What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-02-24 compared with 2021-02-26 · 156 added, 233 removed, 615 unchanged (39% of the section changed)

Impact of the COVID-19 Pandemic

The evolving spread of COVID-19 has caused significant disruptions to the global economy and the hospitality industry, including in the United States, where more than 80% of our franchised hotels are located.

The COVID-19 pandemic has led governments and other authorities and businesses around the world to impose or recommend measures intended to control its spread, including temporary closures of many businesses, "shelter in place" orders, travel restrictions, cancellation of events including sporting events, conferences and meetings, social distancing measures and other governmental regulations.

As a result, the COVID-19 pandemic and its consequences have dramatically reduced travel and demand for hotel rooms, which has had a material adverse impact on the hospitality industry and the Company both financially and operationally.

The development of effective vaccines and initial distribution efforts are significant and positive developments.

However, the extent to which the COVID-19 pandemic will continue to impact the hospitality industry and our operations remains uncertain and will depend largely on future developments, including the rate and pace of vaccination in the broader population, the severity and duration of resurgences or variants of the virus, and the effectiveness of actions by government authorities and the public to contain the pandemic.

The impacts of COVID-19 on the Company's business were first experienced toward the end of the first quarter of 2020, with domestic occupancy levels ranging between 25.5% and 32.5% in the last ten days of March resulting in significant decreases in revenue per available room ("RevPAR").

Lower occupancy and RevPAR trends continued into the second quarter of 2020, with

domestic RevPAR experiencing a decline of approximately 60.1% from the comparative prior year April.

These trends have steadily improved, albeit remained significantly impacted, in the third and fourth quarters, with domestic RevPAR experiencing a decline of approximately 28.8% over the comparative prior year third quarter and 25.1% over the comparative prior year fourth quarter.

For the reasons cited above, we expect significant impact on our results of operations to continue in 2021.

As of March 31, 2020, approximately 10% of the Company's domestic hotel system that had temporarily suspended operations due to governmental restriction or a franchisee’s election, compared to less than 1% as of both December 31, 2020, and January 31, 2021.

The COVID-19 pandemic continues to cause disruptions to the global economy and the hospitality industry, including in the United States, where more than 80% of our franchised hotels are located.

The COVID-19 pandemic and its consequences have reduced travel and demand for hotel rooms, which has adversely impacted, both financially and operationally and at varying degrees throughout the pandemic, the hospitality industry generally and the Company.

The development of effective vaccines, the on-going distribution of such vaccines and other containment efforts have been significant positive developments that we believe have contributed to improved operating metrics since the second quarter of 2021.

However, the extent to which the COVID-19 pandemic will impact the hospitality industry generally and our operations remains uncertain and will depend largely on future developments.

The impacts of COVID-19 on the Company's business were first experienced toward the end of the first quarter of 2020, resulting in significant decreases in revenue per available room ("RevPAR").

The Company continued to experience significant negative impacts through the first quarter of 2021, although an increase in leisure travel reservations was observed in March 2021 that steadily improved through the remainder of 2021.

The fourth quarter 2021 domestic RevPAR experienced an increase of approximately 52.2% and 13.9% relative to fourth quarter 2020 and fourth quarter 2019, respectively.

As of both December 31, 2021 and December 31, 2020, less than 1% of the Company's domestic hotel system had temporarily suspended operations due to governmental restrictions or a franchisee’s election.

While the ultimate impact and duration of COVID-19 is uncertain and will depend on future developments, which are difficult to predict, the Company believes that it will continue to benefit in the long-term from its primarily franchise-only business model, which has historically provided a relatively stable earnings stream and low capital expenditure requirements.

Further, as of December 31, 2020, the Company had approximately $834.8 million in cash and additional borrowing capacity through its senior unsecured revolving credit facility.

Based on our business model, the financial mitigation measures described below, and information known at this time, the Company believes that cash flows from operations and available financing capacity are adequate to meet the expected future operating, investing and financing needs of the business.

In response to the COVID-19 pandemic, we have implemented measures to focus on the safety of our customers, employees, franchisees and their staff, while at the same time seeking to mitigate the impact on franchisees' and our Company's financial position and operations.

The duration of these measures cannot be predicted at this time.

These measures include, but are not limited to, the following:

• Implemented fee-deferral programs for domestic and international franchisees.

• Reduced one-time reputation management fees and guest relations handling fees.

• Extended capital-intensive brand deadlines and created more flexible brand standard options to assist franchisees.

• Advocated to increase the benefits and eligibility requirements for government relief SBA programs and other CARES Act benefits to support franchisees in retaining employees and servicing debt.

• Established a proactive, ongoing multi-channel franchisee outreach and education program that is actively assisting our franchisees in accessing newly available capital.

• Revised the Company's guest cancellation policy to provide travelers greater flexibility during these challenging times.

• Implemented travel restrictions and work-from-home practices for the Company’s employees.

The Company made a priority of working closely with its franchisees to drive business to their hotels across a wide variety of industries and government and emergency-management agencies.

Many of the Company's franchisees committed their rooms inventory at discounted rates, or on a complimentary basis, to support their communities in dealing with the effects of the pandemic, opening their hotels for hospital overflows and providing temporary housing for first responders, the National Guard, healthcare workers, critical infrastructure workers and others in dire need.

In addition, the Company provided hotel room donations to Operation Homefront to help ill and injured service members that were displaced by the pandemic.

The Company also teamed up with Serta, Inc.

to contribute to its “Stay Home, Send Beds” initiative, which provided bed donations to help address nationwide shortages at hospitals and temporary medical facilities.

Since the onset of the pandemic, management and the Board of Directors have taken steps to adjust the Company’s cost structure and increase its financial flexibility, which include, but are not limited to, the following actions:

• Reduced the compensation of the Board of Directors, chief executive officer, and other executive officers.

• Reduced global workforce by approximately 18% since December 31, 2019 through a combination of layoffs and furloughs.

• Introduced a hiring freeze, except with respect to certain critical positions.

• Suspended associates’ 401(k) match through the end of 2020.

• Eliminated, reduced or deferred non-essential expenditures, discretionary capital expenditures and investments.

We are actively working with vendors to achieve relief on fees or timing of fee payment.

• Temporarily suspended activity under the Company’s share repurchase program.

• Determined to temporarily suspend future, undeclared dividends while the COVID-19 pandemic is significantly impacting travel.

• Entered into a $250 million unsecured term loan (the "Term Loan") on a precautionary basis, enhancing the Company’s financial flexibility by increasing its borrowing capacity.

• Offered $450 million of 3.70% senior unsecured notes due 2031 (the "2020 Senior Notes"), using net proceeds to repay the Term Loan in full and fund the $197.8 million purchase price of the cash tender offer (the "Tender Offer") for approximately $183.4 million aggregate principal amount of the Company's 5.75% senior unsecured notes due in 2022 (the "2012 Senior Notes").

As disclosed above, domestic occupancy of the Company's branded hotels has been severely impacted.

However, approximately 90% of the Company’s domestic hotels are in suburban, small town and interstate locations and have experienced less severe occupancy declines related to COVID-19 than hotels in urban centers or resorts.

