Settle Inn

Terry Kline, senior vice president of franchise sales & development with Settle Inn LLC and GuestHouse International LLC, answers questions about Settle Inn and its franchise philosophy.

For more information about Settle Inn, contact Terry Kline, senior vice president of franchise sales & development. Phone: 605-725-5302 Fax: 605-725-5305 Email: terry@settleinn.com Web site: www.settleinn.com

Fast Facts:
•  Number of Settle Inn hotels in the U.S.: 8 open in 5 states
•  Franchise fees: $25,000 initial fee (includes PMS system software and training, installed on franchisees’ hardware and the Signature employee training program)
       • ROYALTY: 3 % for the first year
       • 3.5% for the second year and beyond.
       • MARKETING/RESERVATION FEE: 2.25%

LodgingOperator.com: I understand that Settle Inn has been recognized by the American Association of Franchisees & Dealers for its franchise agreement? What does this recognition mean and how does your franchise agreement differ from other franchise agreements?

Kline: Working with the AAFD, Settle Inn developed a franchise that has been recognized as the most franchisee-friendly, not only in the lodging sector but across all franchising sectors, achieving a near-perfect score of 99.3 percent conformity against the AAFD standards for fairness. Robert Purvin, AAFD Chairman, praised Settle Inn Management for setting a new standard in fair franchise agreements. He said, “Settle Inn has demonstrated its commitment to placing fair franchising as the cornerstone of its franchise program by working with the AAFD to achieve a near-perfect score in our grading process.”

We wanted to write a simple and straight-forward franchise agreement that we crafted into just 39 pages. The franchise agreement differs from other agreements by being built upon a “common sense” premise that fosters a true partnership between franchisee and franchisor — it eliminates many of the one-sided restrictions often placed on franchisees.

LO: How is Settle Inn different from other franchise companies?

Kline: We are different because we are committed to going back to what ‘franchising’ really means: creating that close working relationship with a focus on what our franchisees really want — the delivery of those cost-effective, essential services that are designed to enhance profitability and success.

LO: How does your organization benefit hoteliers?

We benefit hoteliers by offering them a simple, back-to-the-basics franchise program that is “entrepreneurial,” allowing properties to manage their assets and business in the context of their local markets and by being “smart,” eliminating needless and costly mandated amenity programs that do not drive brand loyalty or allow for the franchisee to increase revenues.

The Settle Inn franchise system provides a central reservation system, including toll-free voice, consumer web site and complete GDS representation with third-party online travel sites such as Travelocity, Priceline and Expedia. We also offer customized hands-on franchise support in the areas of property marketing programs, operations, training and revenue management through our innovative franchise manager program.

LO: What educational opportunities do you offer to your franchisees?

Kline: We offer a full spectrum of both in-class room and online franchise training programs. We are also the only franchise company to include in the franchise purchase the renowned training program by Signature. The program, titled “Transient Edge,” assists our properties in maximizing revenues and servicing their guests.

LO: How long has the Settle Inn brand been around? Briefly, will you tell the story of how the brand was founded?

Kline: Settle Inn has been around for just over 14 years, with the first property opening in Kaukauwna, Wisconsin, in 1992. The brand was founded by Mr. David Graf, an experienced hotelier and real estate developer from Aberdeen, South Dakota. Mr. Graf went on to develop numerous other Settle Inn projects throughout the Midwestern states. These limited-service, mid-market properties were known for their exceptional customer service, successfully positioned to cater to both business and leisure travelers.

Mr. Graf continues to serve as a co-owner of the franchise company, serving on the board of directors. He was instrumental in the organization and development of the franchise company. During 2005, he worked to assemble a team of experts from a variety of perspectives and experiences within the hospitality industry. This resulted in the eventual creation of the award-winning Settle Inn franchise agreement.

LO: I also understand that the company recently purchased GuestHouse International? How is this a strategic move for the company? Will the two brands continue to operate separately? What synergies are created?

