Get the information you need to make a wise decision.

ITEM 1

THE LICENSOR, ITS PREDECESSORS AND AFFILIATES

PARENTS. PREDECESSORS AND AFFILIATES

To simplify the language in this disclosure document, "we,"

or "M1SF" means

Microtel Inns and Suites Franchising, Inc., the franchisor. "You" means the entity acquiring a franchise. All direct and indirect owners of a controlling ownership interest in you must sign the Guaranty, which means that all provisions of the License Agreement (Exhibit D) also will apply to them. We expect that only entities, and not individuals, will acquire our franchise. We use the

ls,_will acquire our franchise^ terms "licensee" and "franchisee" and "licensor" and "franchisor" interchangeably.

 

The Licensor

Microtol Inns and Suites Franchising, Inc. ("wo," "us," or "M1SF") was incorporated

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corporation formed in Georgia on September 28, 1995. Corporate Square, Suite 250, Atlanta, Georgia, 30329-1905.

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under any other name, our company name and the Proprietary Marks (defined helow). fSee Item 13}

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We are the franchisor of the Microtel Inns & Suites hotel brand. ^ We began offering franchises in October 1995. We did not previously offer franchises in this or any other type of business.

We do not operate, nor have we previously operated, Microtel �uite9;-Microtel-Inn or Microtel��� Inn &

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Suites_or_any brand extension including Microtel Inns

business.

Our Predecessors

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We are a wholly-owned subsidiary of U.S. Franchise Systems, Inc., a Delaware corporation incorporated on November 26, 1997 and whose predecessor entity (also called U.S. Franchise Systems, Inc.) was incorporated in Delaware on August 28, 1995. U.S. Franchise Systems, Inc. also has its principal place of business at 13 Corporate Square, Suite 250, Atlanta, Georgia, 30329 (^^USFS^w tho "Parent"^-!.²⁰⁹� or the "Parent"^. ²¹ �Through a-SjejJesjaLttansaeticjlS- effectuated in November ,20Q0, business interests of the Pritzker family acquired substantially all of, the,outstanding-Shares of USFS. ²¹¹ Although_business interests of the Pritzker family do not actively sell hotel franchises, certain business interests of the Pritzker family are the owners of the Hvatt hotel chair? and maintain certain other interests

1. nor offered, franchises in, the type of

in_tlie__lQ_dging industry ²,__ ^l3Our Parent has

business-described in this²¹ Disclosure Document²¹⁵, or any othex-business. except. until�February 2003 it was approximately a 55% owner of the general partner of, Equity Partners. L.P.. which meant it indirectly owned a minority interest Hess than,l%1 in,two,Microtel Hotels� You may see references in

franchising. Inc. r''RFI"t and Rest Worldwide. Inc. rBWFY

this_�� Disclosure Document��� to Bi

y^hicJiarejQfl^

tnlry Hearth Jnns. ''

The Franchise

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We offer franchises for the right to operate all-new construction economy/budget lodging facilities that use the Hotel System (defined helow) and are identified hv the Proprietary Marks ("Microtel Inn & Suites". "Microtel Hotel" Or "Hotel"). Microtel Hotels offered in this Disclosure Document��� are MicroteMnn &, Suites, .which contain_sjngks^doubles and suites.���� Microtel, Hotels

featurcunQdern up;Sca|e_acc.Qmmodations, down-sized slandar.d_guest rooms, and/or one-room suites, and budget room rates. Microtel Hotels are distinctively, stvled hotels with a residentialjook that .offer trayejfics_an attractive and consistent,appearance, clean. comjpjflahle_rpoms and the safety of interior corridor room access, all for competitive, room rates. Microtel, HotelsJeature_distinctive architectural desjgn_ihat_ helps minimize² construction costs and maintenance expensesJhrough smaller room sizes, limited common areas,,.smaller land,requirements and built-in standardized furniture. Microtel

including, without limitation, tl / and interior guestroom wind<

cabinet. You operate the Microtel Hotel only from the location we approve before signing^the License Agreement (Exhibit D), We Specify the location of the Hotel in the License Agreement.

