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Howard Johnson International says Canadian franchise firm defaulted on fees

Canadian Press

Toronto — Howard Johnson International Inc. is accusing its Canadian franchise partner of failing to pay fees owed to the U.S.-based hotel chain.

Toronto-based AFM Hospitality Corp., which owns Howard Johnson Franchise Canada Inc. and other lodging businesses, said Friday that Howard Johnson International, a subsidiary of Cendant Corp., is alleging default.

"AFM and HJFCI are in the process of reviewing the amounts claimed and anticipate that such amounts will be significantly reduced when finalized," AFM chairman Lawrence Horwitz said in a release.

"We value the relationship with Cendant and look forward to this issue being cleared up in due course as we explore a mutually satisfactory resolution to this important matter."

AFM Hospitality reported the dispute as it posted a second-quarter loss of about $1-million or 11 cents a share, compared with a loss of almost $100,000 or one cent per share a year earlier.

Revenue declined to $2.8 from $3.6-million.

"The decrease in revenue related to the sale of Ramada Franchise Canada Inc. on Dec. 20, 2002, which had contributed $2-million to last year's second-quarter revenues," the company said.

"After deducting Ramada, AFM Hospitality realized an increase in total revenues of nearly $1.2-million during the second quarter of 2003."

In late June, the company announced the departure of chief financial officer Alan Raffan. Horwitz said AFM "continues to achieve a dramatic increase in the number of completed franchise applications, the number of newly executed management agreements, and the number of new financial institution engagements for receivership, consulting and other asset management services."

He said the franchise division is growing more than 50 per cent a year.

Horwitz also noted the impact of an economic slump and travel downturn related to the Sept. 11 terrorist attacks, the U.S.-Iraq war and SARS.

AFM's numerous holdings include Northwest Lodging, Trigild Services Inc., Special Asset Services Inc. and Staffing Services International.

Through its subsidiaries, it is the exclusive Canadian franchiser for Aston, Best Inns, Hawthorn Suites, Howard Johnson, Knights Inn and other chains.

On the Toronto stock market Friday, AFM Hospitality shares (TSX:AFM) were unchanged at $2.60.

© The Globe and Mail

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