The Franchise Process

Franchising is a highly regulated business practice with a number of procedures required under federal and state law.   Timeshare is also a highly regulated business.  The combination makes a vacation ownership franchise unusually complex.

Affiliating a development as a franchise is a big decision for both Shell Vacations and the prospective franchisee. It is a long-term commitment with millions of dollars at risk for both parties.

Because of the complexity and importance of the decision, unlike like most franchisors SVS does not go from offering to contract in one step. Joining Shell Vacations as a franchise is a process that gives everyone involved ample opportunity to understand every aspect of the relationship and get to know one another.

The following are the basic steps in becoming a
Shell Vacations Systems Franchise:

1. Delivery and receipt of the Franchise Disclosure Document (FDD)
The FDD describes the franchise relationship, services provided, and expected costs in great detail.

We will provide the FDD to a prospective franchisee as soon as possible after we determine through a quick interview that the proposed resort location appears to be a “fit” with the Shell Vacations Club system.

2. Introductory Meetings or Teleconferences
These first serious discussions cover the franchise program in great detail and answer any questions that arise. More than one session will probably be required for a prospective franchisee to feel comfortable about his or her understanding.

3.  Point Valuation Study
The first formal agreement in the franchise process is for a point valuation. A team from Shell Vacations will work closely with the prospective franchise to understand the resort, its location, and its special situations. The analysis will include such factors as demand in Shell Vacations Club, unit quality, RCI demand for the location, seasonality, and hotel occupancy and rates in the area.

SVS will issue a report that specifies the number of Shell Vacation Club
points that would be attributed to each type of unit for each day of the
year. We also provide our price matrix and sample point packages.

A developer with timeshare experience should be able to use the point valuation report to approximate potential sales revenue as a Shell Vacations franchise and compare that to revenue if sold as weeks. Inexperienced developers will probably need to engage a qualified consultant to help them analyze the report and prepare financial models. They may also wish to have an independent feasibility study done for reference and validation.

The point value is a primary decision point for both Shell Vacations and the prospective franchisee. If the numbers are viable to both sides, it probably will be worthwhile proceeding to the next step.

4. Due Diligence Phase
The second preliminary agreement provides for extensive due diligence.

Our goal is to have the prospective franchisee really understand our product, systems, and corporate culture. The franchisee is free to visit any of our resorts and sales offices and meet with our top management at the resorts and in the corporate office.

Shell Vacations team members will visit the proposed franchise locations and get to know its people and verify the company’s ethics and ability to perform financially.

The due diligence period is also when the franchise legal work
is prepared and reviewed by Shell Vacations, the franchisee, its lender, and their respective legal and financial advisors.

5. Execution of the Franchise Agreements
None of the above agreements bind the prospective franchisee or Shell Vacations Systems beyond the work specified. The actual affiliation only happens after the franchise agreements are executed.

The plural is used because there are several interlocking agreements in addition to the franchise agreement itself. Samples of these are provided in the FDD.