By Andrew Sangster
Friendly Hotels, the 30-strong UK-based chain, has sealed a deal with US franchise giant Choice Hotels International to become the master franchisor for the UK and Ireland.
Under the terms of the agreement, Friendly must expand the Choice network from the current 41 properties in the UK and Ireland to at least 85 hotels within 10 years.
The deal will also see Choice pumping £11m into Friendly to support the development of 10 new Comfort Inns. This finance, together with the fee it is paying for the master franchise agreement, will result in Choice taking a stake in Friendly worth up to 27.9% of Friendly's shares.
Henry Edwards, Friendly's chairman, told Caterer the best route for his company to expand was for Choice to take a stake. "It is early days to talk about the 10-year target but we expect the number of properties to be in three figures easily," he added.
Construction work has already started on the first of the 10 Comfort Inns at Arundel, West Sussex. Mr Edwards said he expected to exchange on another site this week and was close to finalising three other deals.
Nabil Ashkar, managing director of Choice Hotels Europe, said he hoped to see the Friendly deal repeated elsewhere in Europe. "We are looking for similar deals, particularly in Germany," he told Caterer.
Growth in the UK would focus on Quality Inn and Comfort Inn, he added.
Friendly has also announced it is to quit its serviced office division to focus on hotels and catering. It has made a provision of £9.6m in its results for the year ended 24 December 1995, which means it has reported an overall loss of £6.26m. The hotels division produced a net profit before tax of £4.18m from sales of £36.46m. The offices division lost £417,000 from a turnover of £5.55m.
The combined results for the two divisions for 1994 were pre-tax profits of £2.97m from £38.79m of sales.