Based on industry data, the Company's brands have been performing ahead of its upper-midscale, midscale and economy chain scale competitors, and the Company’s hotels have experienced relatively stronger same-store RevPAR share gains versus their local competition from mid-March through the end of 2020.

Given the uncertainty as to the potential duration of the crisis, including a potential resurgence of the virus, and its severity, the Company does not expect material improvement in the industry until there is a sense that the spread of the virus has been contained, shelter-in-place orders have been lifted, and economic forecasts begin to improve.

As the industry continues to recover, the Company believes it will continue to benefit from the expected faster rebound of leisure demand as a result of its higher share of leisure travel mix relative to competitors.

The Company's properties are also well distributed in drive-to markets, which the Company believes will lead in the demand recovery for the industry.

While the Company believes that the long-term fundamentals of the business remain strong, it will continue to adjust business contingency plans as the COVID-19 pandemic evolves.

For additional information, see Risk Factors in Part I, Item 1A of this Form 10-K.

We are primarily a hotel franchisor with franchise agreements and owned hotels representing 7,147 hotels open comprising 597,977 rooms and 1,022 hotels under construction, awaiting conversion or approved for development comprising 86,264 rooms as of December 31, 2020, located in 50 states, the District of Columbia and over 40 countries and territories outside the United States.

Further, as of December 31, 2021, the Company had approximately $1.1 billion in cash and additional borrowing capacity through its senior unsecured revolving credit facility.

Based on our business model and information known at this time, the Company believes that cash flows from operations and available financing capacity are adequate to meet the expected future operating, investing and financing needs of the business.

While a recovery in the hospitality industry has commenced, industry projections anticipate that recovery to 2019 operating performance will occur over multiple years.

As the industry recovery continues, the Company believes it will continue to benefit from the faster rebound of leisure demand as a result of its higher share of leisure travel mix relative to competitors.

The Company's properties are also well distributed in drive-to markets, which the Company believes will lead in the demand recovery and foreseeable future for the industry.

We believe these points are illustrated by the Company's RevPAR results for full year and fourth quarter 2021, which both reflect growth relative to the comparable 2019 periods.

The effects of the COVID-19 pandemic on our annual 2021 results and anticipated trends are discussed further in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K.

We are primarily a hotel franchisor with franchise agreements and owned hotels representing 7,030 hotels open comprising 579,746 rooms and 924 hotels under construction, awaiting conversion or approved for development comprising 79,915 rooms as of December 31, 2021, located in 50 states, the District of Columbia and nearly 40 countries and territories outside the United States.

Our brand names include Comfort Inn ® , Comfort Suites ® , Quality ® , Clarion ® , Clarion Pointe™, Ascend Hotel Collection ® , Sleep Inn ® , Econo Lodge ® , Rodeway Inn ® , MainStay Suites ® , Suburban Extended Stay Hotel ® , WoodSpring Suites ® , Everhome Suites ® , and Cambria ® Hotels (collectively, the "Choice brands").

On January 27, 2020, we announced the launch of Everhome Suites, a new-construction midscale extended-stay brand offering.

We expect to open the first Everhome Suites hotel in 2021.

The Company's primary segment is the hotel franchising business, which represents approximately 96% of the Company's total revenues.

The Company's domestic operations are conducted through direct franchising relationships and the ownership of five Cambria hotels, while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships.

The Company's domestic operations are conducted through direct franchising relationships and the ownership of six Cambria hotels, while its international franchise operations are conducted through a combination of direct franchising and master franchising or master development (collectively, "master franchising") relationships.

Master franchising relationships are governed by master franchising agreements which generally provide the master franchisee with the right to use our brands and sub-license the use of our brands in a specific geographic region, usually for a fee.

11 unchanged sentences

The number of rooms in our hotel system and the occupancy and room rates at those properties significantly affect the Company’s results because our fees are based upon room revenues or the number of rooms at owned and franchised hotels.

All of these factors have been and we expect will continue to be materially disrupted by the COVID-19 pandemic.

To varying degrees, all of these factors have been and may continue to be disrupted by the COVID-19 pandemic.

The key industry standard for measuring hotel-operating performance is RevPAR, which is calculated by multiplying the percentage of occupied rooms by the average daily room rate realized.

3 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

We are required by our franchise agreements to use the marketing and reservation system fees we collect for system-wide marketing and reservation activities.

These expenditures, which include advertising costs and costs to maintain our central

reservations and property management systems, enhance awareness and consumer preference for our brands and deliver guests to our franchisees.

Greater awareness and preference promotes long-term growth in business delivery to our franchisees and increases the desirability of our brands to hotel owners and developers, which ultimately increases franchise fees earned by the Company.

While we continue to actively manage and eliminate certain discretionary marketing and reservation system expenditures, as a result of lower occupancy and therefore, lower marketing and reservation system fees generated, we realized marketing and reservation expenditures in excess of fees in 2020.

As a result of the COVID-19 pandemic, we expect significant impact to our marketing and reservation fees generated to continue in 2021.

We are required by our franchise agreements to use the marketing and reservation system fees we collect for system-wide marketing and reservation system activities.

These expenditures, which include advertising costs and costs to maintain our central reservations and property management systems, enhance awareness and consumer preference for our brands and deliver guests to our franchisees.

Greater awareness and preference promotes long-term growth in business delivery to our franchisees

and increases the desirability of our brands to hotel owners and developers, which ultimately increases franchise fees earned by the Company.

Due to increased RevPAR growth during the second, third, and fourth quarters of 2021 and our disciplined management of discretionary marketing and reservation system expenditures, marketing and reservation revenues exceeded expenses for full year 2021.

Our Company articulates its mission as a commitment to our franchisees’ profitability by providing our franchisees with hotel franchises that strive to generate the highest return on investment of any hotel franchise.

We have developed an operating system dedicated to our franchisees’ success that focuses on delivering guests to hotels and reducing hotel operating costs.

The Company has taken numerous measures to combat the significant impact of the COVID-19 pandemic on our business.

These measures have been and remain an immediate priority in order to mitigate the financial impacts to our franchisees and the Company.

We believe these immediate measures support the Company's preparedness and complement the strategic priorities we execute against to create value for our shareholders over the long-term.

In addition to our hotel franchising business, we have also developed or purchased five Cambria hotels.

We intend to continue to strategically develop or purchase Cambria hotels to increase the presence of our Cambria Hotel brand in the United States, drive greater guest satisfaction and brand preference, and ultimately increase the number of franchise agreements awarded.

When developing or purchasing hotels, we seek key markets with strong growth potential that will improve the recognition of the Cambria Hotel brand.

We believe our owned Cambria hotels provide us the opportunity to support and accelerate growth of the brand.

We do not anticipate owning these hotels on a permanent basis and expect to target dispositions to a franchisee in the future.

As discussed above, the Company has taken and is continuing to take measures to combat the impact of the COVID-19 pandemic on our business.

We believe these measures support the Company's preparedness and complement the strategic priorities we execute against to create value for our shareholders over the long-term.

These key long-term goals are as follows:

Profitable Growth.

Our success is dependent on improving the performance of our hotels, increasing our system size by selling additional hotel franchises with a focus on revenue-intense chain scales and markets, improving our effective royalty rate, expanding our qualified vendor programs and travel-related partnerships and maintaining a disciplined cost structure.

