Atlanta: Indian hotel owners have filed lawsuits in federal court accusing two of the biggest hotel chains in the world of gouging them with fees, penalties and overpriced products. The excesses by Choice Hotels International, the company behind the Comfort Inn brand, and Holiday Inn franchiser Intercontinental Hotels Group reached a tipping point during the pandemic when the hospitality industry experienced a steep drop in business, the franchisees say.
The claims echo those made by franchisees in other industries. But the suits against IHG and Choice also claim the companies discriminate against Indian American owners, and Indian hoteliers have cast them as a racial struggle. Some, unironically, have likened the fight against the United Kingdom-based IHG to India’s campaign against British rule.
“Indians still have this mentality. We’re still afraid to stand up regardless of how powerful you are, how well off you are,” said Vimal Patel, who is spearheading the fight against the big hotel chains. “Why should we be scared of these larger corporations?”
Patel’s lawsuit filed in May in US district court in New Orleans was the first of at least five suits against IHG that are being coordinated by two law firms and seek to represent a larger group of franchisees as a class action.
His suit and the suit against Choice, which was filed by more than 90 franchisees last year, accuse the companies of receiving kickbacks from required vendors that charge franchisees higher prices for linens, utensils and other products.
That allegation strikes at a “cardinal rule” of franchising, said Joel Libava, a franchise consultant who blogs about the industry at thefranchiseking.com. In exchange for paying royalties and fees for the brand name, franchise owners should expect the franchise company to use its buying power to get them discounts on products and services.
“If that is not true and if you’re paying pretty much what the independent is paying, then why are you in a franchise?” Libava asked.
IHG spokesman Jacob Hawkins said in a statement that the company is committed to treating its hotel owners fairly and does not believe the claims have merit.
Choice “has always had a strong commitment to the success of its franchisees,” the company said in a statement.
The suits also accuse Choice and IHG executives of routinely making racially derogatory comments about Indian American franchisees, though they don’t provide examples of any remarks.
Both companies enforce their standards more strictly against Indian Americans, the suits allege. Choice provides more financing to white owners and has largely spared them from a rule forbidding two-story properties from carrying the Comfort Inn brand, the Choice suit says.
Choice said in its statement it does not tolerate any form of discrimination and is “regularly recognized for its long-standing and deep commitment to diversity, equity and inclusion.” Hawkins said IHG values the diversity of its franchisees and does not make decisions based on their ethnicity or national origin.
