<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported)
June 26, 1997
CHOICE HOTELS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware
--------
(State or other jurisdiction of incorporation)
1-11915 1985619
------- -------
(Commission File Number) (IRS Employer Identification No.)
10750 Columbia Pike, Silver Spring, Maryland 20901
- -------------------------------------------- -----
(Address of principal executive officers) (Zip code)
Registrant's telephone number,
including area code (301) 979-5000
--------------
<PAGE>
Item 5. Other Events
- ------ ------------
The company announced in a press release, attached as Exhibit 99.1, its
three year strategic plan. The company also issued a press release, attached as
Exhibit 99.2, announcing the name and management team of the company upon the
proposed spin-off of the company's franchising operations. The discussion in
each of the press releases contains forward looking statements which represent
management's current judgment. However, these statements are subject to risks
and uncertainties. The following factors, among others, could cause actual
results to differ materially:
-- growth strategies are subject to the company's access to sufficient
capital;
-- expansion into new niches is dependent upon sufficient capital,
demand for such new products from franchisees and consumers and the
company's ability to successfully manage the expansion;
-- new acquisitions are dependent upon market conditions, access to
sufficient capital and reaction of shareholders to potential
dilution;
-- actual costs associated with acquisitions and development could
exceed budgeted costs;
-- performance of Project Manager is subject to unforseen delays in
continued roll-out, such as unforseen technical problems and ability
of third party suppliers of hardware to meet orders;
-- Profit Manager's ability to increase RevPAR could be adversely
affected by a downturn in occupancy rates, and imbalance between
supply and demand for hotel rooms, increased competition and the
ability of franchisees to maintain staff trained in using the
product;
-- international growth is dependent upon demand for the company's
brands and the ability of the company to consummate strategic
alliances with foreign partners;
-- international growth and profitability could be adversely affected by
currency fluctuations and political/social risks in certain
countries;
-- the proposed spin-off of the franchising business is subject to
certain conditions and there can be no assurance that the spin-off
will occur.
Investors are urged to read the Company's other documents filed with the
Securities and Exchange Commission, including the Preliminary Proxy Statement
filed May 30, 1997, for additional investment considerations.
Item 7. Financial Statements and Exhibits
- ------ ---------------------------------
(c) Exhibits
--------
99.1 Press Release, dated June 26, 1997 announcing the company's three year
strategic plan.
99.2 Press Release dated June 26, 1997 announcing name and CEO of company
upon spin-off of franchising operations.
2
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
CHOICE HOTELS INTERNATIONAL, INC.
(Registrant)
By: /s/ Michael J. DeSantis
----------------------------------
Name: Michael J. DeSantis
Title: Senior Vice President, General
Counsel and Secretary
Date: June 26, 1997
<PAGE>
EXHIBIT 99.1
[LOGO OF CHOICE HOTELS INTERNATIONAL APPEARS HERE]
FOR IMMEDIATE RELEASE
CONTACT: ANNE PAPA CURTIS
301/979-5032
CHOICE SETS COURSE FOR STRATEGIC GROWTH,
CONSUMER FOCUS IN ADOPTION OF THREE-YEAR PLAN
CEO FLOYD OUTLINES NEW REGIONAL STRUCTURE,
CONSUMER-DIRECTED MARKETING STRATEGY
SILVER SPRING, MD. (JUNE 25, 1997) - Choice Hotel International (NYSE:
CHH) Vice Chairman and CEO William R. Floyd today announced the adoption of a
three-year plan that realigns resources, implements bold new growth and service
strategies, and heightens the company's focus on consumers - all as part of a
master strategy to enhance profitability for owners of 4,164 Comfort, Quality,
Econo Lodge, Sleep, Clarion, Rodeway and MainStay Suites brand hotels.
"Throughout the strategic planning process, we never lost sight of our
primary mission: to help our franchisees make more money," said Floyd. "We
believe the combined power of our new structure, our new focus and our new
culture creates a tremendous profit potential for our franchisees. Because,
after all, when they are profitable, we are profitable."