As noted above, we have introduced several temporary measures designed to assist franchisees during the COVID-19 pandemic.

We attempt to improve our revenues and overall profitability by providing a variety of products and services designed to increase business delivery and/or reduce operating and development costs.

These products and services include national marketing campaigns, a guest loyalty program, a central reservation system, property and yield management programs and systems, revenue management services, quality assurance standards, qualified vendor relationships and partnerships with other travel-related companies that provide services to our franchisees and guests.

We believe that healthy brands, which deliver a compelling return on investment, will enable us to sell additional hotel franchises and raise royalty rates.

We have multiple brands that meet the needs of many types of guests, and can be developed at various price points and applied to both new and existing hotels.

This ensures that we have brands suitable for creating growth in a variety of market conditions.

Improving the performance of the hotels in our system, strategically growing the system through additional franchise sales, and improving franchise agreement pricing while maintaining a disciplined cost structure are the keys to profitable growth.

As disclosed above, prior to the second quarter of 2021, the Company's hotels experienced declines in occupancy and RevPAR resulting from the impacts of the COVID-19 pandemic.

The declines impacted the profitability of the Company and the negative impact to the Company could return if a resurgence of the COVID-19 pandemic significantly impacts travel.

Maximizing Financial Returns and Creating Value for Shareholders.

Our capital allocation decisions, including capital structure and uses of capital, are intended to maximize our return on invested capital and create value for our shareholders.

We believe our historically strong and predictable cash flows create a strong financial position that provides us a competitive advantage.

We maintain a capital structure intended to generate high financial returns and use our excess cash flow to provide returns to our shareholders primarily through share repurchases, dividends and investing in growth opportunities.

In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, we suspended future, undeclared dividends and activity under the Company's share repurchase program.

Given our strong liquidity and credit profile, the Company's board of directors declared on May 7, 2021, a quarterly cash dividend of $0.225 per share of common stock and approved resumption of the share repurchase program.

On September 9, 2021, the Company's board of directors declared a quarterly cash dividend of $0.225 per share of common stock.

Additionally, on December 6, 2021, the Company's board of directors approved a 6% increase in the quarterly cash dividend and declared a quarterly cash dividend of $0.2375 per share of common stock, which was paid in January 2022.

In addition to our hotel franchising business, we have also developed or acquired six Cambria hotels.

We intend to continue to strategically develop hotels to increase the presence of our brands in the United States, drive greater guest satisfaction and brand preference, and ultimately increase the number of franchise agreements awarded.

When developing hotels, we seek key markets with strong growth potential that will deliver strong operating performance and improve the recognition of our brands.

Our hotel development and ownership efforts currently focus on the Cambria Hotels and Everhome Suites brands.

We believe our owned hotels provide us the opportunity to support and accelerate growth of our brands.

We do not anticipate owning hotels on a permanent basis and expect to target dispositions to a franchisee in the future.

A key component of our strategy for owned hotels is to maximize revenues and manage costs.

We strive to optimize revenues by focusing on revenue management, increasing guest loyalty, expanding Cambria Hotels' brand awareness with targeted customer segments, and providing superior guest service.

We strive to optimize revenues by focusing on revenue management, increasing guest loyalty, expanding brand awareness with targeted customer segments, and providing superior guest service.

We currently do not manage our owned hotels but utilize the services of third-party management companies who provide their own employees.

We manage costs by setting performance goals for our hotel management companies and optimizing distribution channels.

As a result of the COVID-19 pandemic, the operations of our owned hotels was significantly impacted in 2020 and we expect such impacts to continue in 2021.

Our capital allocation decisions, including capital structure and uses of capital, are intended to maximize our return on invested capital and create value for our shareholders.

We believe our strong and predictable cash flows create a strong financial position.

We strive to maintain a capital structure that generates high financial returns and use our excess cash flow to return value to our shareholders primarily through share repurchases, dividends and investing in growth opportunities.

In light of uncertainty resulting from the COVID-19 pandemic, during the second quarter of 2020 we determined to suspend future, undeclared dividends and have temporarily suspended activity under the Company's share repurchase program.

Given our long-standing commitment to returning value to shareholders, we expect to consider resuming payment of a quarterly dividend and/or resuming activity under the share repurchase program at such time that conditions are appropriate.

We currently have no estimated time frame for when these may occur.

The Company also allocates capital to financing, investment and guaranty support to incent franchise development for certain brands in strategic markets;

hotel ownership;

and exploring growth opportunities in business areas that are adjacent or complementary to our core hotel franchising business, which leverage our core competencies and are additive to our franchising business model.

The Company also allocates capital to financing, investment and guaranty support to incentivize franchise development for certain brands in strategic markets and to explore growth opportunities in business areas that are adjacent or complementary to

our core hotel franchising business, which leverage our core competencies and are additive to our franchising business model.

The timing and amount of these investments are subject to market and other conditions.

In light of uncertainty resulting from the COVID-19 pandemic and to preserve liquidity, we have limited significant discretionary investments and intend to continue to do so until such time as we determine conditions are appropriate to resume any such activity.

Our direct real estate exposure is currently limited to activity in the United States, including our Cambria hotel assets open and under development and a commercial office building.

Our direct real estate exposure is currently limited to activity in the United States, including our owned hotel assets open and under development.

In addition, our development activities that involve financing, equity investments and guaranty support to hotel developers create limited additional exposure to the real estate markets.

22 unchanged sentences

Similar to other industries, lodging experiences both positive and negative operating cycles.

The COVID-19 pandemic and its consequences have dramatically reduced travel and demand for hotel rooms, which has had a material adverse impact on the hospitality industry and the Company both financially and operationally.

The duration of the negative operating cycle resulting from the pandemic remains unknown, however we anticipate negative impacts to persist in 2021.

Independent of the present operating cycle, there are general trajectories and characteristics of positive and negative cycles.

The COVID-19 pandemic and its consequences have reduced demand for hotel rooms, which has adversely impacted, both financially and operationally and at varying degrees throughout the pandemic, the hospitality industry generally and the Company.

The duration of impact from the pandemic remains unknown, however the Company anticipates some negative impacts to persist in 2022.

Independent of the present impacts from the COVID-19 pandemic, there are general trajectories and characteristics of positive and negative operating cycles.

Positive cycles are characterized as periods of sustained occupancy growth, increasing room rates and hotel development.

10 unchanged sentences

The increase in occupancy and room rates serves as a catalyst for increased hotel development.

As a franchisor with 7,147 opened hotels, including ownership of five hotels, we believe we are generally well positioned in any stage of the lodging cycle as our fee-for-service business model has historically delivered predictable, profitable, long-term growth in a variety of lodging and economic environments.

As a franchisor with 7,030 opened hotels, including ownership of 6 hotels, we believe we are generally well positioned in any stage of the lodging cycle as our fee-for-service business model has historically delivered predictable, profitable, long-term growth in a variety of lodging and economic environments.

We have historically benefited from both the RevPAR gains typically experienced in the early stages of recovery, as our revenues are based on our franchisees’ gross room revenues, and the supply growth normally occurring in the later stages as we increase our portfolio size.

The ultimate impact and duration of the present negative operating cycle resulting from the pandemic remains to be seen.