You onerate the Microtel Hotel under the Hotel System.�� The Hotel System means the

concept and system associated with the development and operation of Microtel Hotels. The Hpftl

System may he periodically modified by us. The Hotel System incJudes^arnong other things, Q� the trademarks, service marks, logos, slogans, trade dress_r domain names and other source and origin designations that we or USES periodically designate for use with the Hotel System (collectively_T the "Proprietary Marks"); (ii) copyrightable materials that we periodically develop and designate for use with the Hotel System including prototypical architectural plans, designs, layouts.���� building designs, and���� a set of confidential, construction/operations manuals, (the

23*4 233

"Manual"); (iii) a central reservation system (the "CRS"); (jy)���� a unified platform property

mapagejTient-sy^tejn^manafiejnejiLancLpersonnel training, ² operational procedures and marketing,

advertising and promotional programs; (v) all confidential information (see Item 14) and (vi)

standards,� procedures,� policies.� Specifications� and� rules� associated� with� the construction,

operations, marketing furnishings and equipment that we introduce and implement for the Hotel

System which are described in the Manuals or in Other written (electronic or otherwise) directives

and which we may periodically modify. We designed the Hotel System for the operation of "super

budget" and "hard budget"�� Jiotels^and,, we, expqct that,,�� each Microtel Hotel�� ��will'' comply with

Hotel System- standards, to achieve, a, relatively uniform ,and_standardjzed_package of services and

amenities that ²⁴ are offered²⁴¹ to guests consistent with the ²⁴²economv/²⁴³budget sector oft
244_iLt~,______ ___________________ ■ t<._____ _. �____i__..m245

industry,^���� "Super budget" and "hard budget" ___________________________________________

mean.²⁴⁶ejampjp^⁴⁷b^dge^������������������������������������������������������������������������������������������ few orjnQjiesUmenities,.

 

and while you apply for the right to operate a Microtel Hotel, you must sign the License Application (Exhibit C) and pay the application fee described in Item 5. Part of your Application Fee is refunded if we and vou do not sign a License Agreement. (See Item 5) During the Period you are evaluating the purchase of a franchise, and before receiving aqy confidential information, you must sign the Confidentiality and Non-Disclhsure Agreement (Exhihit N) (the "Confidentiality Agreement"! (See Item \4\

Hotels

anrld

252

except that some Microtel- Inns pffer�only single-beddt

it ceased doing so in October ;ion are similar to the Microtel

md some ofler_siDi

We estimate that the primary market ²⁵⁴for guests for the Microtel Hotels ²⁵⁵will be that

the �traveling public,.interested in low cost ac

itions and basic lodging facilities who

are willing to sacrifice the additional services and amenities (such, as restaurantsJoealt are generally available at lodging facilities,,whose accommodations are more expensive. We anticipate that you will locate,�� your MicrojeJ��� Hotel in areas_mQSt_�onvenient to a traveler. The locations will

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

�

yarv from area to are^^aritLmay_incJude_locations near ^y^ortst conventiQjL-Centejcs^_major highway rautes_and other sites that provide easy access for a traveieL

 

Our History.²⁵⁹

 

On October 5, 1995, pursuant to under an agreement dated September 7, 1995 (the �262�263jrjj_nt Venture Agreement-²⁶⁴"²⁶⁵), our Parent acquired many of the assets of Microtel. Franchise and Development Corporation, a New York corporation having its principal place of business at One Airport Way, Suite 200, Rochester International Airport, Rochester, New York, 14624. In March 1996, Microtel Franchise and Development Corporation changed its name to Hudson Hotels Corporation ^�266�267_Hudson!,268�269 _{0f the} �²K²⁷¹p_ret|_eCessor^²⁷²^²⁷³). The assets of Hudson are described below.

 

Hudson was incorporated in June 1987, and developed a system (the -²⁷⁴^²⁷⁵Microtel Franchise

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System-�� II�� ) for establishing, operating and franchising of budget or economy hotels that operated

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under trade name and service mark ^''^Microtel.^ ;T⁰'' Hudson obtained several federal trademark registrations for the word ^²⁸²^²⁸³Microtel.^²⁸⁴II²⁸⁵ Hudson began offering franchises in June 1988. As of the date of the Joint Venture Agreement, Hudson had entered into, or had committed to enter into,

286 287�������������������������������������������������������������������������������� 288 289

franchise agreements (- ^ Existing Hudson Franchise Agreements" II ) relating to 27 hotels that became Microtel Hotels. Under the Joint Venture Agreement, USFS acquired from Hudson the following

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assets: the Microtel Franchise System; the - ^ Microtel- II trademarks, trade name, service marks, and related intellectual property including the marks ^²⁹⁴I?⁹⁵Microtel;^²⁹⁶^²⁹⁷MicroteI Inn *

�298^299_Microte,�� j_nn�� _&�� _Suj_teS)�300�301��� ^�� ^02�303_Microte|�� _Suj_tes�304�305�� _(co|j_ectj_ve|_y ,_he

-³⁰⁶lt³⁰⁷Proprietary Marks-³⁰⁸!!³⁰⁹); the Existing Hudson Franchise Agreements, and other assets utilized in the operation of the Microtel Franchise System and franchise program, such as architectural and design plans for the hotels, design and specification manuals, and an operations manual.

