RLHC’s franchisee retention improves in Q3
RLHC’s franchisee retention improves in Q3
05 NOVEMBER 2020 10:24 AM

RLHC executives said during the company’s third-quarter earnings call that fewer franchisees are leaving the system in comparison to 2019.

DENVER—RLH Corporation franchisee retention rates improved during the third quarter, indicating fewer franchise owners are leaving the brand compared to 2019, according to executives.

John Russell, CEO of RLHC, said during the company’s third-quarter earnings call that ROAR, its corporate initiative, along with the introduction of additional franchise support tools and marketing programs resulted in 33% fewer franchisees leaving the brand compared to Q3 of 2019.

Year to date, 26% fewer franchisees have left the brand.

“In September, we experienced our lowest number of (franchisee) terminations in over four years, and in October we experienced equally positive results,” he said.

Franchise agreements
The company executed 129 new franchise agreements in the first nine months of 2020, which included adding 23 properties. During Q3, it executed 37 new franchise agreements, with four being in new locations, Russell said.

In October, RLHC announced it relaunched its GuestHouse International brand as GuestHouse Extended Stay to meet the increased demand for longer-term stays with an economy offering.

Russell said during the earnings call the current expansion includes six new-build opportunities and 15 conversion opportunities for the brand.

He said the company also launched new franchising initiatives for its Americas Best Value Inn and Knights Inn brands with incentives designed to bring new contract signings.

“We are encouraged by the progress we are making across the brands, but we also recognize that we face continued headwinds from the pandemic,” Russell said. “We are singularly focused on supporting our franchisees during this challenging time and we believe that if we can show progress during this industry disruption, we will be well-positioned to continue our wins as the economy stabilizes.”

Acquisition, investment interest
According to the company’s earnings release, RLHC has engaged advisors to review and respond to “bona fide inquiries received from parties considering an investment in or acquisition of the company.”

The release states RLHC’s portfolio of franchised hotels has drawn interest from those who view the portfolio as being in well-located areas “that are less impacted by a reduction in leisure travel and are well-positioned to respond quickly to upticks in travel, especially drive-to travel.”

RLHC does not plan to disclose further information until its board of directors has decided on an action or that further disclosure is required.

Executives did not address this during the earnings call.

Q3 performance
During Q3, RLHC reported a net loss of $3.1 million compared to a net loss of $3.7 million during the same period in 2019. Its adjusted earnings before interest, depreciation and amortization was $1.5 million during the quarter compared to $5.9 million in 2019, according to the company’s earnings release.

Russell said the company’s revenue per available room index performance shows it is taking market share from its competitive set by 5.6%. He said the performance in market share was driven by its economy brands. Occupancy for its brands overall was 51.5%, with midscale brands at 49.6% and economy brands at 54.2%, he said.

“These statistics continue to give us confidence in the performance of both our economy and midscale franchise portfolios,” he said.

Gary Kohn, CFO at RLHC, said during the call that RLHC’s model is “relatively resilient to occupancy rate.”

Kohn said the economy segment is among the best RevPAR performers and is not experiencing nearly as much COVID-19 impact as hotels located in major cities, resort or airport locations. RLHC’s relative outperformance has generated improved cashflow for its owners, he said.

As of press time, RLHC’s stock was trading at $2.10 a share, down 43.7% year to date. The New York Stock Exchange Composite was down 5.23% for the same time period.

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