The ultimate impact and duration of the present dynamic operating cycle resulting from the pandemic remains to be seen.

The Company’s portfolio of brands offers both new construction and conversion opportunities.

3 unchanged sentences

The lodging industry can be divided into chain scale categories or groupings of generally competitive brands as follows:

Chain Scale Brand Examples Room Count % of Total Avg.

of Rooms Per Hotel

Chain Scale Brand Examples

Luxury Four Seasons, Ritz Carlton, W Hotel, JW Marriott

4 unchanged sentences

Economy Econo Lodge, Super 8, Days Inn, Motel 6

Sub-Total Brand Affiliated 3,830,299 72.5 % 109.4

Independents 1,455,526 27.5 % 65.9

Total All Hotels 5,285,825 100 % 92.6

According to STR, the lodging industry consisted of over 57,000 hotels representing approximately 5.3 million rooms open in the United States at December 31, 2020.

Approximately 78% of the new rooms opened during the year ended December 31, 2020 were positioned in the Upscale, Upper Midscale, Midscale and Economy chain scale categories in which we primarily operate.

The lodging industry consists of independent operators of hotels and those that have joined national hotel franchise chains.

Independent operators of hotels not owned or managed by major lodging companies have increasingly joined national hotel franchise chains as a means of remaining competitive with hotels owned by or affiliated with national lodging companies.

Over the years, the industry has seen a significant movement of hotels from independent to chain affiliation, with affiliated hotels increasing from 46% of the rooms in the market in 1990 to 72.5% of the market in 2020.

However, the pace of this increase has moderated over the last several years and in 2020 the percentage of rooms in the market affiliated with a chain increased by approximately 70 basis points from 71.8% in 2019.

Due to the fact that a significant portion of the costs of owning and operating a hotel are generally fixed, increases in revenues generated by affiliation with a franchise lodging chain can improve a hotel’s financial performance.

4 unchanged sentences

Choice’s Franchising Business

As discussed above, the Company has taken numerous measures to combat the significant impact of the COVID-19 pandemic on our business.

As discussed herein, the Company has taken numerous measures to combat the significant impact of the COVID-19 pandemic on our business.

These measures have been and remain an immediate priority in order to mitigate the financial impacts to our franchisees and the Company.

6 unchanged sentences

The initial fee and ongoing royalty portion of the franchise fees are intended to cover our operating expenses, such as expenses incurred in business development, quality assurance, administrative support, certain franchise services and to provide us with operating profits.

The marketing and

reservation system fees are used for the expenses associated with marketing, media, advertising, providing a central reservation system, property management systems, e-commerce initiatives and certain franchise services.

The marketing and reservation system fees are used for the expenses associated with marketing, media, advertising, providing a central reservation system, property management systems, e-commerce initiatives and certain franchise services.

Our fees depend on the number of rooms in our system, the gross room revenues generated by our franchisees and effective royalty rates under our franchise contracts.

3 unchanged sentences

Our family of well-known and diversified brand offerings positions us well within the lodging industry.

Our new build brands such as Cambria Hotels, Comfort, Sleep Inn, WoodSpring, and our newly launched Everhome Suites brand offer hotel developers an array of choices at various price points for transient and extended stay business during periods of supply growth in the various hotel chain scale categories.

Our new build brands such as Cambria Hotels, Comfort, Sleep Inn, WoodSpring, and Everhome Suites offer hotel developers an array of choices at various price points for transient and extended stay business during periods of supply growth in the various hotel chain scale categories.

Our brands such as Quality, Clarion Pointe, Ascend Hotel Collection and Econo Lodge offer conversion opportunities during both industry contraction and growth cycles to independent operators and non-Choice affiliated hotels who desire to affiliate with our brands and take advantage of the services we have to offer.

25 unchanged sentences

In addition, we provide our franchisees with education and training programs as well as revenue management technology and services designed to improve property-level performance.

These services and products promote revenue gains for franchisees and improve guest satisfaction which translate into both higher royalties for the Company and improved returns for owners, leading to further room growth by making our

brands even more attractive to prospective franchisees.

We develop our services based on customer needs and focus on activities that generate high return on investment for our franchisees.

48 unchanged sentences

(2) The periods prior to 2018 exclude operating statistics from WoodSpring Suites properties, while 2018 includes full year operating statistics.

(3) 2020 and 2019 amounts include operating statistics of the Company's owned hotels, including intersegment royalties of $0.8 million and $0.9 million, respectively.

(3) The 2021, 2020 and 2019 periods include operating statistics of the Company's owned hotels, including intersegment royalties of $1.6 million, $0.8 million and $0.9 million, respectively.

Currently, no individual franchisee accounts for more than 3% of the Company's total domestic royalty fees.

3 unchanged sentences

Cambria Hotels:

Cambria Hotels is a select service hotel brand that operates in the upscale lodging category, targeting top primary market locations and mid-market locations with a mix of business and leisure demand.

Designed for the modern traveler, Cambria offers guests a distinct experience with simple, guilt-free indulgences and little luxuries allowing them to stay at their best while on the road.

The environment matches guests' casual lifestyles but tailored to their business travel needs.

Properties feature compelling design inspired by the location, spacious and comfortable rooms, spa inspired bathrooms, flexible meeting space, and a locally sourced menu and craft beer.

Cambria Hotels is a select service hotel brand that operates in the upscale lodging category, targeting top primary market locations and secondary markets with a mix of business and leisure demand.

Cambria offers guests a distinct experience with simple, guilt-free indulgences and little luxuries allowing them to stay at their best while on the road.

The environment matches guests' casual lifestyles but tailored to the needs of the modern traveler.

Properties feature compelling design inspired by the location, spacious and comfortable rooms, spa inspired bathrooms, outdoor spaces featuring pools and rooftop bars, flexible meeting space, and a locally sourced menu and craft beer.

Principal competitor brands include:

1 unchanged sentence

Ascend Hotel Collection:

Ascend Hotel Collection is an innovative member program that enables upscale hotels (resort, boutique and historic) to retain their individual brand equity and identity, and yet have access to Choice Hotels' global distribution, technology, performance support services, training and loyalty benefits.

Ascend Hotel Collection is an innovative global soft brand collection offering resort, boutique and historic properties that reflect and are woven into the fabric of their destination.

Ascend enables upscale hotels to retain their individual brand equity and identity, and yet have access to Choice Hotels' global distribution, technology, performance support services, training and loyalty benefits..

Ascend Hotel Collection offers the best of both worlds:

2 unchanged sentences

Tapestry, BW Premier Collection, Tribute, TRYP and Autograph Collection.

Comfort Inn & Comfort Suites:

The Comfort brands are primarily upper midscale limited service hotels that offer a warm and welcoming guest experience designed to help travelers feel refreshed and ready to take on the day.

The brand family includes Comfort Inn, Comfort Inn & Suites, and Comfort Suites.

One of the original brands in the limited service category, Comfort has built a reputation for consistent high-value accommodations that appeal to both business and leisure travelers.

Comfort hotels offer complimentary hot breakfast, a swimming pool and/or fitness center, free high-speed internet access and a 100% smoke-free environment.

Comfort Suites properties are tailored to meet the demands of today's business traveler, with each oversized suite featuring separate areas for working and relaxing, along with a sleeper sofa, refrigerator and microwave.