Under the Joint Venture Agreement, USFS acquired the right to develop and grant franchises to develop, anywhere in the world, hotels utilizing the Microtel Franchise System and the -³¹⁰^ Microtel-³¹²!!³¹³ marks. We or USFS may further develop, refine, or change the Microtel Franchise System. Wo rofor to tho Microtel Franchise System, 03 if is owned, dovolopod, refined, ond changed by USFS or ua, os tho "Hotel System".�³¹⁴Through a trademark license agreement (the �3i5ji6_{Tra(jemark License} Agreement^¹⁷^³¹⁸) between us and USFS, USFS licensed te-^3I9us the right to use, and to_³²⁰iicense others to use, the Hotel System (os dbflnod below) ³²¹and the Proprietary Marks. As a wholly owned subsidiory of USFS, we ore the franchisor and licensor of tho Hotel System and the

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Proprietory Marks.

 

Under the Joint Venture Agreement, we had the worldwide franchising rights and Hudson retained the right to develop an additional 23 Microtel Hotels and 10 Microtel Suites Hotels ₍�323�324_{Hudson Hole}]_s�³²5�32^. _{The Jomt Venture} Agreement was terminated on April 20, 2006 and

Hudson did not develop any Hudson Hotels. Other than the Microtel franchises described above, to our knowledge, Hudson has not, and does not, offer franchises in any line of business.

 

Our Affiliates³²⁷

 

The following companies are our affiliates who will provide products or services to Microtel Hotel franchisees.

 

Marion Reservation Center, L.L.C. ("MRC"^ administers the central reservation system, or "CRS," for Microtel Hotels on nur behalf. (See Items 8 and in MRC''s

principal business address is 900 Skyline Drive, Suite 100_T Marion, Illinois 62959. MRC has never operated hotels or offered franchises in any line of husiness.

 

³³⁰Microtel Reservations and Advertising Fund, , Inc., a Georgia not-for-profit cojpflratifln^the "Microtel Fund Companv"t^admJnislers the fund containing ,the Marketing/Reservation Contributions for the Microtel franchise system. The Microtel Eund-Company is an affiliate of ours, and we control this company and how the Marketing/Reservation,, Contributions are spent. We are not required to make any Marketing/Reservation Contributions unless we own a Microtel Hotel. In 2008. _w_fi mav dissolve the Microtel Fund Company and administer ojigc.tly the fund containing the Marketing/Reservation Contributions for the Hotel System. Prior to August 2005. we managed the Microtel Fund Company under a management agreement and all our licensees yvere required to become members of the Microtel Fund Company. Microtel Fund Company has not offered franchises in any other type of husiness nor has it operated any hotels. This entity''s principal husiness address is 13 Corporate Snuare. Suite 250. Atlanta. Georgia 30329^1305.³"

 

Affiliated Franchise Programs

 

In January 2005, Hyatt Corporation ("Hyatt") acquired certain assets of Prime Hospitality and Prime Hospitality Franchising, L.L.C. relating to tho ownership, operation and management of AmoriSuitcs hotels and tho AmoriSuitos franchise system. Among tho assets purchased by Hyott were all membership interests in AmoriSuitos Franchising L.L.C. ("ASF"). ASF is now a subsidiary of Hyatt''s subsidiary, Select Hotels Group, L.L.C. ("Select Hotels"). ASF is not currently offering now franchises but ASF has franchisees that operate all-suites, upper-mid priced hotols undor tho name AmoriSuitos ("AmoriSuitcs Brand").� Tho AmoriSuitos. Brand features on attractively designed suite with a complimentary hot breakfast in a spacious lobby cafe, remote controlled cable television, fitness centers and pool facilities. AmoriSuitos Brand hotols provide group mooting space, but typically do not include restaurant or lounge facilities. ASF has not offered franchises in any othor typo of business nor has it operated a Microtel Hotel. USFS has entered into n Sorvioos Agreement with ASF to provide certain franchise support serviees-ond-reservation-servicesto ASF and its franchisees. ³³⁵

Hyatt Franchising, L.L.C. ("HFL") offorod franchises for full scrvico hotols under tho names Hyatt-and Hyatt Regency� ''-from December 1994-until-April 1997 and began-offering thcso franchises

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againnn- September 3006. ^JJ''Hft/^JO-has- flever-operated-hotels or offered- fronohises- in ony other-line-of business³³⁹ nor hos it operoted o Microtel-Hotol.�³⁴⁰

Hyott Place Franchising, L.L.C. ("HPF"), a Delaware limited liability oompany, was formed in August 2005 to offer franchises for³⁴¹ upscale solcot services hotels under the name Hyatt Place ("Hyatt

