Cambria Hotels Franchise

Financing Details

Choice Hotels International, Inc. offers several financing options. For the affiliation fee, Choice Hotels International, Inc. may, at its discretion and with credit approval, offer to finance it without interest through a promissory note generally due within three months. If defaulted, this note bears an 18% annual interest rate (maximum 10% in California). Choice Hotels International, Inc. may also provide capital support to help offset development and opening costs for strategically important hotels. This support is typically structured as a forgivable promissory note, amortized over 10 or 20 years from the hotel's opening date, with no interest unless there's a default (then prime plus 2%). Additionally, Choice Hotels International, Inc. offers an Incentive Program for qualifying underrepresented entrepreneurs and honorably discharged veterans, providing up to $3,000 per room (maximum $350,000 for Cambria) via a 10-year forgivable promissory note. A 5-year note for up to $175,000 is also an option. For re-licensing existing Cambria hotels, qualifying franchisees can receive a 50% discount on the affiliation fee. While Choice Hotels International, Inc. directly offers these financing options, it also has non-exclusive Qualified Vendor agreements with third-party lenders such as PMC Commercial Trust, Balboa Capital Corporation, and Ascentium Capital LLC. These lenders may offer conventional and Small Business Administration (SBA) financing for various costs, including site acquisition, construction, equipment, and other expenses. Loan amounts and terms with these third-party lenders vary, and franchisees are not required to use them. Choice Hotels International, Inc. receives annual flat payments from these lenders for marketing access.

Litigation Summary

Choice Hotels International, Inc. has several active and recently resolved legal cases. Currently, there are four pending litigation and arbitration demands. These include a class action lawsuit filed in 2014 by Norma Knuth against Radisson Hotels International, Inc. regarding undisclosed destination marketing fees collected in Canada, seeking $403 million in restitution and damages. Another significant pending case, active since 2020, involves approximately ninety current and former franchisees, led by Jai Sai Baba, LLC, who accuse Choice Hotels International, Inc. of discriminatory and anti-competitive practices, breach of contract, fraud, and violations of various federal and state laws. Two other pending cases, filed in June and October 2024, involve franchisees alleging breach of contract, misuse of system fees, and violations of franchise laws. Additionally, Choice Hotels International, Inc. initiated 66 legal actions in 2024 to recover royalties, liquidated damages, and other debts from franchisees who allegedly defaulted on their agreements. In terms of resolved cases, a former franchisee, Sender Kohl, settled a dispute in August 2021 with Choice Hotels International, Inc. paying $85,000 for claims of breach of contract and fraud. Two arbitrations related to the Jai Sai Baba case also concluded in 2023-2024: one resulted in a judgment against Choice Hotels International, Inc. for approximately $779,000, and another found Choice Hotels International, Inc. owed $882 to a franchisee but was awarded $603,483 for attorney's fees from the franchisee. Finally, an arbitration initiated by Choice Hotels International, Inc. in April 2021 to recover $498,495 from DIP Hospitality, LLC, resulted in Choice Hotels International, Inc. winning $256,051 in fees, but DIP Hospitality, LLC won $4,411,678 for wrongful termination.

Renewal Conditions

Cambria does not offer renewal or extension of the franchise agreement after the initial 20-year term expires. Both the franchisee and Choice Hotels International, Inc. have the right to terminate the agreement, with or without cause, on the 10th and 15th anniversaries of the Opening Date. To exercise this right, the terminating party must provide at least 12 months' prior written notice. If the franchisee chooses to terminate, they must have paid all fees and charges due under the agreement and any related agreements at the time of notice and the proposed termination. This type of termination is not subject to liquidated damages if the franchisee is not in default.

Staffing Notes

Cambria Hotels requires a specific management structure to ensure efficient operations and adherence to brand standards. At a minimum, each Cambria Hotel must have a General Manager, a Director of Sales, an Executive Housekeeper/Supervisor, a Maintenance Engineer/Supervisor, and an F&B Leader. The General Manager must be certified and is required to be solely dedicated to that hotel, meaning they cannot manage any other hotel concurrently. The Director of Sales must be a full-time, on-site position, dedicating at least 40 hours per week to sales efforts. This individual needs to possess significant experience, specifically a minimum of two years as a Director of Sales in the upscale segment or above, or three years as a Business Travel or Groups Sales Manager for a Cambria Hotel or equivalent upscale property. The Director of Sales must be hired at least six months prior to a new hotel's opening and replaced within two months if the position becomes vacant. An F&B Leader is also mandatory on-site, though this role can be full-time or a part-time duty for another full-time associate, such as an Assistant General Manager. Franchisees are required to contract with a hotel management company that is approved by Choice Hotels International, Inc., and Choice Hotels International, Inc. reserves the right to require the replacement of this management company if it fails to meet franchise agreement requirements.