Comfort Suites hotels also offer a business center and marketplace.

The Comfort family, consisting of three extensions - Comfort Inn, Comfort Inn & Suites, Comfort Suites - is an upper midscale brand that offers guests a warm and welcoming experience that is designed to help travelers feel refreshed and ready to take on the day.

Comfort hotels are ready to welcome business and leisure travelers everywhere they need to be.

The Comfort brand family recently completed a multiyear transformation initiative that resulted in updated guest rooms, refreshed public spaces, and a new, modern logo—signaling to guests on the outside of the hotel that something's new on the inside.

As the largest 100% smoke-free hotel brand in North America, Comfort hotels offer complimentary amenities that include a hot breakfast, free Wi-Fi, business center, and fitness center or swimming pool at most locations.

Each spacious guest room offers premium bedding and bath amenities along with a refrigerator and microwave.

Comfort Suites properties are tailored to meet the demands of today's business traveler, with each oversized suite featuring separate areas for working and relaxing, along with a sleeper sofa.

Principal competitor brands include Hampton, Holiday Inn Express and Fairfield Inn & Suites.

Sleep Inn is a midscale new construction brand offering developers a lower cost to build with competitive midscale average daily rates.

Sleep Inn delivers a reliable, simply stylish guest experience, providing both business and leisure travelers

with free high-speed internet access, a complimentary Morning Medley hot breakfast, and an exercise room and/or pool.

Sleep Inn delivers a reliable, simply stylish guest experience, providing both business and leisure travelers with modern nature-inspired designs, free high-speed internet access, free hot breakfast, amenities to support a better night’s rest, and an exercise room and/or pool.

Sleep Inn’s competitors include AmericInn, Baymont and Country Inn & Suites

Clarion helps owners of existing midscale assets with food and beverage capabilities achieve strong returns with reasonable investment.

Clarion helps owners of existing assets with food and beverage capabilities achieve strong returns with reasonable investment.

Clarion allows a more focused and efficient food and beverage operational model that works well with a variety of conversion property configurations.

13 unchanged sentences

All guest rooms feature fully equipped kitchens as well as separate lounge and work areas.

MainStay Suites offer free high-speed internet, an exercise room and a business center, 24/7 laundry facilities, weekly housekeeping, as well as breakfast options for guests.

MainStay Suites offer free high-speed internet, an exercise room, 24/7 laundry facilities, weekly housekeeping, as well as breakfast options for guests.

Each hotel also has a "MainStay Marketplace" where guests may purchase a variety of food and sundry items.

6 unchanged sentences

Larger one-bedroom signature suites come equipped with in-unit washers and dryers.

Guests have access to free high-speed internet, a modern fitness room and pool, business center, 24/7 laundry facilities and weekly housekeeping service.

Guests have access to free high-speed internet, a modern fitness room and outdoor amenity, business center, 24/7 laundry facilities and weekly housekeeping service.

Each hotel also has a “Homebase Market” with food, drink and personal items available for purchase.

1 unchanged sentence

Principal competitors include Candlewood Suites, Home2 Suites and TownePlace Suites.

The Everhome Suites brand was launched in January 2020 and the first hotel will open in 2021.

The Everhome Suites brand was launched in January 2020 and the first hotel opening is projected in 2022.

Suburban Extended Stay Hotel:

17 unchanged sentences

The following table presents key statistics related to the domestic system for the Choice brands over the five years ended December 31, 2021.

During the first quarter of 2020, the Company revised its calculation of Occupancy.

Historically, Occupancy has excluded rooms unavailable to our guests for operational reasons, as reported by our franchisees.

With the onset of the COVID-19 pandemic resulting in reduced travel and lesser demand, our franchisees began closing greater portions of inventory as compared to previous periods.

To provide a more representative depiction of system occupancy and with reference to industry standards for RevPAR reporting for partially closed hotels during the COVID-19 pandemic, we have revised our Occupancy calculation to be reflective of full room availability for open hotels.

Additionally, the Company made minor revisions to the calculation of ADR with respect to complimentary rooms.

As of and For the Year Ended December 31,

70 unchanged sentences

Average occupancy percentage 69.2 % 67.6 % 67.5 % 38.2 % 56.2 %

73.7 % 69.2 % 67.6 % 67.5 % 38.2 %

$ 132.70 $ 138.86 $ 148.10 $ 145.45 $ 112.30

$ 97.76 $ 96.08 $ 100.12 $ 98.12 $ 42.87

ADR $ 138.86 $ 148.10 $ 145.45 $ 112.30 $ 132.48

RevPAR $ 96.08 $ 100.12 $ 98.12 $ 42.87 $ 74.47

ASCEND HOTEL COLLECTION DOMESTIC SYSTEM

7 unchanged sentences

WOODSPRING SUITES DOMESTIC SYSTEM (4)

Number of properties, end of period N/A N/A 249 270 291

Number of rooms, end of period N/A N/A 29,911 32,479 35,020

Number of properties, end of period N/A 249 270 291 302

Number of rooms, end of period N/A 29,911 32,479 35,020 36,374

Royalty fees (in thousands) (1)

N/A N/A $ 18,982 $ 21,901 $ 22,091

N/A $ 18,982 $ 21,901 $ 22,091 $ 29,577

Average occupancy percentage (4)

N/A N/A 77.1 % 75.3 % 71.5 %

N/A N/A $ 45.89 $ 47.10 $ 46.16

N/A N/A $ 35.37 $ 35.46 $ 33.02

N/A 77.1 % 75.3 % 71.5 % 81.1 %

N/A $ 45.89 $ 47.10 $ 46.16 $ 51.61

N/A $ 35.37 $ 35.46 $ 33.01 $ 41.85

(1) Royalty fees exclude the impact of franchise agreement acquisition cost amortization.

(2) Statistics for average occupancy percentage, ADR and RevPAR exclude years in which the Cambria Hotel brand did not have 25 units open and operating for a twelve month period.

(3) Statistics prior to 2018 exclude WoodSpring Suites properties.

Statistics for 2018 include royalties after acquisition on February 1.

2018 and full year statistics for average occupancy percentage, ADR and RevPAR.

(2) Includes Comfort family of brand extensions including Comfort Inn and Comfort Suites.

(3) Includes Clarion family of brand extensions including Clarion and Clarion Pointe.

(4) Statistics for 2017 exclude WoodSpring Suites properties.

Statistics for 2018 include royalties after acquisition on February 1, 2018 and full year statistics for average occupancy percentage, ADR and RevPAR.

International Franchise Operations

5 unchanged sentences

Master franchising relationships typically provide lower revenues to the Company as the master franchisees are responsible for managing certain necessary services (such as training, quality assurance, reservations and marketing) to support the franchised hotels in the assigned development territory and, therefore, retain a larger percentage of the hotel franchise fees to cover their expenses.

Our master franchise and similar multi-unit licensing agreements have expiration dates, which we actively manage and potentially renew as we deem beneficial.

Certain of these agreements have expiration dates in 2023.

In certain circumstances, the Company has and may continue to make equity investments in our master franchisees.

2 unchanged sentences

We believe that international franchise operations will provide a long-term growth opportunity for the Company and as a result we continue to make investments which are expected to enhance the value proposition for prospective international franchisees.