1 AT

Place Brand"). HPF is an indirect subsidiary of Hyatt. Tho Hyatt Place Brand features hotols with attractively dosignod rooms with upscale amenities and exceptional ³⁴³standards incorporating stnto³⁴⁴-³⁴⁵of the art technology, design and entertainment components³⁴⁶. HPF has offered franchises for Hyatt Place Hotels since September 2005 ond hos ncvor offered fronohises in any other lino of business nor hn3 it-operated aMicrotel-Hotel: ³⁴⁷

Hyatt Place Conodo Corporation ("HPC") has offered franchises in Canada for hotols operating under tho name Hyatt Place since August 2006. HPC has novor operated hotols or offered franchises in ony other line of business nor has it operated a Miorotol Hotel.³⁴⁸

 

In January 2006, Select Hotols acquired all of tho partnership interests in Summerfield Hotel Company L.P., which began offering, franchises for Summerfield Suites Hotols in August 1999.�m

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The following companies are nnr affiliates who currently offer franchises or licenses in the United States and around the world. Several are direct and indirect subsidiaries of USFS and Others_flre indirect subsidiaries of USFS'' parent, Hyatt Corporation. Hyatt Corporation''s principal husiness address is 71 South Warker Drive, 12th EIqoj³^ Chicago. Illinois 60606.³*³ The branded hotels~tha7 some of these affiliates operate or franchise mipht use the same reservations systems and other systems and processes as Microtel Hotels. You may compete with lodflinp facilities operated bv these affiliates nr their franchisees.

^35sHawrhom Suites Franchising, Inc. (�³⁵⁶�³⁵⁷HF^³⁵⁸!!³⁵⁹), a Georgia corporation, is another wholly-owned subsidiary of our Parcnt^liSES³⁶¹. Since April 1996, HFI has offered franchises for certain predominantly suites, extended stay hotels under the name Hawthorn Suites p³⁶²^³⁶³Hawthorn Brand^³⁶⁴f⁶⁵). Additionally,. HFI offers brand extension under the name³⁶⁶JiawJhfirn Suites Golf Resort.³⁶⁷ HFT previously offered franchises for the brand extensions under the name names Hawthorn Suites LTD. and Hawthorn Hotel & Suites. HFI offered fronohises for the brand oxtonsions under tho names Hawthorn Suites and³⁷¹ Hawthorn Suites Golf Resort.³⁷² The Hawthorn Brand features upscale, extended-stay hotels providing the traveler with the convenience of a hotel'' and the amenities typically found in an apartment. Many Hawthorn Brand hotel rooms contain fully-equipped kitchens, cookware and utensils, video cassette players, modem ports, exercise facilities and valet service. Hawthorn Brand hotels also offer a complimentary hot breakfast buffet every morning and guests are invited to an evening social hour. HFI has not offered franchises in any other type of business nor has it operated a-Microtel Hot&l³⁷³any_hoteJa³⁷⁴.�� HFI is a guarantor of our performance

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under all license agreements offered by this offering circular. Disclosure Document. HFl''s principal business address is 13 Corporate Square, Suite 25Q, Atlanta. Georpia 30329-190S.³⁷⁶

_³⁷⁷Microtel International, Inc. (�³⁷⁸�³⁷⁹MIii³⁸⁰^³⁸¹) is a wholly-owned Georgia subsidiary of MTSF ours . In April 1996, MI was established to own, operate or franchise Microtel brand hotels outside the United States. As of December 31, 2OOe\³⁸⁴2Q07�³⁸⁵

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there were nine sbt master franchise agreements in effect for the development of the Microtel brand in (i) Argentina, (ii) Uruguay, (iii) Philippines, (iv) Mexico, (v) Central American countries of Guatemala, Salvador, Nicaragua³ , Belize, Honduras, Costa Rica and Panama, and, (vi) Paraguay and Bolivia, (vii) India and Pakistan, (viii) Nigcrio, and (ix) Venezuela.³⁹⁰. MI has not offered franchises in anv other type of husiness nor has it operated anv hotels. MPs principal business address is 13 Corporate Square, Suite 250, Atlanta, Georpia 30329-1905.³⁹¹

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₌ Microtel Canada, Inc. ("MCI") is a wholly-owned Georgia subsidiary of ours. In June 2004, MCI was established to own, operate or franchise Microtel brand hotels in Canada. As of December 31, 200e\³⁹³2QftL��� MCI had signed tW⁹⁵cj�ven³⁹⁶ agreements to

397

develop Microtel brand hotels in Parry Sound, Ontario and Belleville, Ontario, i Woodstock, Ontario; London. Ontario; St. John. New Brunswick: Moncton. New Brunswick; St. John''s Newfoundland (Airport); Frederictpn. New Brunswick: Dartmouth, Nova Scotia; Fnfield (Halifax International Airport), Nova Scotia: Kentville, Nova Scotia; and Sydney, Nova Scotia. MCI has not offered franchises in any other type of husiness nor has it operated any hotels. MCI''s principal husiness address is 13 Corporate Snuare. Suite 250. Atlanta. Georpia 30329-19.05.

