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Howard Johnson Franchise Cost & Fees

Date of Incorporation: 1990

Franchising Since:  1990

Headquarters: Delaware

Country: USA 

Description: Howard Johnson International, Inc. is a subsidiary of Wyndham Hotel Group, LLC, a Delaware limited liability company owned by Wyndham Worldwide Corporation, a Delaware corporation. "Howard Johnson Inns" are primarily smaller, low-rise Chain facilities that feature contemporary interior and exterior design, mid-market level furnishings, a swimming pool, and a small meeting room. If the facility does not have a full service restaurant, it must offer guests a free, deluxe continental breakfast. "Howard Johnson Plaza Hotels" are mid-rise or high-rise full service facilities, positioned at the upper end of the Howard Johnson brand. They feature contemporary furnishings and have superior curb appeal. They also provide extensive banquet facilities, bell and room service, a swimming pool and express check-out. Many also offer exercise rooms with fitness equipment.

Franchise Offer: The franchisor offers, sells and supports franchises for Howard Johnson® Chain guest lodging facilities. The franchisor offers to qualified franchisees a franchise to operate a Howard Johnson guest lodging facility at a single, defined location. 

Financial Assistance: The franchisor may defer payment of the initial fee and initial entry charge if business circumstances warrant, for a fixed period that will generally not exceed one year. The initial fee will then be paid in one installment without the accrual of interest unless the franchisee does not pay the initial fee within ten days after it is due.  In addition, the franchisor may offer at their discretion certain development incentives for new construction and conversion chain facilities. 

Training and Assistance
: Wyndham Hotel Group's Global Training Department offers a variety of mandatory and optional training programs, seminars, online training and other training resources. The initial and any replacement general manager or an owner/operator or other representative who exercises day to day operational authority of the facility must attend the Strategic Training for Exceptional Performance or Advanced Strategic Training for Exceptional Performance training program as well as any supplemental Internet-based training the franchisor may require.

Territory: The franchisor grants to the franchisee a "Protected Territory" in which the franchisor will not own, operate, or manage another chain facility utilizing the same service mark. In addition, the franchisor will not grant any additional license using the same service mark in the protected territory after the franchisee executes a Franchise Agreement with Howard Johnson.

Term of Agreement and Renewal: The term of the franchisee agreement is 20 years for a new construction facility and 15 years for a conversion facility. The franchisee is not given any renewal or extension rights.

Obligations and Restrictions: The franchisor does not have to participate personally in the direct operation of the facility although the franchisor recommends that they do so. If the franchisor does not personally manage the facility, they must hire a management company or individual manager with significant training and experience in general management of similar lodging facilities to manage the facility. The manager must successfully complete the franchisor’s training program. The franchisor does not restrict the type of goods and services that are offered at the facility but the franchisee must offer accommodations that comply with System Standards and applicable law.

Total Number of Units:
Total number of franchised outlets at year ended 2008: 365

Investment Tables:

Initial Investment:

Expenditures Low High
Application Fee, Initial Fee $36,000 $36,000
Market Study $5,000 $12,000
Phase I Environmental Survey $2,500 $5,000
Design & Testing Fees $25,000 $75,000
Land Acquisition Not Estimated Not Estimated
Facility Construction $3,332,128 $5,950,231
Furniture, Fixtures and Equipment $451,815 $519,600
Signage $17,300 $38,000
Opening Inventory and Supplies $20,000 $30,000
Insurance $9,014 $11,518
Utility Deposits $5,000 $10,000
Grand Opening Advertising $20,000 $31,600
Training Expenses $2,700 $4,900
Technical Systems $50,000 $119,500
Miscellaneous, Non-Tangible Asset Costs $55,000 $100,000
Construction Contingency $166,606 $297,512
Additional Funds for 3 Month Initial Period $51,000 $71,000
Total Estimated Initial Investment $4,249,064 $7,311,860
Total Cost Per Room $42,491 $73,119

 Ongoing Fees:

Name of Fee Amount
Royalty 4% of Gross Room Revenues
Room Sales Charge 2.5% of Gross Room Revenues
Marketing Contribution 2% of Gross Room Revenues
Loyalty Program Charge Up to 5% of the Gross Room Revenues accrued by a loyalty program member
Taxes Amount assessed by federal, state and local tax authorities on Royalties, Marketing Contributions and Room Sales Charges
Interest Lesser of .5% per month or the maximum rate permitted by law on the unpaid amount
Extension Fee $2.00 per room per month
Training Fees and Expenses Tuition is currently $1,250 for general manager orientation for initial general manager and $825 for owner orientation. Tuition for initial training is subject to increase if the franchisee or the general manager do not attend a program by the deadline in the Franchise Agreement. The franchisee pays the tuition then in effect for subsequent training for replacement personnel.
Public Offering Fee $15,000
Liquidated Damages Liquidated damages will be equal to the greater of $2,000 per guest room or total Royalties, Marketing Contribution, and Rooms Sales Charges for 24 months. For pre-opening default, reduced to one-half of formula amount, payable 10 days after termination notice is sent.
Condemnation Payments Recurring Fees for one year after notice of condemnation
Agency
Commissions;
International
Sales Office
Commissions;
Member Benefits
Commissions
Up to 15% of Gross Room Revenues generated by Agency reservations; 15% of Gross Room Revenues generated from bookings from an International Sales Office's territory (includes Agency Commission), excluding voucher sales; 10% of Gross Room Revenues booked under Member Benefits program
Service Charge .5% of commissionable revenue booked by Agencies or International Sales Offices
GDS and Internet Booking Fees $5.35 per reservation booked through the global distribution systems ("GDS"), $4.35 per reservation booked through a third party Internet site (not booked through a GDS), plus agency commissions if applicable. No fees will be charged for bookings through the franchisor’s website or the Wyndham Rewards website.
Property to Property Incentive Sales Commissions 10% of Gross Room Revenues
International Conference Fee $895 in 2007.  There is an additional fee for each attendee.
Relicense Fee Same formula as Initial Fee
Indemnification Costs Cost of defending and resolving indemnified claims. Includes "Returned Check Fee" (currently $20) for checks the franchisee submits to the franchisor which are dishonored by the franchisee’s bank or other financial institution.
Audit Fee $1,000, subject to increase on a Chain-wide basis to cover costs, which will not exceed 5% per year on a cumulative basis
Courtesy Lodging Employee rate for the franchisor’s representatives on business
Dispute Resolution Costs Costs, expenses, reasonable attorneys' fees
Reinspection Fee Currently $1,000 for the first reinspection and $ 1,500 for the second and any subsequent reinspection
Guest Services Assessments; Processing Fee $100 Guest Services Assessment plus resolution costs if the franchisee does not respond to a guest's complaint within 7 business days after notified, and the guest contacts the franchisor a second time; $60.00 Processing Fee per complaint in excess of the Annual Facility Allotment
PMS Maintenance, Support and Service Fee $36.40 - $52.50 per room per year, depending on the PMS system purchased, plus up to $1,100 per year for each interface, depending on the PMS system.
Fee for Broadband Internet Access Service $150 to $160 per month for 36 month term.
Guaranteed Best Available Rate Processing Fee $60 plus must match the lower Internet rate less 10%.
Rooms Addition Fee Now $350 for each guest room added to the Facility
Service Interruption Fee $200; $500 if the franchisor must re¬activate service three or more times in any 12 month period.
ResCentral Call Handling Fee $ 1.65 per transferred call with $50 minimum per month
 

Date of FDD: 2009

The above information has been taken from the UFOC/FDD and online sources of Howard Johnson.

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