HOLIDAY INN: Franchisors Must Protect Their Brands

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Related:  HOLIDAY INN: Defranchising a PA Dutch Country Icon

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The franchisor’s greatest responsibility is to protect the integrity of its brand.

In the end, everyone involved is invested in the power of the brand:  franchisees, shareholders, landlords and employees.

Unfortunately, the most devastating attacks on even the most powerful brands often come from within.  Lax employees and undercapitalized or negligent franchise owners can quickly undermine an image built over decades of hard work and billions in advertising and promotion.

Case in point:  The announcement by IHG, franchisor of Holiday Inn, to “disenfranchise” the Lancaster County, PA, Holiday Inn Visitor’s Center location last week.  Unfortunately, the announcement comes after much of the damage – accrued over several years – has been done.

Think of all the brand advertising Holiday Inn has done over the years to build a welcoming, dependable and trustworthy image.  Then consider these excerpts from the Lancaster Sunday News report as to the problems now associated, at least to those who live or travel to and through PA Dutch Country, with Holiday Inn:

Nonpayment of vendors or utilities

“When John Miller showed up at the Holiday Inn on Greenfield Road Wednesday afternoon to collect a past-due invoice, he knew something was amiss.

“The whole place was dark,” the president of On-Site Containers, said. “The front-desk staff was sitting around in the lobby and people staying in the hotel were standing outside.”
What the guests didn’t know was that PPL Corp. had shut off the facility’s electricity for nonpayment.”

Serious Health Code Violations

“Also Wednesday, state health officials conducted a follow-up inspection at the hotel, documenting 67 state health code violations… These included rodents in the Dumpster area just outside the kitchen door and the evidence of rodents in the food-preparation area itself. Officials ordered the hotel to close its kitchen.”

The health inspection documented that, due to a broken walk-in cooler, food was being stored in a guest room with the air conditioning cranked.

Illegal Liquor Sales

Liquor Control enforcement officers executed a search warrant at the property Sept. 23, after officers observed drinks being sold in a banquet room Sept. 18.
The hotel hasn’t had a liquor license since February… According to Liquor Control enforcement documents obtained by the Sunday News, officers found 30 bottles of spirits, three half-kegs, eight cases and 122 bottles of beer, two bottles of wine, 13 bottles of champagne and receipts for alcohol purchases.
Officer Greg Harvat… said the confiscated receipts show sales occurring over a long period and that those witnessed on Sept. 18 were ‘not an isolated incident.’”  The investigation is still ongoing and will likely result in criminal charges.

“Huge Mold Problem”

[GM] “Byrnes also described a scene when the hotel was renovating: ‘When we started stripping the wallpaper we found all kinds of mold on the walls. We had a huge mold problem and we had to take care of it either with bleach, a cleanser or new sheet rock. It was going to be expensive.’  But Byrnes said [Franchisee Kronos Hotels] corporate officials told him to ‘talk to a guy up in Michigan who was taking care of the problem in one of their properties there for $300 a room. It turned out all he was doing was painting over the wallpaper directly.’

Unpaid employees, lawsuits, ill will

“In February, I went to IHG headquarters [in Atlanta] for a training session,” he said. “When I came back I had about $500 in expenses, but I was never reimbursed.”
Byrnes sued Kronos to get the money he was owed.
“One month later I was terminated,” he said.
The financial issues still mystify Byrnes. Earlier in his career he served as a controller for another hotel, and is familiar with accounting systems.
“That hotel could easily be self-sufficient financially, and turn a profit,  if it were left by itself,” he said. “I have no idea where the money was going.”
Overall, Byrnes said, “My concern is for the community. How many people —  employees, guests — have been negatively affected by this operation?”

Owned by Kronos Hotels and Resorts

The Lancaster, PA Holiday Inn was purchased 15 months ago from Lodgian by Kronos Hotels & Resorts, an Atlanta-based hotelier founded by Malaysian businessman Charles Morais.  According to the Sunday News,

“This is not the only Kronos-owned hotel with problems.

Kronos owns the Crowne Plaza Five Seasons in Cedar Rapids, Iowa. According to reports published in the Cedar Rapids Gazette and televised on KCRG-TV, the company owes the city $71,000 and the state more than $400,000 in unpaid taxes. Employees there also report bounced paychecks. Vendors have sued for non-payment and the general sales manager recently sued Kronos alleging sex discrimination.
In Sheffield, Ala., the city council voted late last month to terminate its lease with Kronos for the ground the hotel sits on for non-payment of taxes. The company was operating the Holiday Inn, Sheffield.

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