not required to sue the franchisor only in the state of Georgia, but the franchisor can sue you in the state of Georgia. Out-of-state litigation may force you to accept a less favorable settlement for disputes. It may also cost more to litigate with the franchisor in the state, county and judicial district in which the franchisor’s principal place of business is then located than in your own state.
Certain states may require other risks to be highlighted. Check the “State Specific Addenda” (if any) to see whether your state requires other risks to be highlighted.
Item 5: Initial Fees
When you submit an application for a License, whether for a new development, conversion, change of ownership or re-licensing, you must pay Holiday an initial application fee (the “Application Fee”) of $500 per guest suite, but not less than $50,000. See Item 6 for information relating to the requirements and fees for changes of ownership, franchisee name changes, realignment of the franchisee’s ownership and re-licensing.
REFUNDABILITY: If Holiday does not approve your application for a License, or if you withdraw the application before Holiday approves or denies it, Holiday will return the Application Fee to you, less its processing fee of $15,000. If Holiday approves the application subject to certain requirements, Holiday may revoke its approval if you fail to meet those requirements. Once Holiday approves the application (even if Holiday subsequently revokes its approval), the Application Fee is nonrefundable.
PIP: Before you submit an application for a conversion, re-licensing, change of ownership or brand change you must arrange for Holiday to conduct an inspection of the Hotel so that Holiday can prepare written specifications for the upgrading, construction and furnishing of the Hotel in accordance with the Standards, in the form of a plan called a “Property Improvement Plan” (“PIP”). There is a nonrefundable $6,500 fee for the inspection of your hotel and the preparation of the PIP report (see also Item 6). In the case of a conversion hotel, Holiday will not authorize your Hotel to open until you complete all PIP requirements, including submission of plans before the start of construction in accordance with the dates specified in your License and the attachments to your License (see Item 11). In the event the hotel fails its opening inspection, Holiday may charge you up to $5,000 for each re-evaluation and re-inspection
TRAINING, EQUIPMENT AND MATERIALS: The Openings and Renovations program provides services and training required to open a hotel in the System including IHG Concerto(TM) Ramp Up, Key Programs Training, post-opening support and other onsite consultations. The Openings and Renovations fee covers up to two participants per Hotel. This fee is $6,000, plus trainee/trainer expenses. The fee covers pre-opening training, including instruction, materials and library and instructor expenses, and post-opening support. Additional attendees will be required to pay a separate registration fee, which will be $250 per additional participant for the IHG Concerto(TM) Ramp Up program. Participants from all hotels are responsible for their own airfare, lodging, meals and other miscellaneous expenses for the program or workshop for their brand group. IHG Concerto(TM) Ramp Up is a training class that provides basic instruction on the Reservation System and revenue management. Your General Manager and the individuals designated as the system experts for your Hotel must attend a four-day IHG Concerto(TM) Ramp Up Program at an SCH designated location. No additional fees will be incurred for the IHG Concerto(TM) workshop, but you will incur expenses for travel, meals and lodging.You must use the prototype design plans and the Standard Room D?cor Program (“SRD Program”) supplied by Holiday. An architect approved by Holiday must adapt these plans for a specific site and construction type. You must commission and pay your architect directly. You must meet with your Openings and Renovations Regional Director before your architect begins detailed construction plans. You must pay your travel, lodging and other miscellaneous expenses if any are incurred. You must provide Holiday with periodic updates of your development progress. Before your architect begins detailed construction plans, you must submit preliminary plans to Holiday for Plan Review comment. You, your architect and general contractor must also attend a Construction Consultation in Atlanta, Georgia, or other locations that Holiday may designate. There are no fees for the Construction Consultation; however, you must pay for your travel, lodging and other miscellaneous expenses. During the Hotel opening process, you may be required to pay additional fees for pre-and post-opening training, consultation and coaching services provided by SCH or designated representatives. These additional fees, that are payable to SCH and are associated with on-site visits, rescheduling of those visits or extensions of your hotel’s opening date, will not exceed $5,000 per visit, and you must also pay for the expenses of the trainers’ travel, living and lodging expenses while conducting the visit. Your General Manager, Front Office Manager (or equivalent) and Director of Sales must be hired prior to opening and each must attend an initial certification training program. The cost for the initial certification training program will range from $1,725 to $2,195 per trainee. You must pay for any travel or training expenses of your trainees. You must also purchase training materials for the training programs described in Item 11, which Holiday estimates will cost no more than $5,000 per hotel for all trainees combined. Your General Manager and Guest Experience Champion must each complete the Leading the Brand Training for New Hotels certification prior to the hotel opening. The cost for the training event and initial training materials is $375 for the Staybridge Suites brand. You may be required to purchase subsequent training materials to fulfill the ongoing training of new employees. Before opening, you may receive on-site training and consulting from a member of Holiday’s franchise service team. This Holiday employee will visit your Hotel to assist the Hotel to become a Staybridge Suites Hotel. The Holiday employee may train all Hotel management/supervisory staff to deliver information to line-level employees. Generally, training topics include: the Standards, guest service skills, departmental performance standards, marketing and loyalty programs, service planning, quality measurement and the Reservation System. The training must also include management orientation and Hotel employee orientation. The Hotel must provide meeting space and lodging for the trainer. Holiday estimates the fee will be $7,500 per day for the training, materials and shipping and handling. These fees and costs do not include expenses incurred by Holiday’s employee for travel, lodging