As of December 31, 2021 and December 31, 2020, approximately 2% and 5%, respectively, of the Company's international branded hotels temporarily suspended operations due to governmental restriction or a franchisee’s election.

The hotels and room online figures below include those with temporarily suspended operations.

The 2020 and 2021 operating results were significantly impacted by the COVID-19 pandemic, and we anticipate impacts of the pandemic on international operating results to persist in 2022.

The following chart summarizes our franchise system and operating results outside of the United States (1) :

The 2020 operating results were significantly impacted by the COVID-19 pandemic, and we anticipate impacts of the pandemic on international operating results to persist in 2021.

As of and For the Year Ended December 31,

4 unchanged sentences

$ 21,396 $ 22,005 $ 21,680 $ 12,158 $ 14,829

(1) Reporting of operating statistics (i.e., average occupancy percentage, average daily room rate) of international franchisees is not required by all master franchise contracts, thus these RevPAR metrics are not presented for our international franchisees.

(2) Royalty fees exclude the impact of franchise agreement acquisition cost amortization.

The Company's direct franchising operations are primarily conducted in the following countries and territories.

Note, as of both December 31, 2020 and January 31, 2021, approximately 5% of the Company's international branded hotels temporarily suspended operations due to governmental restriction or a franchisee’s election.

The hotels online figures below include those with temporarily suspended operations.

Continental Europe.

The Company conducts direct franchising operations in Germany, Italy, Czech Republic, Austria and Hungary through Choice Hotels Licensing B.V.

("Choice BV"), a wholly-owned subsidiary, and in France, Portugal and Belgium through a wholly-owned subsidiary of Choice BV, Choice Hotels France SAS.

The Company also has an affiliation with properties in Spain through a strategic alliance with Sercotel Hotels.

At December 31, 2020, the Company had 176 franchised properties online in the Choice system in continental Europe.

United Kingdom .

The Company conducts direct franchising operations in the United Kingdom through Choice BV.

At December 31, 2020, the Company had 29 franchised properties online in the United Kingdom.

The Company conducts direct franchising operations in India through wholly-owned subsidiaries for the Comfort, Quality and Clarion brands.

As of December 31, 2020, the Company had 35 franchised properties online in India.

The Company conducts direct franchising operations in Australia, New Zealand, and Singapore through a wholly-owned subsidiary, Choice Hotels Asia-Pac Pty.

As of December 31, 2020, CHAP had 164 franchised properties online in Australasia.

The Company’s wholly-owned subsidiary Choice Hotels Mexico S.

("CHM") conducts direct franchising operations in Mexico on behalf of Choice BV, which acts as the franchisor in Mexico.

At December 31, 2020, the Company had 40 franchised properties online in Mexico.

The Company conducts direct franchising operations in Canada through its wholly-owned subsidiary, Choice Hotels International Licensing ULC, and had 2 properties online at December 31, 2020.

Other International Relationships .

The Company, through Choice BV, has direct franchise relationships with properties in Colombia, and Turkey.

At December 31, 2020, 4 properties were online in Colombia and 4 properties were online in Turkey.

The Company also has an affiliation with properties in Mexico and Central America through a strategic alliance with AMResorts.

At December 31, 2020, 35 international properties are online in the Choice system through the strategic alliance.

The Company utilizes master franchising relationships primarily in the following countries and territories:

We conduct our operations in Scandinavia through a master franchise relationship with Nordic Choice Commercial Services A/S ("NCH"), formerly known as Choice Hotels Scandinavia.

As of December 31, 2020, NCH had 206 properties online in its development territory, which includes Denmark, Norway and Sweden on an exclusive basis and Lithuania and Finland on a non-exclusive basis.

The Company’s master franchise agreement with NCH grants rights to the Comfort, Quality, Sleep and Clarion brand and expires in 2023.

Through a separate agreement

signed in 2010, NCH also possesses the right to franchise Ascend Hotel Collection hotels in its territory.

This agreement also expires in 2023.

The Company conducts its operations in Japan through a master franchise relationship with Choice Hotels Japan Co.

CHJ possesses exclusive rights to develop the Comfort brands and non-exclusive rights to the Sleep and Clarion brands.

The Company’s master franchise agreement with CHJ expires in December 2033.

As of December 31, 2020, CHJ had 64 properties online.

We conduct our operations in Canada for the majority of our brands through Choice Hotels Canada Inc.

("CHC"), a joint venture owned 50% by us and 50% by InnVest Management Holdings Ltd.

CHC is one of the largest lodging organizations in Canada with 330 of our franchised properties online as of December 31, 2020.

The Company is a party to a master franchising agreement with Luckwell Limited for the exclusive right to develop our Clarion, Quality and Comfort brands in Ireland and a non-exclusive right in Northern Ireland.

The agreement also provides Luckwell Limited with limited rights to franchise Ascend Hotel Collection hotels in the territory.

The master franchise agreement with Luckwell Limited expires in 2027.

As of December 31, 2020, Luckwell Limited had 3 properties online in Ireland and Northern Ireland.

South America.

We conduct our operations in Brazil and certain other South American territories through a master franchise relationship with Atlantica Holdings International, Ltd.

("Atlantica").

As of December 31, 2020, Atlantica had 66 properties online, all in Brazil.

The Company’s master franchise agreement with Atlantica grants rights to the Comfort, Quality, Sleep and Clarion brands, which rights are exclusive in Brazil and non-exclusive in Atlantica's remaining territory.

The agreement expires in December 2024.

Central America.

We conduct our operations in certain Central American territories through a master franchise relationship with Real Hotels and Resorts, Inc.

As of December 31, 2020, Real had 14 properties online in its development territory which consists of Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, and Panama.

The Company’s master franchise agreement with Real grants rights to the Comfort, Quality, Sleep and Clarion brands.

The agreement was executed in 1994 and is currently scheduled to expire in May of 2034, with certain rights by both parties to terminate the contract early.

Through a separate agreement signed in 2011, we have also granted Real limited non-exclusive rights to franchise Ascend Hotel Collection hotels in Colombia, Costa Rica, Ecuador, Honduras and Panama.

Master Development Agreement and Other International Relationships .

We also have non-exclusive master development and area representative arrangements in place with local hotel management and franchising companies doing business in China and Southeast Asia, and an exclusive master development agreement in the Kingdom of Saudi Arabia.

At December 31, 2020, 8 properties were online in China.

The following table presents key worldwide system size statistics as of and for the year ended December 31, 2020:

Open and Operational Approved

for Development

(1) Reporting of operating statistics (i.e., average occupancy percentage, average daily room rate) of international franchisees is not required by all master franchise contracts, thus RevPAR metrics are not presented for our international franchisees.

(2) Royalty fees exclude the impact of franchise agreement acquisition cost amortization and impairment.

The Company's international operations are primarily conducted in the following countries and territories, as organized by region:

Asia-Pacific.

Australia, China, India, Japan, New Zealand

Europe & Middle East.

Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Kingdom of Saudi Arabia, Lithuania, Norway, Portugal, Spain, Sweden, Turkey, United Kingdom

Latin America & Canada.