 

₌³⁹⁹Hawthorn International, Inc. (n⁴⁰M^0I_H^⁴⁰²�⁴⁰³) is a wholly-owned Georgia subsidiary of HFI. In June 1998, HI was established to own, operate or franchise the Hawthorn Brand outside the United States. As⁴⁰⁴ of December 31, SOO^^MDJ,⁴⁰⁶ there were four master franchise agreements in effect for. the development of the Hawthorn Brand in (i) Argentina^ Uruguay and Paraguay, (ii) Nigeria, (iii) Oman, United Arab Emirates, Bahrain, Qatar, Kuwait, Saudi Arabia, Turkey, Tunisia, Morocco, Egypt, Algeria, Jordan, and Libya, and (iv) Philippinesr⁴�V_and-there was one unit license apreement for a Hawthorn Suites hotel located in Melbourne (13th Beach/Barwon Heads)t Australia. HI has not offered franchises in any other type of husiness_nflr. has it operated anv hotels. Hi''s principal.business address is 13 Corporate Square. Suite 250. Atlanta. Georpia 30329-190S. ^4U8

 

 

Our Parent has novor operated, nor offered franchises in, tho type of business described in this ⁴⁰⁹offcrihg ciroular⁴¹ �, or any other business, oxoopt, until February 2003 it was approximately a 55% owner of tho general partner of Equity Partners, L.P., which meant it indirootly owned a minority intorost (less than 1%) in two Microtel Hotels.�You may seo roforoncos in this ⁴¹¹offoring ciroular⁴¹ to Best Franchising, Inc. ("BFI") and Best Worldwide, Inc.. ("BWI"), which are former affiliates that offer franchises. In Ootobor 2005, USFS sold BFI and BWI to Buckheod America Corporation, tho franchisor of Country Hearth Inns. ⁴ⁱ³

Other Affiliates⁴''⁴

 

Microtol Reservations and Advertising Fund, Inc., a Georgia not for profit corporation, (tho "Microtol Fund Company") administers tho fund containing tho Marketing/Reservation Contributions for tho Microtol franohiso system. Tho Microtol Fund Company is on affiliate of ours, and we control this oompany and how tho Marketing/Rosorvation Contributions aro spent. Wo are not required to mako any Marketing/Rosorvation Contributions unless wo own a Microtol Hotel. In 2007, wo may dissolve the Miorotol Fund Company and administer directly tho fund containing tho Marketing/Reservation Contributions for tho Hotel System.�Prior to August 2005, wo managed tho Miorotol Fund Company under a management agreement and all-our-liccnsces-were required to become-members-of-the-Mierotel

417

₌^4I8Hawthorn Reservations and Advertising Fund, Inc., a Georgia not-for-profit corporation, administers the fund containing the Marketing/Reservation Contributions for

419

lyjt�_oi_business nor has it operated any hotels. This entity''s principal husiness
address is ²¹ 13 Corporate Square, Suite 250. Atlanta. ^---------------- ^:~ ''"^V1� ^,nnc

 

None of those affiliates has operated or operates a Miorotel Hotol or has offered franchises in any other⁴²⁴Iine of business.⁴²⁵

Scloet Hotols, HPF, HPC, SHC and ASF have a principal business address of 200 W. Monroe, 8^lh Floor, Chicago, Illinois 60606.�Hyatt and HFL havo a principal business address of 71 S. Wooker Drive⁴²⁶, Chicago, Illinois 60606.⁴² Except for affiliates listed in tho previous two sentenco, all affiliates of USFS that offer franohisos and/or administer a fund for a franohiso system as described in this Item 1

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have a principal businoss address of�� 13 Corporate Square, Suito 250, Atlanta, Goorgio 30329 1905. Ownership of USFS⁴³⁰

Through a series of transactions effectuated in November 2000, business interests of the Pritzker family aoquirod substantially all of tho outstanding shares of USFS. ⁴³ ''Although businoss interests of tho Pritzker family do not actively soil hotol franchises, certain business interests of tho Pritzkor family ore tho ownors of tho Hyatt hotel chain and maintoin certain other interests in the lodging industry _; including direot-or-ihdireet-interests-in approximately three Howthorn-hotels:⁴³³

 