and meals, which are billed directly to your Hotel. Holiday currently designates Oracle America, Inc. as the Property Management System (“PMS”) provider and requires you to install the Opera Xpress PMS software (see Items 1, 6, 7, 8 and 11). The estimated costs for equipment configuration, installation software and training will vary depending on the number of guest rooms and technology needs at your hotel. We estimate that the cost for the PMS installation and the purchase of required hardware devices (i.e., workstations and printers) will range from $64,000 to $75,000 for a hotel with 1-100 rooms; $83,000 to $96,000 for a hotel with 101-175 rooms; $97,000 to $130,000 for a hotel with 176-250 rooms; $124,000 to $187,000 for a hotel with 251-350 rooms; and $196,000 or greater for a Hotel with 351 rooms or more. For hotels which are managed by an affiliate of Holiday and have fewer than 150 rooms and six PMS workstations, a hosted PMS option is available. This hosted option is priced differently from the premise-based option which is offered to all Holiday hotels. All hotels will require a custom quote at the time the deployment process begins to better determine estimated costs. You must pay these costs before any goods or services are delivered to the hotel. These cost estimates include: the basic hardware for the PMS and access to the Reservation System, the basic software, the installation of equipment and software and initial training for your employees on how to use the PMS with the Reservation System, and the purchase, installation of, and training for the SPS equipment and software. These estimated costs do not include other training, additional equipment, additional software, additional operational manuals, shipping and handling, taxes, insurance, or food, travel and lodging expenses of your employees, vendor employees, SCH employees or contractors who install the PMS and Reservation System equipment and software at your hotel and train your employees to use them or the cost of internal hotel cabling or infrastructure. SCH requires that you refresh PMS hardware/software every 48 months. Holiday may consider requests to alter the requirements described in this Item. Holiday will only consider changes under special circumstances and any changes must comply with applicable laws.
Item 8: Restrictions on Sources of Products and Services
Except as described below, you are not required to purchase or lease products or services from Holiday or its affiliates, or from suppliers approved by Holiday, or under Holiday’s specifications.
The Standards and Specifications: You must build, design furnish, equip, decorate and supply the hotel subject to Holiday’s approval of your plans. You must equip the hotel with products which meet the Standards, specifications and prototype plans. You must equip the Hotel with products which meet the Standards and specifications, including those described in the License, mandated Standard Room D?cor Program and the Standards (see also Item 11). All modernization, renovation and upgrading of your Hotel must also meet the Standards and specifications. Holiday issues specifications by brand of product and in many instances by brand “or equivalent,” by physical characteristics and by other methods, depending on the product or service involved. Holiday can make changes to the Standards. These changes will become binding on you as if originally set forth in the Standards. Any change Holiday makes must be approved by Holiday’s designated internal franchise committee or subcommittee, after seeking the advice and counsel of the appropriate committee of the IHG Owners Association. Holiday will provide you with an explanation of any change, in writing, at least 30 days before it goes into effect. Holiday estimates that the Standards and specifications will apply to 90% to 95% of your purchases and leases. If you purchase or lease any equipment or supplies not previously approved by Holiday, it may require you or the manufacturer to submit a written request for Holiday’s approval. Holiday reserves the right to require removal of any non-approved product installed at the Hotel. While Holiday has no obligation to respond within a certain time frame, it expects to do so within 45 to 60 days from receipt of your request. Holiday may require certain information, tests and inspections, at no expense to Holiday, as a condition of approval. Under the Standard Room D?cor (“SRD”) Program, all Staybridge Suites brand hotels must choose and install in all guestrooms and public areas a design scheme provided under Holiday’s established SRD program or, under limited circumstances, a custom design approved by Holiday, meeting all of Holiday’s detailed quality specifications. If a custom design is used, a Custom Design Review Fee and a model room will be required. If you wish to use suppliers other than the established SRD approved suppliers, your alternate suppliers must provide samples to show that their products will meet Holiday’s quality specifications, and you must receive prior written approval from Holiday. At the time you and Holiday sign a License, and before your hotel opens, SCH may determine to fund your purchases from approved suppliers and then invoice you. You must reimburse SCH for these purchases. If Holiday funds your purchase before your hotel opens, Holiday will not receive fees from approved suppliers. Holiday requires you to hire qualified, licensed, professional advisors in the form of a project team that may consist of, depending on complexity and scope of the work, an architect, interior designer, engineer or other related specialist when building or renovating an IHG hotel. If you cannot find such licensed professional help, contact your IHG Openings and Renovations Regional Director. Any design work submitted by unqualified individuals hired by you will be rejected and your Hotel can be subject to Plan default, resulting in an assessment of fees under the terms of your License. The fee for such Plan default will be up to $5,000. At our sole discretion, you may be required to remove any non-approved product installed in your Hotel that has not been approved by IHG Plan Review explicitly in writing before installation. In some instances, Holiday receives a small commission from vendors’ sales to offset Holiday’s costs of implementing the SRD Program. These costs include professional design services for creating new d?cor schemes for Holiday’s franchisees, prototype room development and testing, specifications development, negotiating and contracting services for items that the franchisee may buy through this program, web site updating and maintenance, and franchisee support service expenses. The commission amounts to 1/2 -2% for SRD items. The information below reflects operations as of the date of this disclosure document and is subject to change. Standard Room D?cor commissions for the year ending December 31, 2019 were $208,686.