Brazil, Canada, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico

The open hotels and rooms by region and franchising relationship as of December 31, 2021 are presented below:

Direct Franchising Master Franchising Total

Hotels Rooms Hotels Rooms Hotels Rooms

Asia-Pacific 199 9,289 80 12,895 279 22,184

Europe & Middle East 112 10,067 258 44,291 370 54,358

Latin America & Canada 48 5,893 413 38,129 461 44,022

International Total 359 25,249 751 95,315 1,110 120,564

The worldwide open and pipeline hotels and rooms for the year ended December 31, 2021 are presented below:

Open Pipeline

Hotels Rooms Hotels Rooms

14 unchanged sentences

Brand growth is important to our business model.

The number of franchise agreements awarded in 2020 was significantly impacted by the COVID-19 pandemic, and we anticipate negative impacts to franchise sales activity to persist during the duration of the pandemic.

The number of franchise agreements awarded in 2021 were impacted by the COVID-19 pandemic, and we anticipate negative impacts to franchise sales activity to persist during the duration of the pandemic.

We have identified key market areas for hotel development based on supply/demand relationships and our strategic objectives.

17 unchanged sentences

Investment, Financing and Guaranty Franchisee Support

Our board of directors authorized a program which permits us to offer financing, investment, and guaranty support to qualified franchisees as well as allows us to acquire and resell real estate to incent franchise development of the Cambria Hotels brand in strategic markets.

We deploy capital pursuant to this program opportunistically to promote growth of the brand.

Our board of directors authorized a program which permits us to offer financing, investment, and guaranty support to qualified franchisees, and allows us to acquire or develop and resell hotels to incentivize franchise development of our brands in strategic markets.

We deploy capital pursuant to this program opportunistically to promote growth of our brands.

The amount and timing of the investment in this program will be dependent on market and other conditions and we generally expect to recycle these investments within a five year period.

For additional information, see the "Investing Activities" caption under the "Liquidity and Capital Resources" section in Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Franchise Agreements

Our standard domestic franchise agreements grant franchisees the non-exclusive right to use certain trademarks we own and receive other benefits of our franchise system to facilitate the operation of their franchised hotel at a specified location.

Our standard domestic franchise agreements generally have terms ranging between 10 and 30 years.

Our standard domestic franchise agreements generally have a term of 20 to 30 years.

Generally, either party to our standard domestic franchise agreement can terminate the agreement prior to the conclusion of the agreement’s term under certain circumstances, such as upon designated anniversaries of the agreement, subject to applicable law.

6 unchanged sentences

The upfront fees received on signing of the MDA are non-refundable and are allocable to the affiliation fees due upon the execution of each franchise agreement between the parties in the regions covered by the MDA.

The MDA specifies development schedules the developer must maintain;

The MDA specifies development schedules the developer

must maintain;

if not met, the Company can terminate the geographic exclusivity, however the upfront fees remain allocable to future franchise agreement affiliation fees as long as the MDA remains in effect.

26 unchanged sentences

$225/$30,000 $475/$30,000 6.00 % 2.50 %

WoodSpring Suites N/A/$50,000 N/A/$50,000 6.00 % 2.50 %

WoodSpring Suites (3)

N/A/$50,000 N/A/$50,000 6.00 % 2.50 %

Everhome Suites (4)

$300/$50,000 $550/$50,000 6.00 % 2.50 %

N/A/$50,000 $550/$50,000 6.00 % 2.50 %

(1) Fees are based on a percentage of gross room revenue.

(2) For dual brand hotels that combine either the Mainstay Suites or Suburban Extended Stay Hotel brand with another Choice brand, we may increase the Royalty Fee and/or System Fee up to the standard amount for such other Choice brand.

(3) The initial or transfer fee is $50,000 for properties with 122 rooms or less.

Each additional room is $300/per room for initial fees.

(4) The initial fee is $50,000 for properties with 113 rooms or less.

13 unchanged sentences

Our marketing and advertising programs are designed to heighten consumer awareness and preference for our brands as offering the greatest value and convenience in the lodging categories in which we compete.

Marketing and advertising efforts include national television, social media and digital advertising, online radio advertising, print advertising in trade media, and

promotional events which include joint marketing promotions with qualified vendors and corporate partners.

Marketing and advertising efforts include national television, social media and digital advertising, online radio advertising, print advertising in trade media, and promotional events which include joint marketing promotions with qualified vendors and corporate partners.

We also actively seek to reach travelers who are shopping for travel online by purchasing key search related terms and meta search ads from the various search engine providers to help ensure that our franchisees' hotels are prominently displayed to potential guests.

We conduct numerous marketing and sales programs and deploy field-based sales agents which target corporate, travel agency and group sales including business travelers, senior citizens, automobile club members, government and military employees, educational organizations, and meeting planners.

We conduct numerous marketing and sales programs and deploy field-based sales agents which target corporate, travel agency, group and small and medium size enterprises including business travelers, senior citizens, automobile club members, government and military employees, educational organizations, and meeting planners.

Other marketing efforts include domestic and international trade show programs, targeted marketing campaigns (including print, digital, and social media), direct-mail programs, marketing e-mail programs, and centralized commissions for travel agents.

25 unchanged sentences

In addition, we have introduced programs such as our Lowest Price Guarantee program which has greatly reduced the ability of the travel intermediaries to undercut the published rates at our franchisees' hotels.

Further, we selectively distribute our franchisees' inventory to key third-party travel intermediaries that we have established agreements with to help drive additional business to our franchisees' hotels.

Further, we selectively distribute our franchisees' inventory to key third-party travel

intermediaries that we have established agreements with to help drive additional business to our franchisees' hotels.

These agreements typically offer our brands preferred placement on these third-party sites at reduced transaction fees.

We continue to educate our individual franchisees about the risk of an unfavorable impact to their business from contracting with sites with

which we do not have preferred agreements.

We continue to educate our individual franchisees about the risk of an unfavorable impact to their business from contracting with sites with which we do not have preferred agreements.

We currently have agreements with many, but not all, major online third-party booking sites.

31 unchanged sentences

The ability of a hotel to compete may be affected by a number of factors, including the location and quality of the property, the abilities of the franchisee, the number and quality of competing lodging facilities nearby, its affiliation with a recognized name brand and general regional and local economic conditions.

While the COVID-19 pandemic has significantly impacted the operating results of the Company in 2020, we generally believe the effect of local economic conditions on our results is substantially reduced by our range of products and room rates and the geographic diversity of our franchised properties, which are open and operating in 50 states, the District of Columbia and over 40 countries and territories outside the United States.

While the COVID-19 pandemic has impacted the operating results of the Company, we generally believe the effect of local economic conditions on our results is substantially reduced by our range of products and room rates and the geographic diversity of our franchised properties, which are open and operating in 50 states, the District of Columbia and nearly 40 countries and territories outside the United States.

We believe that our focus on core business strategies, combined with our financial strength and size, geographic diversity, scale and distribution will enable us to remain competitive.

30 unchanged sentences

We seek to attract and retain the best talent in the hospitality, franchising, and technology industries and provide an open and inclusive environment.

We believe these objectives will yield a high performing organization that drives positive business outcomes for the Company, our shareholders, and our franchisees.