The Licensee⁴³⁴

The Licensee ("you") meons-o-sole-propfietor, a partnership, corporation,-joint-venture or a limited liability oompany and may inoludo tho ownors, general partners, limited partners, shareholders, officers, directors, joint venturers and members.⁴³⁵

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Wo offor lioonsos to operate all new construction, budget lodging faeilitios known as "Microtol Inn & Suites" (sometimes roforrod to as tho "Hotol"). Tho terms, conditions, and obligations by whieh you will oporoto tho Hotol will bo sot forth in a Lioonso Agroomont that you must sign before you commence operation of tho Hotol. ⁴³⁷Boforo signing tho Liconso Agreement, ⁴³⁸howovcr, you must sign and submit to us an application. Wo refer to tho License Agroomont in Item 22 bolow, and we havo attached a copy as an Exhibit to this offering ciroular. ⁴³⁹

You operate-the-Hotel-under the Hotel System�⁴⁴��The-Hotel- System includes, among other things, ⁴⁴¹tho Proprietor)'' Marks, prototypical architecture⁴⁴² plans, designs, layouts,⁴⁴³ a sot of confidential construotion/oporotions monunls (the ⁴⁴⁴"Mnnuol"), a central reservation system (the "CRS"),⁴⁴⁵ a unified platform property management system, management and personnel training, ⁴⁴⁶ood marketing/advertising programs.�⁴⁴⁷Microtcl Hotels feature modern up soalo accommodations, down sized standard guest rooms, and/or one room suites, and budget room rates. ⁴⁴⁸Wc specify tho location of the Hotol in tho Liconso Agreement (sec Item 11 bolow for a discussion of how you select and identify a sito for tho Hotol), which will be tho only loeotion whore you can build or operate tho Hotol. You operate tho Hotol using tho Proprietary Marks and you provide lodging services to the public according to the standards of the Hotol System. Wo designed the Hotel System for tho operation of "super budget" and "hard budget"⁴⁴⁹ hotols, and wo expect that ^45QMicrotol Hotels⁴⁵¹ will comply with Hotel System standards to ochiovo a relatively uniform and standardized pookago of services and amenities that ⁴⁵²yet* offer⁴⁵³ to guests consistent with the ⁴⁵⁴budgot sector of the hotol industry. ⁴⁵⁵"Supor budget" and "hard budget"⁴⁵⁶ are torms generally used in tho hotol industry to moan ⁴⁵⁷budgot lodging fooilitios with low room rates and fow or modest amenities.�⁴⁵⁸Microtcl Hotols offered in this offering circular⁴⁵⁹-afe Microtol Inn & Suites, which contain singles, doubles and suites. ^46QMicrotol Hotels ore distinctively styled hotols with a residential look that offer travelers on attractive and consistent appearance, clean, comfortable rooms and tho safety of interior corridor room oocoss, all for oompotitivo room rates. Mierotel-Hotels -feoture-distinctivc-orchiteetural design that ^46lminimizes⁴⁶² construction costs and maintenance expenses through smaller room sizes, limited common areas, smaller land requirements and built in standardized furniture Miorotol Hotols hove a unique color scheme and trade dress including, without limitation, tho building ⁴⁶³"bumpout"⁴⁶⁴ feature, throe gable front ontry and canopy ond interior guestroom window seat cabinet.⁴⁶⁵

We-previously offered-o-brand-extension called "Microtel Inn,"-but-ceased doin|-so-in October 2003;�The-hotels that operate undor-the-Miorotellnn brand extension ore similar to tho -Microtel Inn & Suites" discussed obovo⁴⁶⁷, oxcept that some Microtol Inns offer only single beddod rooms and some offer single bedded and double bedded rooms.⁴⁶⁸

We estimate that-the-primary market-⁴⁶⁹wil I be that segment of-the traveling publio interested in low cost accommodations and basic lodging fooilitios who aro willing to sacrifice tho additional services ond amenities (suoh as restaurants, health olubs, etc.) that ore generally available ot lodging facilities whose accommodotiens-are more expensive. We ontie-ipate-that-youwill locate ^47Qthe^47l-Hotel in areas most convenient-to o-troveler. The locations will vary from orea-to area, ond may include-locations neor airports, convention centers, major highway routes, ond other sito3 that provide oosy access for a traveler⁴⁷²

�������������� Hyatt Franchising, L.L.C. (formerly known as Hyatt Franchise Corporation)

("Hyatt Franchising") offerer! franchises for full service hotels under the Hyatt� and Hvatt Regency� names Jrom-Ekcember 1994 .until April 1997 and, began offering these,franchis�S_again in September_M2006. ⁴⁷⁴Hya.tt Franchising,⁴⁷⁵Jiasjieyej operated,hotels or offered, franchises in any other line of business⁴ . Its principal husiness address IS the same as Hvatt Corporation''s address.⁴⁷⁷