Suppliers: If Holiday requires you to purchase equipment, furnishings, supplies or other products for the Hotel from a designated or approved supplier or service provider in the License, the Standards, or other communication to you, then you must purchase the mandated product unless you receive prior approval from Holiday to purchase such products from another source whose products meet such specifications. Holiday may provide you with information and recommendations concerning firms which offer products and services (which the License and/or the Standards require you to use) which are necessary and useful to the operation of a Hotel, or which meet the Standards and specifications. However, Holiday has no ongoing obligation to provide purchasing information to you, and Holiday’s practice and approach to this activity may change at any time. Your License does not require Holiday to engage in or continue these voluntary activities. In furnishing supplier or service provider information and making recommendations, Holiday uses its business judgment regarding the long-term interests of the System as a whole, based on its information at that time concerning quality, performance, competitive pricing and similar factors. However, by identifying or recommending a supplier or service provider, Holiday makes no warranty to you of these or any other factors. Your use of an identified or recommended supplier or service provider, selling products or services meeting the Standards and specifications may make it easier for you to comply with the Standards and specifications, but it is not a substitute for compliance. While Holiday may, from time to time, communicate with you or your suppliers/service providers regarding supply/service provider issues and take steps to improve performance or resolve complaints, Holiday has no responsibility for the financial condition or performance of any supplier or service provider. Suppliers may offer Holiday the opportunity to take advantage of funds to support co-op marketing, training and other services that support the System at national and hotel levels. When these options are available and selected, Holiday uses these funds as designated, and to the extent possible to benefit the System and the systems of Holiday’s other brands which purchase from the suppliers. SCH and its affiliates may enter agreements with suppliers and receive revenue attributable to purchases by franchisees and by SCH and its affiliates. Nothing in your License prevents Holiday from having an ownership interest in any other business, including firms providing products or services to you or providing procurement services to you. If Holiday has, or later acquires, an ownership interest in a product or service provider, Holiday has no obligation to maintain that interest or to refrain from disposing of it as Holiday sees fit. No officer of Holiday currently owns any interest in an approved supplier or service provider. SCH currently utilizes a mixed resource model for the supply chain management functions. In the future, the procurement program may be comprised solely of SCH employees. The procurement program develops and supports purchasing programs and provides System franchisees with several valuable services. You can contact the procurement program by mail c/o IHG Marketplace, Three Ravinia Drive, Suite 100, Atlanta, Georgia 30346 or by telephone during normal business hours of Monday – Friday 8:30AM – 5:00PM at its toll free support line 855-466-7877.Purchasing professionals will be available to assist you with any questions you may have regarding sourcing of products or services through IHG Marketplace. Beginning January 1, 2011, a procurement program run by IHG named InnSupply (“InnSupply”) was initiated with the endorsement of the IHG Owners Association to deliver value and lower cost purchasing opportunities and options to its customers (“Programs”), including Holiday’s franchisees, as explained below. In 2014, the name of the procurement program was changed to “IHG Marketplace.” You are, however, under no obligation to use IHG Marketplace’s Programs. If you become an IHG Marketplace participant you will purchase goods and services directly from suppliers at IHG Marketplace’s negotiated prices. The relationship between franchisee and supplier is that of buyer and seller. You are not required to purchase from IHG Marketplace’s suppliers or participate in the IHG Marketplace program in any way and you are free to purchase goods and services from any supplier, so long as the supplier fully complies with Holiday’s and SCH’s specifications and the Standards, unless Holiday requires you to purchase a product from a designated or approved supplier in the License, the Standards or other communication to you. IHG Marketplace operates on a cost recovery basis with fees for both procurement and technical ordering transaction services included in the supplier invoiced price. Prices paid by franchisees for goods and services as a participant of IHG Marketplace and/or under a Brand Standard/Specification Program will include up to a 2% cost recovery fee. These fees cover the resource, travel, technology and Program related costs for IHG Marketplace. Occasionally, the prices will include allowances and rebates paid to IHG Marketplace or franchisees directly by suppliers on your purchases. Allowances and rebates received by IHG Marketplace or properties directly from suppliers will generally range from approximately 1% to 5% of the amount of the invoice price for the goods and services purchased by you from suppliers participating in the Programs. All supplier allowances and rebates will be fully transparent to the franchise buyers and distributed to the hotels either directly from suppliers or through the IHG Marketplace administrative group.
