Deck 14: Franchise Agreements and Management Contracts

Question 1

What is the name of the legal contract describing the relationship between a hotel owner and the hotel brand with which the owner seeks to affiliate?

A) Franchise agreement
B) Franchise offering circular
C) Product improvement plan
D) Franchise disclosure document

Answer 1

A

Question 2

What is the primary role of a franchise service director (FSD)?

A) Sell franchises
B) Draft franchise agreements
C) Monitor franchise agreement compliance
D) Develop franchise disclosure documents (FDDs)

Answer 2

C

Question 3

A management company has secured a contract to operate a branded hotel.Who will typically employ the hotel's GM in this situation?

A) The hotel owner
B) The brand managers
C) The hotel's franchisor
D) The management company

Answer 3

D

Question 4

A franchised hotel generates $2,000,000 per year in gross rooms revenue.What amount of franchise fees is this hotel likely to be required to pay its franchisor on this level of rooms revenue?

A) Less than $60,000
B) $60,000 to $300,000
C) $300,001 to $500,000
D) Over $500,000

Question 5

In an effort to rapidly expand the growth of an aging hotel brand,its brand managers may allow a significant number of brand

A) swaps.
B) alterations.
C) conversions.
D) foreclosures.

Question 6

The purpose of a "window" in a franchise agreement is to give franchisors and franchisees the right to

A) early extension of their agreements.
B) early termination of their agreements.
C) renegotiate the area of protection called for in the agreements.
D) renegotiate the franchise fees that must be paid during the life of the agreements.

Question 7

The hotel occupancy tax is also know in the hotel industry as the

A) inn tax.
B) bed tax.
C) sleep tax.
D) pillow tax.

Question 8

A hotel lender is considering making a loan to a hotel owner.If the hotel owner is utilizing a management company in the hotel's operation,the lender will most often

A) be less likely to make the loan because the hotel's profits will be reduced because it must pay the management company's fees.
B) be more likely to make the loan because the hotel's profits will be increased because of the professional management of the property.
C) be less likely to make the loan because the hotel's profits will likely be increased after paying the management companies fees.
D) be more likely to make the loan because the hotel's profits will be reduced because of the professional management of the property.

Question 9

Who absorbs a hotel's operating losses when it is affiliated with a national brand?

A) The hotel's managers
B) The brand's managers
C) The owners of the hotel
D) The owners of the brand

Question 10

In most cases the fees charged by a management company to operate a hotel are based upon the

A) length of the management agreement.
B) brand affiliation of the hotel being managed.
C) revenue generated by the hotel being managed.
D) number of rooms contained in the hotel being managed.

Question 11

Who is the GM's employer when his or her hotel is operated as part of a branded chain?

A) The franchisee
B) The franchisor
C) The brand's managers
D) The franchise services director (FSD)

Question 12

Which governmental agency in the U.S.regulates the actions of franchisors?

A) Department of the Treasury
B) Federal Trade Commission (FTC)
C) Small Business Administration (SBA)
D) Consumer Financial Protection Bureau

Question 13

The purpose of an area of protection clause in a franchise agreement is to

A) limit the total number of hotels sold in a defined geographic area.
B) expand the total number of hotels sold in a defined geographic area.
C) limit the number of a specific brand of hotels in a defined geographic area.
D) expand the number of a specific brand of hotels in a defined geographic area.

Question 14

What would be the impact on an owner's ability to sell a hotel if the management contract currently in place on the property included a very high cost buyout clause?

A) The clause would prevent the sale of the property.
B) The hotel would be easier to sell because of the clause.
C) The hotel would be harder to sell because of the clause.
D) The clause would have no impact on the potential sale of the property.

Question 15

The purpose of liquidation fees identified in a franchise agreement is to compensate the

A) franchisor for early exit by the franchisee.
B) franchisee for early exit by the franchisor.
C) franchisor for an agreement extension requested by the franchisee.
D) franchisee for an agreement extension requested by the franchisor.

Question 16

A depressed hotel market is one in which

A) hotels find it very difficult to find and retain qualified workers.
B) there are too few hotels operating in the market.
C) there are large numbers of franchised hotels in the market.
D) hotels in the market are operating at occupancy levels or ADRs that are well below their historic averages.

Question 17

From the list of alternatives below,the hotel management company that would be ranked as largest would be the company

A) managing the largest number of hotels.
B) responsible for the management of the most sleeping rooms.
C) managing the largest number of different hotel brands.
D) responsible for managing the most hotels within the same brand.

Question 18

Two primary advantages a hotel gains by affiliating with a franchised brand are name recognition and

A) reduced per occupied room labor costs.
B) lower levels of commissions paid to OTAs.
C) connection to the brand's reservation system.
D) the ability to employ temporary workers when volume fluctuations greatly.

Question 19

Who is most often responsible for any costs resulting from errors made by a management company in its operation of a branded hotel?

A) The hotel's GM
B) The hotel's owners
C) The brand managers
D) The management company

Question 20

Who is responsible for verifying the accuracy of information presented in a Franchise Disclosure Document (FDD)?

A) A Federal governmental agency
B) The person or company reading the FDD
C) The person or company preparing the FDD
D) A governmental agency operating in the state in which the FDD was filed

Question 21

Which is most likely to be a source of hotel guests' displeasure when a property is operated as part of franchised brand?

A) Unrealistic FSD expectations
B) Unrealistic owner expectations
C) Dissatisfaction with brand consistency
D) Dissatisfaction with brand pricing policies

Question 22

A hotel owner of a 1,000-room resort has signed a new tier-two management agreement replacing the current management company and its agreement.When the new agreement takes effect,which member(s)of the hotel's current staff will most likely be replaced?

A) GM
B) Night auditor
C) Front desk agents
D) Front desk supervisor

Question 23

Who is most often the direct employer of a hotel's line level staff when a management company operates a branded hotel?

A) The franchisor
B) The hotel's owner
C) The management company
D) The hotel's brand managers

Question 24

The entity that most benefits when the term length of a management contract to operate a branded hotel is shorter,rather than longer,is the

A) hotel's GM.
B) hotel's owner.
C) hotel's franchisor.
D) management company.

Question 25

A manager works for a management company as the GM of a large full-service franchised hotel.Who will most affect the advancement opportunities given to this GM?

A) The hotel's owner
B) The management company
C) The hotel's brand managers
D) The hotel's franchise services director (FSD)