Choice's new plan is driven by six strategic planks:
1. ORGANIZE FOR SUCCESS. Choice has developed a new organizational structure
that provides alignment and accountability in three key areas:
FRANCHISEES. In a move to focus more resources on franchisees, the franchise
sales and franchise services functions are consolidated under five
regionally-based operating groups with bottom-lime, P&L responsibility. As a
result of the new regional structure, each franchisee in the Choice system will
have one, regionally-
-OVER-
<PAGE>
based contact person who will be responsible for assessing and responding to
each hotel's specialized needs. Rod Sibley, senior vice president, franchise
operations, oversees these new groups. Regional offices will be based in Silver
Spring, MD, Charlotte, NC; Indianapolis, IN; Denver, CO; and Los Angeles, CA.
CONSUMERS. Brand management, new product development and traditional consumer
marketing are combined to create more consumer focus and drive demand for Choice
brand products. Exhaustive consumer research, already underway, will drive brand
development, both for existing and new products. As a result, marketing's focus
broadens from generating trial of Choice brands (traditional advertising,
marketing, sales) to actual management of the product (brand positioning,
development and standards). Barry L. Smith, senior vice president, marketing, is
responsible for the newly-defined marketing function.
SCALE. Choice has consolidated functions within the company that leverage the
scale of the system to benefit franchisees, particularly in the areas of
strategic partnerships and purchasing. Operating under a philosophy dubbed "4-
Win," the new Partner Services Group, under the direction of Senior Vice
President Joe Lavin, seeks to develop alliances and partnerships that result in
benefits for franchisees, vendors, Choice, and guests at Choice brand hotels.
2. OPTIMIZE THE BRAND PORTFOLIO. With its portfolio of new, fresh brands like
Sleep, Comfort Inn, Comfort Suites and MainStay Suites, and its primarily
conversion brands such as Quality, Clarion, Rodeway and Econo Lodge, Choice has
the brand to suit any business strategy, in any economic cycle. The strategic
plan calls for leveraging the strengths of each brand for profit growth and for
identifying new niches into which the company will expand.
Choice will also develop a strong team whose primary responsibility is
to aggressively seek acquisition both within lodging and in related fields.
3. INCREASE MARKET PENETRATION ON A STRATEGIC BASIS. Through its new regional
structure,
-MORE-
<PAGE>
Choice will analyze key markets in the U.S. and, in conjunction with its
franchisees, identify the best opportunities for new development or conversion
to a Choice brand. This strategic approach to system growth will give
franchisees an early opportunity for additional development within their
communities.
4. IMPROVE MARGINS THROUGH INCREASED PRODUCTIVITY. Choice will continue to look
for efficient, effective business strategies that represent a "win-win"
proposition for the company and for franchisees. A primary component of this
strategy, the new Profit Manager by Choice property management system, is
already being rolled out to franchisees, with a goal of 100 percent usage by the
year 2000. The new system not only enhances franchisees' ability to take
advantage of Choice's reservations system, CHOICE 2001; but, by virtue of its
"last room availability" feature, the system is projected to improve each
property's RevPAR performance by five percent within the first year.
5. PROFITABLY GROW INTERNATIONALLY. Through a strategic pursuit of joint
ventures, master franchising agreements and brand specific area development
agreements. Choice plans to leverage its international advantage by focussing on
development of its brands in key destination countries.
6. LEVERAGE SPIN-OFF OF CHOICE MANAGEMENT & REALTY SERVICES. As announced in
April, a separation of Choice Management & Realty Services, which owns and
operates 71 hotels, and Choice Hotels International, which franchises 4,164
hotels, into two separate publicly-traded companies is planned for the fall.
Choice's strategic plan calls for maximizing the growth potential of both
companies; specific to the franchising company, the separation allows for a pure
focus on franchising, including pursuant of acquisition opportunities that
complement the company's core businesses.
"Our vision, simply stated, is for Choice to dominate high margin
lodging segments globally, and to expand selectively into complementary
businesses when attractive, sustainable economic propositions are achievable,"
said Floyd. "This new plan sets us on the right course to realize this vision."