Gift Card Program: When the gift card program is launched, you will have to purchase the gift card equipment (see Item 6) and honor the SCH Gift Card payment method for Hotel charges. Training for the program is selfadministered, but assistance from SCH or its vendor may be available.
Coffee Program: SCH, on behalf of all Staybridge Suites Hotels in the U.S., has entered into a coffee program agreement with Royal Cup Coffee to provide brewing equipment and ground coffee to the Hotels’ public area coffee and 2 oz. coffee packs for in-room use. Each Hotel must purchase all coffee from Royal Cup Coffee, but no minimum purchase is required. The cost of coffee ranges between $139.20 and $147.84 per case (public area) and between $19.37 and $22.05 per case (in-room), and it is subject to change from time to time by Royal Cup Coffee.
Signage: Your Hotel must display a primary sign that meets Holiday’s specifications. The total signage package, including all additional signage, must also meet Holiday’s specifications and it must be purchased from a Holiday approved sign vendor. A post-installation inspection fee will be included in the price from the Holiday-approved sign vendor. Only sign suppliers approved by Holiday are authorized to manufacture and install exterior signage.
Reservation System and Computerized Enhancements: You must purchase equipment, software and services for property-level technology and telecommunications systems from third-party vendors whom Holiday designates or who meet Holiday’s specifications (see Item 11).
Long Distance Telecommunications Program Management Commissions and Miscellaneous Services: SCH has negotiated rates which are on file with the Federal Communications Commission with certain providers of long-distance telecommunication services to System franchisees, such as AT&T and Verizon, in consideration for assistance, program support or other services SCH renders to the providers in connection with their sales to franchisees. You do not have to use these providers.
Insurance: Holiday’s specifications for the amounts and types of required insurance coverage are specifically described in paragraph 9.B of the License. If you fail to procure or maintain the insurance coverages and limits set forth in paragraph 9.B, Holiday will have the right and authority (but not the obligation) to procure such insurance at your cost, including any costs incurred by Holiday for procurement and maintenance of such insurance. Holiday currently requires that you obtain a commercial general liability insurance policy (including coverage for product liability, completed operations, contractual liability, host liquor liability and fire legal liability) and business automobile liability insurance policy (including hired and non-owned liability) with single limit coverage for personal and bodily injury and property damage of at least $10,000,000 per occurrence naming Holiday, SCH and its parents, subsidiaries and affiliates as additional insureds. In connection with all construction at the Hotel, you must require your general contractor to maintain commercial general liability insurance (including coverage for product liability, completed operations and contractual liability) and business automobile liability insurance (including hired and non-owned liability) with limits of at least $10,000,000 per occurrence for personal and bodily injury and property damage naming Holiday, its parents, subsidiaries and affiliates as additional insureds. The holder of the liquor license must maintain liquor liability insurance with single limit coverage for personal and bodily injury and property damage of at least $10,000,000 for each occurrence naming Holiday and its parents, subsidiaries and affiliates, (and the Licensee if applicable) as additional insureds. Holiday also requires that you obtain employment practices liability insurance (including coverage for harassment, discrimination and wrongful termination and covering defense and indemnity costs) with a limit of $1,000,000 per occurrence and in the aggregate. You must also obtain: (i) employer’s liability with minimum limits of $1,000,000 per occurrence; (ii) worker’s compensation insurance; (iii) business interruption insurance to ensure the royalties, Service Contributions and any other sums payable to us (the policy should insure against ‘all risks’ of physical loss or damage, and be endorsed to provide for payments to be made directly to Holiday). Insurance premiums for required coverages can range from $35,000 to $125,000 or higher depending on such factors as jurisdiction, exposures, type of hotel, loss history, location and size of hotel, payroll size and other factors.
“Private Network” Connecting Services: You must purchase”private network” connecting services, or another solution Holiday specifies, for use in communicating with the Reservation System from Holiday’s designated vendor. Your Hotel’s private network will be connected to a fully managed router service with a certified interface to SCH’s proprietary systems.