Our board of directors provides oversight on certain human capital matters, including through its Diversity Committee that seeks to assist and advise management and the board of directors in developing a workplace culture that values working with diverse groups of people, offering diversity of thought and perspective.

This delivers a high performing organization that drives positive business outcomes for the Company, our shareholders, and our franchisees.

Our board of directors provides oversight on certain human capital matters, including through the Diversity Committee, which provides guidance to management and the board of directors in developing a workplace culture that values working with diverse groups of people, offering diversity of thought and perspective, and through the Compensation and Management Development Committee, which engages with management on pay for performance alignment, as well as talent review and development.

Career Development

We empower our 1,498 associates across the globe to advance their careers by providing a career framework that allows them to understand and proactively manage their career path potential.

We empower our nearly 1,500 associates across the globe to advance their careers by providing a career framework that allows them to understand and proactively manage their career path potential.

Guided by a personalized development plan, each associate is empowered to identify and develop the skills and competencies necessary to prepare for their next, and future, desired roles.

As of December 31, 2020, the Company has 1,353 domestic and 145 international employees.

As of December 31, 2021, the Company has 1,323 domestic and 137 international associates.

Leadership development programs offer level specific career-building experiences, increasing the potential for broader levels of responsibility and leadership.

1 unchanged sentence

The Company conducts talent review and succession planning discussions across all leadership levels.

These are conducted with the board of directors semi-annually, focusing primarily on senior leadership levels.

Further, eleven Corporate Resource Groups (“CRGs”) allow groups of associates to join together based on shared characteristics, life experiences or interests.

The talent landscape is reviewed with the board of directors semi-annually, focusing primarily on senior leadership levels.

Further, eleven Corporate Resource Groups (“CRGs”) allow groups of associates to come together based on shared characteristics, life experiences and/or interests.

The CRGs are open to all associates to join.

1 unchanged sentence

Choice Culture and Diversity

At Choice, we are committed to nurturing an environment where every associate feels welcome, wanted, and respected – that’s our brand promise.

At Choice, we are committed to nurturing an environment where every associate feels welcome, wanted, and respected.

Part of how we deliver on this promise is by weaving deliberate diversity initiatives throughout all levels of the enterprise, focusing on three core commitments:

• Diversity – Ensuring that the Choice workforce is an authentic representation of the world we live in where associates from different backgrounds may thrive.

• Diversity – Striving to build a workforce that is an authentic representation of the world we live in where associates from different backgrounds may thrive.

• Equity – Providing fair and competitive pay regardless of gender, race, or other demographics.

10 unchanged sentences

Our Diversity Framework that supports all our efforts is shown below.

The Company is proud to have been named as one of the Best Employers for Diversity, as well as one of the Best Employers for Veterans in 2020 by Forbes magazine.

The Company has also been named one of the "Best Places to Work for People with Disabilities” with a top score in the 2020 Disability Equality Index and “Best Places to Work for LGBTQ Equality” with a 100% Corporate Equality Index designation from the Human Rights Campaign in 2020.

The Company offers a generous benefits package including a 401(k) matching program, paid family leave, paid caregiver leave, a monthly fitness subsidy, commuter benefits, a legal services plan, charitable gift matching, a LEED certified workspace, and paid volunteer leave.

COVID-19 Related Human Resource Matters

2020 was obviously an unusual year.

The COVID-19 pandemic had a significant impact on our 2020 human capital management.

As of December 31, 2019, the Company employed 1,833 associates;

on December 31, 2020, the Company employed 1,498 associates, resulting in a year-over-year reduction of 18% of its workforce.

Given the cost management required to effectively respond to the pandemic and the accompanying economic slowdown, Choice rightsized its workforce, evaluating key positions and re-prioritizing associate focus on matters that most effectively supported franchisees and drove targeted business outcomes.

One of our highest priorities has been to safeguard the physical health and emotional well-being of our associates, all of whom showed incredible dedication to the needs of our franchisees, guests, and each other amid rapidly evolving circumstances all while caring for their own families.

The Company is proud to have been named by Forbes magazine in 2021 as one of the “Best Employers for Diversity,” one of the “Best Midsize Employers,” as well as one of the “Best Employers for Veterans.” The Company has also been named one of the "Best Places to Work for People with Disabilities” with a top score in the 2021 Disability Equality Index and one of the “Best Places to Work for LGBTQ Equality” with a 100% Corporate Equality Index designation from the Human Rights Campaign in 2021.

The company was also recognized as one of the “70 Innovative Companies That Are Leading on Leave in 2021” by the National Partnership for Women and Families.

One of our highest priorities has been to safeguard the physical health and emotional well-being of our associates, all of whom show incredible dedication to the needs of our franchisees, guests, and each other amid rapidly evolving circumstances all while caring for their own families.

Key features include mental health support, including employee assistance and financial wellness programs, as well as creating opportunities for belonging and connections within the organization.

In addition, the Company offers a generous benefits package including a 401(k) matching program, paid family leave, paid caregiver leave, wellbeing days, commuter benefits, a legal services plan, charitable gift matching, a LEED certified workspace, and paid volunteer leave.

Information about our Executive Officers

11 unchanged sentences

Oaksmith 50 Senior Vice President, Real Estate and Finance

Raul Ramirez Sanchez 38 Chief Strategy and International Operations Officer

Director from 1977 to 1996 and since 1997, serving as Chairman of the Board from March 1987 to November 1996 and since October 1997;

32 unchanged sentences

She was Senior Vice President, General Counsel, Corporate Secretary & Chief Compliance Officer from 2012 to 2015.

Prior to joining the Company in 2012, she was employed by XO Communications and its affiliates as Executive Vice President, General Counsel and Secretary from 2011 until 2012, Senior Vice President, General Counsel and Secretary from 2006 to 2011, Vice President, the

acting General Counsel and Secretary from 2005 to 2006, Vice President and Assistant General Counsel from 2004 until 2005, and Senior Corporate Counsel from 2001 until 2004.

Prior to joining the Company in 2012, she was employed by XO Communications and its affiliates as Executive Vice President, General Counsel and

Secretary from 2011 until 2012, Senior Vice President, General Counsel and Secretary from 2006 to 2011, Vice President, the acting General Counsel and Secretary from 2005 to 2006, Vice President and Assistant General Counsel from 2004 until 2005, and Senior Corporate Counsel from 2001 until 2004.

Before that she was Vice President of Legal and Business Affairs at LightSource Telecom, held legal and business positions at MCI and AOL, and began her legal career in 1989 at Skadden, Arps, Slate, Meagher & Flom.

20 unchanged sentences

from January 1994 to October 2002, last serving as Senior Manager from October 2000 to October 2002.

Raul Ramirez Sanchez .

Chief Strategy and International Operations Officer since October 2021.

He was Senior Vice President, Head of International and Strategic & Financial Planning from June 2020 until October 2021.

He was Senior Vice President, International Strategic Planning and Global Head of Financial Planning and Analysis from August 2019 until June 2020 and was Vice President, Strategic Finance and Financial Planning and Analysis from August 2017 until August 2019.

Prior to joining the Company, he was Head of Finance, XO Business Unit for Verizon Communications from February 2019 until August 2019 and was employed at XO Communications as Vice President, Financial Planning and Analysis and Corporate Development from September 2015 until January 2019.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business