*������������������ Hvatt Place.Franchising. L.L.C. f"HPF"\ a Delaware limited liability company, was

formed in August 2005 to offer franchises for��� hotels with attractively-designed rooms

-*u������������ i����������������������������� j������������� ... 480������ .���� 481 .���� ,��� .�� -�������������������� .-������ , . 482

with, upscale amenities and exceptional service standards incorporating state ^ ⁴⁸³of-the_Tart technology, design and entertainment components⁴⁸⁴ under the name Hyatt

PJateJntel ("Hyatt Place Brandt. HPF is direct subsidiary of Hvatt Corporation. HPFJias offered franchises for Hvatt Place Hotels since September 2005 and-has nexer offered franchises in any other line of business nor has it operated a Microtel Hotel. HPF''s address is 200 West Monroe. Sth Floor. Chicago, Illinois 60606. �

 

*������������� Hyatt Franchising Canada Corp. ("Hyatt Franchising Canada") has offered

franchises in Canada for full service hotels operating under the Hyatt� and Hyatt Regency� names since November 2007- Hvatt Franchising Canada has never operated hotels or offered franchises in any other line of business. Its principal business address is the same as Hyatt Corporation''s address.

Hvatt Place Canada Corporation ("Hyatt Place Ca nada") has offered franchises in Canada for hotels operating, under the Hyatt� Place name since August 2006. iLhas never operated hotels or offered franchises in any other line of husiness. Hyatt Place Canada''s principal business address is the same as HPF''s address.

Summerfield Hotel Company, L.L.C. (formerly known as Summerfield Hotel Company L.P.) ("Summerfield"! has offered franchises for extended stay hotels operating, under the Summerfield Suites� name since August 1999 and the Hvatt Summerfield Suites name since February 2006. Summerfield has, never operated hotels (although its related companies operate SummerfieJd-Sitites⁴⁸⁹� hotels! proffered franchises in any other line of husiness: Summerfield''s principal business address is HHLsame as HPF''s address.

 

Hvatt Summerfield Suites Canada, Inc. ("Hyatt Summerfield Canada"! has offered franchises in Canada for hotels operating under the Hyatt Summerfield Suites name since Sentemher 2007. It has never operated hotels or offered franchises in any other line of business: Hyatt Summerfield Canada''s principal husiness address is lhe_same as HPFV address.

 

The Market

The market for budget lodging services is well-developed. The lodging industry is very competitive both in general and in the particular submarket that appeals to the price conscious traveler. The Hotel is an economy-budget hotel offering minimal amenities and intended to compete directly with hotels in each target market that are considered ^⁴⁹²^⁴⁹³super budget^⁴⁹⁴!!⁴⁹⁵ or ^⁴⁹⁶^⁷hard budget"⁴⁹⁸!!⁴⁹⁹ hotels within the lodging industry. You will compete for guests with franchisees of other hotel chains, independent properties and owner-ope rated^: chains. In choosing a particular hotel or motel, consumers consider differences in room rates, quality and condition of accommodations, name recognition, availability of alternative lodging, service levels, reputation, safety,, reservation.systems and convenience of location. You can expect to compete with other budget lodging facilities which offer basic no frills lodging accommodations, as well as more established and more expensive hotels that offer accommodations with additional services to the public.

 

Industry-Specific Regulations

 

You must comply with a number of federal, state and local laws which apply generally to the establishment and operation of hotel businesses. The laws include those affecting zoning and construction, public accommodations, accessibility by persons with disabilities, health and safety, and labor. Many of the laws vary from jurisdiction to jurisdiction. It is your responsibility to apprise yourself of, and comply with, all applicable laws. Examples of applicable laws include:

 

Health & Sanitation. Most states have regulations or statutes governing the lodging business and related services. Many state and local authorities require licensing of lodging businesses to assure compliance with health and sanitation codes. Health-related laws affect the use of linens, towels, and glassware, among other things.

 

Facility Operations. Lodging facilities are subject to innkeepers'' laws that (i) allow innkeepers to impose liens against the possessions of guests who do not pay their bills; (ii) limit the liability of innkeepers regarding guests'' valuables; (iii) require posting of house rules and room rates in each room or near the registration area; (iv) may require registration of guests and proof of identity at check-in, and retention of records for a specified period of time; (v) limit the rights of innkeepers to refuse lodging to certain guests; and (vi) may limit the right of innkeepers to evict guests in certain circumstances. Applicable federal and state civil rights laws prohibit discrimination in hotels'' on the basis of the race, creed, color, or national origin. Some states prohibit -⁵⁰⁰"⁵⁰¹overbooking-⁵⁰²"⁵⁰³ and require innkeepers to find other accommodations if the guest has paid a deposit. Some states and municipalities have also enacted laws and regulations governing non-smoking areas and guest rooms.