Property Management System: You must install the certified equipment specified for the PMS as required by SCH. You must request a waiver to use an alternative source. The PMS equipment is also used for accessing the Reservation System. PMS equipment, software and maintenance are described in the Master Technology Services Agreement (Exhibit C). You must purchase PMS training, implementation, and hardware and software support services (see Item 6). You must also enter into Joinder Agreements (can be found within Exhibit C) with Hewlett-Packard Inc. (“HP”) in order to obtain the PMS system hardware, software and deployment services at your Hotel and for the procurement and installation of hardware, software, and installation services of a credit card solution at your Hotel. Hotels will operate a computerized property management system (PMS) that has been certified by SCH and must maintain the PMS in conformance with the Standards of SCH. The PMS must have a database schema and shell which is approved by SCH, in order for the interface from the PMS to the Reservation System to work correctly. Hotels will be responsible for establishing and maintaining proper application access control to align with Payment Card Industry Data Security Standards (PCI-DSS).Operating systems, database, and other programs must be maintained with current approved security patches that are fully supported by the software vendors. The PMS must be periodically updated and maintained to conform to SCH approved software versions, technology advancements and security requirements. This may require certain hardware and/or software components to be replaced or upgraded. At a minimum, the PMS hardware and software must be replaced at least every 48 months. PMS hardware includes server(s), workstations, printers, monitors, ups, back-up device, and associated network components. In the twelve months ending December 31, 2019, SCH and its subsidiaries’ gross revenue from franchise purchases of PMS and Reservation System equipment, software, training and support services (“information technology program purchases”) was $6,997,263, as indicated in the year-end financial statement of the Deployment Profit and Loss Statement for the Global Technology division. SCH retains a portion of the project management charges from franchisee information technology program purchases. Holiday estimates that more than 95% of the gross revenues from franchisee information technology program purchases are therefore paid over directly to the information technology program vendors and are not retained by SCH or Holiday. (The financial information provided in the Profit and Loss Statement for the Global Technology division is not generally available to franchisees). SCH has selected Opera Xpress PMS solution as the required property management system to interface with and access the Reservation System for Staybridge Suites brand Hotels. You must enter into a license agreement with the supplier for the PMS solution. You must also obtain from the supplier of the PMS, for a fee, ongoing maintenance and support for all other PMS components, including software, PMS software upgrades and required Brand Standard system interfaces to the PMS (see Item 11). Oracle America, Inc. is the PMS Provider for the Opera property management system. You must also pay support fees for the other components of property-level systems, such as PMS equipment maintenance, and for other systems which interface to the Opera Xpress PMS system; such as the telecommunications system, the electronic door locking and keycard system, and the specialized sales software. Hardware and software maintenance fees may vary based on the number of rooms at the Hotel. SCH’s criteria and procedures for approval of this required supplier of the PMS software and its ongoing maintenance and support are not readily available to System franchisees, but SCH will provide them at your request. SCH will notify you of any discontinuation of these services.
Secure Payment Solution: SCH administers a computerized payment card processing program, Secure Payment Solution (“SPS”). SPS is a data security process designed to remove certain credit card information from IHG systems. Using PCI certified payment terminals, credit card data will be encrypted and converted to tokens before entering the PMS. SCH has contracted with ACI Worldwide Corp. (“ACI”) to provide the tokenization application services. All hotels are required to use SPS. Hardware and software systems required to connect must be fully operational when the hotel opens, with appropriate management and staff trained and competent to operate SPS at all times. Each franchisee will be required to enter into a merchant processing application and agreement with Banc of America Merchant Services, the SCH-approved merchant service provider, and a participation agreement with ACI and SCH (see Exhibit I-4).
Guest Internet Access – Bandwidth (IHG Connect): For Guest Internet Access (“GIA”) Bandwidth, a hotel will be required to use an approved SCH-certified provider and to sign an IHG Direct Hotel Participation Agreement with AT&T, Century Link, Beyond Reach A CCR Company, Comcast, Cox Communications, GTT, Shaw Telecom, Spectrum or Verizon, or such other provider as may be approved by SCH from time to time, the form of which is attached as Exhibit I-5 to this disclosure document. Estimates for infrastructure needs can vary greatly by location. Actual costs can only be obtained once vendor site surveys are completed, due to the unique building and construction circumstances of a given property.
Guest Internet Access – Hardware (IHG Connect): For Guest Internet Access (“GIA”) Hardware, a hotel will be required to install SCH approved Wi-Fi equipment and use an SCH approved certified integrator (an “Integrator”) for the installation of Wi-Fi equipment. Hotels are required to enter into an agreement with one of the following Integrators (or such other integrators as may be approved by SCH from time to time): Allbridge, BluePrintRF, GuestTek, Hospitality WIFI, Intello Technologies, MTS, Ovation Networks, Inc., Parity Technology Solutions, Pinnacle Communications, SafetyNet Access, Sagenet, Single Digits, Inc., Sonifi or World Cinema. Estimates for infrastructure needs can vary greatly by location and building type. Due to unique building and construction of any given property, actual costs can only be obtained once Integrator site surveys are completed. The site survey will help determine the number and types of Wi-Fi equipment through a WiFi heat map coverage diagram (see Item 7, Note 5)
Keycard System: Staybridge Suites brand hotels must utilize an approved Keycard System that meets brand requirements. The estimated initial cost for the Keycard System solution purchase and installation will range from $10,000 to $15,000. This includes the server, key encoders, installation, and support. It doe s not include the cost of the locks for the doors themselves. You must obtain ongoing maintenance and support for the required Keycard System software, including upgrades and new versions. You must also obtain ongoing equipment maintenance for the Keycard System hardware. The Keycard System provider will bill and collect the fee from you for the required Keycard System hardware / software support. The costs will vary depending on the Hotel’s specific technology needs, including the number of key encoders and servers at the Hotel.