Kline: Settle Inn purchased the Guesthouse International franchise system on December 1, 2006. The acquisition of GuestHouse, and its 71 properties in 22 states, allows for one central management team to oversee the growth and operations of both brands, even though the brands will retain their individual identities in their respective tiers and the markets they serve. Settle Inn was attracted to the GuestHouse brand by the similar cultures and philosophies that both brands share in delivering personal service and the building and maintaining of franchisee/franchisor relationships. The acquisition allowed for the absorption of 16 key, experienced lodging industry veterans who will now supply franchise services and support to the franchisees of both brands.

LO: What are your plans for growth? How many Settle Inn hotels do you expect to open in 2007? What are your target markets within the U.S. and Canada?

Kline: We have aggressive growth plans for the brand in 2007. Our goal is to initiate 20 additional franchise agreements during 2007, to add to the 20 locations currently under development through the agreements signed in 2006. Since most of these projects are for new construction facilities, we expect somewhere between six and 10 of these facilities to possibly open in calendar year 2007.

We have invested considerable resources to build a team of experienced industry veterans to facilitate franchise sales and development through six key regions of the United States. The regions include the Southeast region (with a field office in Atlanta), the South Central region (with a field office in Dallas), the Midwest region (with a field office in Kansas City), the West-Southwest region (with a field office in Santa Barbara, California), the Pacific-Northwest region (with a field office in Medford, Oregon), and the North Central/Northeast region (with a field office in Fort Wayne, Indiana).

LO: What are your other goals for the next couple of years? (i.e., plans to launch new initiatives, new marketing campaigns, etc.)

Kline: We are finalizing plans to launch our brand new customer loyalty program called “Rest Rewards.” The no-fee program is designed to reward all guests and is a cost-effective alternative to other brands, which have mandated points based on programs that are very expensive for franchisees.

LO: What is the most innovative idea that Settle Inn has introduced to its hoteliers?

Kline: The most innovative idea is most certainly the terms of fairness within our franchise agreement, upon which the cornerstone and foundation of our franchise system is built. The agreement gives the franchisee the security of the typical long-term franchise agreement, yet allows the franchisee flexible exit options without having to be concerned over liquidated damage provisions — they maintain control and can manage their asset much more effectively.

Another innovation of the Settle Inn brand, not offered by any other competitive franchise system, is the inclusion of the property management system within the initial fee and the value-added amenity of the Signature training program.

LO: What are the keys to your success?

The keys to our success lie within the success of each and every one of our franchisees. Given our philosophy of being in true partnership with each of our individual owner-operators, we understand completely that we cannot experience success until each of our franchisees is successful. This is our mission: to work each day to facilitate the success of our owners and to earn their business. If we don’t deliver, our franchise agreement gives the franchisee the right to give us notice and to exit the system.

LO: Please describe the “typical” Settle Inn property — average number of rooms, typical demographics of the trade area, etc.

The typical Settle Inn or Settle Inn & Suites property would consist of 60 to 80 rooms and compete as a mid-market, limited-service lodging facility. The competitive set would include the likes of other brands such as Comfort Inn & Suites, Fairfield Inns, Country Inn & Suites, etc. The facilities typically cater to both business and leisure travelers; they could be located anywhere from interstate locations, to business parks or near airports in primary or secondary markets.

LO: What is the quality assurance (QA) process like for Settle Inn members?

The quality assurance program of the Settle Inn franchise system has been written and developed Byjon Hoffman, our vice president of franchise operations, training and QA. Jon has nearly 20 years of hospitality experience explicitly in the areas of management and administration of QA policy and procedure. The program is points-based and designed for an inspection of each property to be conducted a minimum of three times each year. The results are then reviewed with ownership and management on pro-active basis to ensure guest satisfaction is maximized.

LO: Can you give some measure of member satisfaction? (i.e., franchisee renewal rate or some other measure?)

Kline: This statistic is unavailable due to the fact that the franchise company has only been in existence since 2005.

LO: Is there anything else you’d like add about Settle Inn?

Kline: More information on the Settle Inn franchise system is available on our consumer website at www.settleinn.com or on our development site at www.gosettleinn.com.




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