Persons with Disabilities. The American with Disabilities Act (�⁵⁰⁴�⁵⁰⁵ADA-⁵⁰⁶!!⁵⁰⁷) requires public accommodations, such as inns, hotels, motels or similar places of lodging to (i) offer facilities without discriminating against persons with disabilities;, (ii) offer auxiliary aids and services to enable a person with a disability to use and enjoy the goods or services of an establishment to the extent such a provision is not unduly burdensome or disruptive to business; and (iii) remove barriers to mobility or communication to the extent readily achievable. The U.S. Department of Justice has published ^^accessibility guidelines^⁵¹⁰!!⁵¹¹ ("⁵¹²"⁵¹³ADAAG-⁵¹⁴!!⁵¹⁵) that prescribe a specified number of handicapped accessible rooms,, assistance devices for hearing, speech, and visually impaired persons, and general standards of design applicable to all areas of facilities, among other things. The ADA requires that all new_⁵¹⁶public accommodations and commercial facilities that ore ready for first ocoupanoy after January 26, 1993,⁵¹⁷mnsl⁵¹⁸ be designed and constructed so that they are -^5l9!t⁵²⁰readily accessible to and

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useable by individuals with disabilities,- � unless an entity can demonstrate that it would be structurally impractical to do so. Alterations of existing facilities also may need to comply with the ADA and ADAAG to the maximum extent feasible. The ADA requires that if -⁵²³^⁵²⁴alte rat ions that affect or could affect the usability of the facility-�� "��� are made in an existing facility, they must be made so that

527 52S

- " to the maximum extent feasible, the altered portions of the facility are readily accessible to and useable by individuals with disabilities.-⁵²⁹!!⁵³⁰ When alterations are made to an area that contains a �53i�532_{primary function}H⁵³³�⁵³⁴ ₀f the facility, then, ^⁵³⁵�⁵³⁶_t0 the maximum extent feasible,^⁵³⁷^⁵³⁸ the ADA requires that the -⁵³⁹^⁵⁴⁰path of travel to the altered area and the bathrooms, telephones and drinking fountains serving the altered area-⁵⁴¹"⁵⁴² must also be made readily accessible. The ADA defines primary function as !i⁵⁴³^⁵⁴⁴a major activity for which the facility is intended.-⁵⁴⁵!!⁵⁴⁶ Areas covered by that definition would include customer service lobbies, dining areas, meeting rooms, as well as other offices and work areas where the activity of the lodging facility are carried out. The ADAAG specifies the minimum room design and layout criteria for handicap accessible rooms. In addition, many states and municipalities have their own laws and regulations which address disability discrimination, access requirements, building modifications and alterations and building code requirements. The owner of each hotel and its contractors are responsible for ADA and ADAAG compliance, and should consult with their legal counsel concerning that compliance, as well as compliance with state and local disability laws and building code requirements.

Fire Safety. The Hotel and Motel Safety Act of 1990 (P.L. 101-391, 15 U.S.C. 2201, et seq.) (the n⁵⁴⁷^⁵⁴⁸Act"⁵ "⁵⁵�) encourages all places of public accommodation to install hard wired, single station smoke detectors. Certain travel directories include only those facilities that comply with the Act. Other state and local fire and life safety codes may require maps, lighting systems, and other safety measures unique to lodging facilities.

 

OSHA Regulations. Like many other businesses, lodging facilities are subject to Occupational Safety and Health Administration standards. State occupational safety laws and rules may also apply.

Telephone Charges. Federal and state laws and regulations affect the re-offering of local, intrastate, and long distance telephone service in Hotel guest rooms and at coin box telephones. Some states regulate or prohibit surcharges on local and intrastate calls.

In addition to these laws, laws of general application may have special interest to hotels. Consult your attorney for more information on these laws.

 

AAFD Certification

 

In 2000 and 2004, we were awarded the American Association of Franchisees & Dealers ^55i�552_AAFD�553�554^ ^ _Francnj_sj_{ng Sea}|��� _Th_e AAFD Fair Franchising Seal is awarded to

companies by the vote of their franchise owners or independent dealers that they are satisfied with their franchise agreement and franchise relationship, and upon certification by the AAFD''s Standards Committee that the franchise system operates in a manner consistent with the spirit of the AAFD''s Fair Franchising Standards. The fact that the franchisor is accredited by the AAFD is no guarantee that any franchisee will be successful in the operation of his or her business.

 

Agents for Service of Process

 

The Agents authorized to receive service of process in various states are listed in Exhibit