Televisions: Hotels are required to provide televisions that meet the technical specification requirements and minimal diagonal screen size for in-room and public spaces.
In-Room Entertainment (IHG Studio): Hotels are required to install approved TV sets and/or STBs that are compatible with IHG Studio, use an approved SCH-certified integrator to install the equipment, and must enter into an agreement with one of them. Monthly service fees will include a base per-room fee for guest support.
Employee Safety Devices: Hotels are responsible for installing an alert system that enables employees to notify hotel management of an emergency with the push of a button (“Employee Safety Devices”). The Employee Safety Devices must be available to all employees that work in guest rooms, must instantly signal guest room and guest floor location when activated, must continuously update guest room and guest floor location, and must be tested every six months. In addition, all new employees, including contract and temporary, must receive training on the Employee Safety Devices within the first 14 days of employment. Employee Safety Devices must be procured and installed by an approved supplier and meet defined requirements set forth in the Standards. You may be required to sign a participation agreement with an approved vendor for these services.
Public Access Computers: Hotels are required to install designated workstations and a multi-function printer, providing complementary internet access to hotel guests in the Business Center (“Public Access Computers”). The Public Access Computers must be available 24 hours a day, must utilize SCH-approved security protection software and must include enrollment in a 24×7 support program offered by an SCH-approved vendor. In addition, all Public Access Computers are required to be refreshed every four years, a minimum of one computer must have Microsoft Office, and all must operate at the same or greater bandwidth port speed as other internet enabled devices on the Guest Internet Access network. You may be required to sign a participation agreement with an approved vendor for these services.
IHG Merlin System: SCH has designed a communication service, (http://ihgmerlin.com) known as “IHG Merlin”, and its messaging tool, currently known as “Hotel Bulletin”, which are the primary means of sending information from Holiday and SCH to franchisees and in some cases, this may be the only manner in which Holiday and SCH communicate with Hotels and franchisees. IHG Merlin and Hotel Bulletin will require you to access the Internet via third-party computer network communications service (“Internet Service Provider” or “ISP”). IHG Merlin is an electronic information library providing up-to-the-minute information and documentation from SCH at your fingertips. IHG Merlin was created solely for Holiday’s various brand groups of hotels and their employees. In some cases, information may be distributed to System hotels only through IHG Merlin. Information may include: the Standards, PMS Manual, newsletters and informational memos from Holiday or SCH, Marketing Solicitations, etc. To access IHG Merlin, you must select and pay a monthly fee for an ISP which meets the minimum specifications established by SCH. The monthly fee will include Internet access and support. This access will provide you with an e-mail account and access to sites on the Internet and World Wide Web. You may select an ISP from any source as long as it meets SCH’s exact specifications. IHG Merlin requires a Microsoft Windows based (Windows 10 Professional or newer OS) PC and printer configured to SCH’s specifications. You may purchase the equipment from any source as long as it meets SCH’s exact specifications. SCH requires ongoing maintenance and support services of equipment that you may purchase from a third party. IHG Merlin houses proprietary information to Holiday and its brands. Information you receive from IHG Merlin may be used exclusively in performance of your rights and obligations under your License with Holiday regarding an IHG-branded hotel only. All such information must otherwise be treated as proprietary to Holiday and SCH and confidential. Your use and access will be limited in accordance with Holiday’s or SCH’s express terms and conditions. Other than as described above, neither Holiday nor SCH derives any other income from your purchase or use of the above described computer systems.
Coca-Cola (R) Agreement: Pursuant to the Standards, you are required to serve and/or provide Coca-Cola carbonated beverage brands exclusively. All Hotels must serve Minute Maid Frozen Concentrate orange juice. You must sign a Participation Agreement with an authorized bottler of The Coca-Cola Company (“TCCC”), a copy of which is attached as Exhibit I-3. With respect to bottled/canned beverages, this only applies to hotels that are located in the geographic territory in which a given bottler is authorized to distribute, promote, market, and sell Bottler bottled/canned beverages. You may not serve or sell carbonated or juice beverages that are in competition with Coca-Cola beverages. Vending machine offerings must be Coca-Cola bottled/canned beverages. At meetings and events, carbonated and juice beverages must be Coca-Cola brands unless an individual client insists otherwise. When minibars are provided, they must include Coca-Cola bottled/canned beverages. Non-leased restaurant and retail shops must include Coca-Cola branded beverages. You must participate in CocaCola promotional programs as directed by Holiday. Hotels with IHG approved leased and/or franchised outlets are not required to comply with the Coca-Cola requirements in those establishments, but may do so at their discretion. Fountain beverages, bottled/canned beverages, juices, teas, and smoothies manufactured by PepsiCo are not permitted. There are certain permitted exceptions that may be granted by Holiday pursuant to a waiver application process. TCCC provides certain funding that is based on the volume of Coca-Cola products sold in System Hotels. Most of such funding is administered by a cross-functional Business Partnership Team with representatives from TCCC and Holiday, who work together to identify and execute opportunities to create value for TCCC and for the System. Some funding is received by SCH on behalf of the System and utilized by SCH for the benefit of the System and/or to promote the sale of Coca-Cola Beverages and Bottler bottled/canned beverages throughout the System.
