Los Angeles Business Journal

Extended-Stay Pioneer at Home With Franchising

Hospitality ExecuStay acquisition opened door for Oakwood Worldwide. By Justin Yang Monday, January 6, 2014

Minding store

Oakwood, founded in 1960 by Howard Ruby, now its chairman and chief operating officer, manages more than 25,000 units worldwide. It has roughly 1,500 employees in the United States, not including franchises. Despite the shift in attitude about franchising, about 70 percent of the properties that bear its brand are company owned. The first Oakwood franchise opened in September, the result of a deal the company struck with Mainsail Lodging & Development of Tampa, Fla., an ExecuStay franchisee that acquired the rights to manage extended-stay locations using the Oakwood name and technology in Florida.

Properties in the extended-stay pool range from studio apartments to single-family homes, helping appeal to a variety of clients, from government workers and consultants to child actors and their families.

Villarreal said some of his personal concerns about the model included overdemanding franchisees taking advantage of the franchisors.

“Being part of the franchise, you’re always reaping the benefits from the franchisors,” said Villarreal, 57. “The franchise concept originally kind of spooked us.”

He said most of the worries stemmed from the fact that the company had never dealt with franchisees in the past.

When Oakwood acquired ExecuStay and started working with its franchisees, Villarreal said he was impressed by the franchisees’ drive and willingness to work closely with the company.

“We thought this was something we could do. It was possible to license our name to a business and hold them accountable because we were aligned – we both thought about the same things in terms of growth and success,” Villarreal said.

That attitude is contrary to the fear that company executives initially had. They were concerned that franchisees could tarnish Oakwood’s reputation.

Even though the business model is relatively new to the company, Villarreal said Oakwood has assets in place that are attractive to potential franchisees.

For example, the company has a service center in Phoenix that takes care of processing all of the invoices and bills generated at each location. The center also handles Oakwood’s Internet traffic and its online booking system. Franchisees, who pay an initial fee of between $25,000 and $100,000 in addition to monthly fees, also have access

to Oakwood’s inventory and sales management systems.

Hospitality consultant Anderson said franchisees would be most attracted by the brand value Oakwood offers.

One reason he suggested that the company’s brand has grown over the years is because it had acquired the resources to focus on brand development.

“Oakwood could not have done this if they did not have a strong enough brand.” he said. “The hospitality industry took a page out of the Oakwood model and started building extended stays. Now there are multiple segments inside the extended-stay lodging industries. They’re basically now selling their expertise using their money to sell their model. It’s a good way to leverage a good name.”

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