###
<PAGE>
This press release contains the plans and objectives of management for
future operations. In accordance with the requirements of the Private Securities
Litigation Reform Act of 1995, investors are cautioned that actual results could
materially differ and are referred to documents filed by the company with the
Securities and Exchange Commission for investment considerations.
<PAGE>
EXHIBIT 99.2
[LOGO OF CHOICE HOTELS INTERNATIONAL APPEARS HERE]
FOR IMMEDIATE RELEASE
CONTACT: JAMES MACCUTCHEON
CHIEF FINANCIAL OFFICER
301/979-5001
BETSY O'ROURKE
VICE PRESIDENT
COMMUNICATIONS
301/979-5032
CHOICE HOTELS INTERNATIONAL
ANNOUNCES NAME, MANAGEMENT TEAM
FOR PROPOSED REAL ESTATE COMPANY
LANDRY APPROVED AS CEO OF SUNBURST HOSPITALITY CORPORATION
SILVER SPRING, MD. (JUNE 26, 1997) -- Choice Hotels International, Inc.
(NYSE:CHH), which has announced its plan to divide its business through a
pro-rata spin-off to shareholders of its franchising operations, today announced
the proposed name and executive officers of the real estate company.
Sunburst Hospitality Corporation was approved by Choice's board of
directors as the company's new name after the spin-off. At that time, the
franchising company will adopt Choice Hotels International, Inc., as its name.
Donald J. Landry, currently Choice's president, has been named chief executive
officer of Sunburst Hospitality and will serve on its board of directors as vice
chairman. It is anticipated that Antonio DiRico, currently Choice's senior vice
president -- hotel operations, will be named president and chief operating
officer, and Kevin P. Hanley, currently vice president -- real estate and
development for Choice, will be senior vice president -- real estate and
development of the new company.
William R. Floyd, vice chairman and chief executive officer of Choice,
said, "Don Landry and his team have the proven expertise to position this new
company for
-OVER-
<PAGE>
significant growth. The growth of Choice's owned-hotel division, from 12 hotels
in 1992 to 71 hotels today and from $39.8 million in revenues in FY93 compared
to $135.2 million in FY96, as well as the launch of innovative new operations
concepts, provide solid testimony to the unparalleled talents of this management
team."
Landry joined Choice in 1992 as president of the owned-hotel division,
then a unit of Manor Care, Inc. (NYSE:MNR). (In November, 1996, Choice Hotels
International, including both the franchising and ownership/operations
divisions, was separated from Manor Care in a tax-free spin-off.) His mandate
upon joining the company was to develop and execute an acquisition strategy that
capitalized on the then-soft real estate market. Following these acquisitions,
Landry and his team were charged with building operating revenues through
innovative and efficient operations strategies.
Since 1993, revenues from owned and managed hotel operations have grown
at a compound annual rate of 50.3 percent. At the same time, gross margins for
the owned and managed hotel operations improved from 27.6 percent in FY93 to
32.7 percent in FY96.
The hotel division under Landry's leadership also worked with the
franchising group to create innovative, operations concepts, including Choice
Picks Food Court, a branded, modular food service system now franchised
nationwide; and K-Minus, a banquet service system that greatly minimizes labor,
space and energy requirements while providing guests with top quality food. The
hotel division was also involved in the creation and development of MainStay
Suites, the nation's first midmarket, extended-stay brand.
According to Landry, who became president of Choice in 1995, the new
Sunburst Hospitality Corporation's mandate going forward is to build on the
successful foundation already established. Sunburst plans to continue an
aggressive development strategy for new brands such
-MORE-
<PAGE>
as MainStay Suites and to pursue innovative operations concepts that increase
profit margins for owned hotels. Additionally, Sunburst will continue to develop
new lodging projects in conjunction with Choice.
Choice Hotels International is the second largest hotel franchisor in
the world with 4,089 hotels open or under development representing 350,065 rooms
in 33 countries, marketed under the brand names Comfort, Quality, Econo Lodge,
Sleep, Clarion, Rodeway and MainStay Suites.
Sunburst Hospitality Corporation will own and manage 71 hotels in the
United States, with 20 hotels currently under construction or in the development
process.
###