OTHER PURCHASES: Holiday or its affiliates may also offer you, on a non-exclusive basis, additional advertising materials, products, services, equipment or supplies. Holiday may earn a profit from these sales, but you have no obligation to purchase any of these products, services, equipment or supplies from Holiday or its affiliates. Holiday does not currently provide any material benefits (i.e. re-licensing or granting additional licenses) to a franchisee based on its use of a designated or approved supply source.
Item 10: Financing
Holiday does not offer any formal program for direct or indirect financing. Holiday, SCH or its affiliate, General Innkeeping Acceptance Corporation (“GIAC”) may furnish loans or guaranties to franchisees. Holiday, SCH and GIAC consider making loans or guaranties under terms and conditions that would be negotiated on a case by case basis with the prospective franchisee and any decision to make a loan or provide a guaranty would be made in the judgment of Holiday, SCH or GIAC alone, and conditioned upon approval of the Executive Committee and Board of Directors. It is your responsibility alone to obtain adequate financing for all expenses related to the development, opening and operation of the hotel.
Item 12: Territory
Holiday does not typically grant franchises for exclusive areas or territories. The License will be for a specific site only and for the licensing of one hotel. The License applies to the location specified therein and to no other location. You will not receive an exclusive territory. You may face competition from other franchisees, from hotels that Holiday or its affiliates own, or from other channels of distribution or competitive brands that Holiday or its affiliates control. You may not promote, implement or be responsible for any web site relating to your Hotel without Holiday’s advance written approval. You may not register any of the Marks (defined in Item 13), as part of any domain name or Uniform Resource Locator (“URL”), and/or display or use any of the marks or other intellectual property rights related to the System or to any of the other brands franchised by Holiday in connection with any web site, without Holiday’s advance written approval. You must comply with all of Holiday’s web site requirements in connection with any web sites you develop and maintain relating to your hotel. The License does not otherwise limit the channels through which you may solicit customers for your hotel.
The License does not limit Holiday’s right or the rights of its parents, or any subsidiary or affiliate, to use or license the System or any part of the System, to engage in or license any business activity (including business activities referenced in Item 1 which sell similar products and services) or to license any other hotels (or any other hotel brands). The License creates no rights of any kind for you in these other hotel brands and/or businesses at any other location. These rights include, for example, the licensing, franchising, ownership, operation and/or management of lodging facilities and related activities under the names and marks associated with the System and/or any other names and marks. There is no restriction in the License on Holiday’s using any channel of distribution to solicit customers for Holiday’s and its affiliates’ hotels, whether operating under the marks licensed to you or other marks. Holiday and its affiliates are not restricted from establishing other franchises or company-owned outlets or other channels of distribution through which services or franchises under different trademarks might be offered. The License creates no rights of any kind for you in these other hotel brands and/or businesses at any other location. The License grants you no options, rights of first refusal or other rights to acquire additional franchises.
In special circumstances, when, in Holiday’s sole judgment, special considerations warrant, Holiday may grant exclusive or protected areas within which it will not license another Staybridge Suites Hotels, however in such cases the License would still be for a specific site only and for the licensing of one Hotel only. Holiday licenses numerous hotel brands – see Item 1. Holiday may license other hotel brands in the future. There may currently be franchised, company-owned hotels or company-managed hotels operating under Holiday’s brands situated in or near your area. Holiday and its affiliates may establish new franchised, company-owned or company-managed hotels operating under Holiday’s brands in or near your area. You may compete with any other hotels operating under Holiday’s brands in or near your area. Hotels operating under Holiday’s brands (including the same brand as your hotel) may solicit reservations from customers in your area for which you will receive no compensation.
Holiday uses the same principal business address for its operation of all its hotel brands and Holiday does not maintain physically separate offices for its various brands. Holiday does offer some physically separate training facilities for some hotel brands. There is no mechanism for resolving any conflicts that may arise between your Hotel and other franchised, company-owned hotels or company-managed hotels operating under Holiday’s brands. Any resolution of conflicts regarding location, customers, support or services will be entirely within the business judgment of Holiday and its affiliates.
Item 15: Obligation to Participate in the Actual Operation of the Franchise Business
Whether you are an individual, corporation, partnership or other entity, Holiday requires you to retain and exercise direct management control over the Hotel’s business at all times unless otherwise approved by Holiday. However, Holiday does not require that you participate personally in the direct operation of the Hotel. Holiday may include conditions in your License requiring you to hire a duly qualified and experienced (i) management company acceptable to Holiday or (ii) General Manager or Director of Sales with at least two year’s prior experience in such position at a hotel operated under any of Holiday’s brands or at a hotel in a similar brand segment as the Hotel, as defined by Smith Travel Research, Inc. Regardless of whether you or a third party management company operate your Hotel, if a General Manager with extended stay hospitality business experience and/or a Director of Sales are required by Holiday, such individuals must work exclusively for your Staybridge Suites Hotel at all times, and if you own more than one Staybridge Suites Hotel, you must have a separate, qualified General Manager and Director of Sales for each Hotel. You must obtain Holiday’s written consent before entering into any lease, management agreement or other similar arrangement with any entity for the operation of the Hotel or any part of the hotel.
If Holiday requires that you hire a management company, General Manager, or Director of Sales to operate your Hotel, Holiday may require that you hire this management company or person within a specific period of time, either after signing your License or before the date your Hotel opens in the System. You must notify Holiday in the designated timeframe before hiring or changing your management company for any reason. These conditions will be determined by Holiday and contained in your License Holiday may reject a proposed management company if Holiday determines that such management company is inexperienced in the extended-stay hospitality business, generally unqualified to operate the hotel or unwilling or unable to: (1) comply with all requirements of Holiday under the License and the Standards, (2) cease operating the Hotel as a Staybridge Suites Hotel once the License terminates, or (3) treat the terms of the License as superior over any conflicting terms in the agreement between you and your management company.
Holiday may determine that you are not qualified to operate the Hotel, and if so, Holiday will require you to retain a management company to operate the Hotel. Normally, Holiday does not require that you engage it or one of its affiliates as the management company in order to obtain a License. Occasionally, because of the distribution of company managed hotels in a particular geographic area, or other factors, Holiday may determine that the development of a new Hotel is appropriate only if one of its affiliates manages the Hotel. In that case, Holiday may condition the granting of a license on one of its affiliates managing the Hotel. If you hire a management company, General Manager, Director of Sales, or Regional Director of Operations to operate the Hotel for you, whether or not Holiday required you to hire these positions, you and any of your guarantors remain liable to Holiday, SCH and IHG Technology Solutions LLC under the terms of the License, the Master Technology Services Agreement and any Guaranty.
You remain solely responsible for the selection, conduct and performance of any required management company, General Manager, Director of Sales or Regional Director of Operations and Holiday has no responsibilities or liability in connection with your selection and its, his or her conduct or performance. The General Manager and other department heads and staff, including Directors of Sales, must attend Holiday’s training programs (see Item 11 of this disclosure document). Holiday does not impose restrictions, nor does it require you to impose restrictions, on any of your employees. However, Holiday and you agree to comply with each other’s reasonable requirements concerning confidentiality of information, and in particular, you may not disclose without Holiday’s written permission information pertaining to Holiday’s marketing and reservation programs that has not yet been disclosed to the public.
Holiday requires that any management agreement between you and a management company be in writing, and that the agreement contain certain provisions including, for example, the following: the management company accepts, agrees to abide by, and is subject to all rules, regulations, inspections and requirements of Holiday; you and the management company will cease operating the Hotels as a Staybridge Suites Hotels if the License terminates; you and the management company must agree that the License prevails over the terms of the management agreement if there is any conflict in terms; you and the management company must that Holiday’s consent to the management agreement or approval of the management company does not relieve you or any guarantor of any obligations under the License; and, you and the management company must keep the confidentiality of trade secrets described in Item 14, and follow the covenants not to compete described in Item 17. Holiday may request at any time a copy of your management agreement for review to determine compliance with requirements of the License.
You or your management company, whichever may be applicable, will be the sole employer of the employees working at the Hotel. Holiday does not direct or control employment policies, discipline, recruitment or termination. You or your management company will be solely responsible for all employment decisions, regardless whether you have received guidance with respect to such matters from Holiday. If you are an entity, then, based on Holiday’s examination of your financial reports and the financial reports of any proposed guarantor, Holiday may require your shareholders, partners, members or affiliates to sign a “Guaranty” of the License, a copy of which appears as part of the License in Exhibit B to this disclosure document. This document guarantees immediate payment and performance of each of your obligations under the License if you default.
Item 16: RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
You must provide the hotel services described in Attachment “A” to your License and must ensure that no part of the Hotel or the System is used to facilitate or promote a competing business. There are no restrictions as to the customers to whom you may sell guest suites, or other goods or services that are related to your Hotel business.
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