Choice Hotels and CHE Hotel Group agreed to transfer the European franchising operations, now conducted by CHE Hotel Group in France, Belgium, Portugal, Spain, and portions of Switzerland to Choice.

Concurrent with the signing of the sale and purchase agreement, the master franchise agreement between Choice and CHE for these countries was also terminated, and all of CHE's employees and infrastructure involved in its franchising business were transferred to Choice. As a result, Choice will directly operate the franchise in these countries now consisting of 139 properties from the existing headquarters in Bretigny sur Orge, France.

The transaction is a follow up to the announcement Choice and CHE Hotel Group made on October 30, 2006, regarding the execution of a similar transaction, in which the franchising operations previously conducted by CHE Hotel Group in the central European countries of Austria, Germany, Italy, the Czech Republic, and portions of Switzerland were transferred to Choice. Concurrent with the signing of that sale and purchase agreement, the master franchise agreement between Choice and CHE covering these countries was also terminated, and all of CHE's employees and infrastructure involved in its franchising business were transferred to Choice and continue to work from the existing Munich offices.

The Choice franchise in continental Europe currently consists of 71 Comfort, Quality, and Clarion branded hotels. Of these properties, CHE continues to operate eight hotels in Germany, as well as eight hotels in France and Belgium as a franchisee of Choice.

"We are pleased with the mutual benefits that these two transactions provide Choice and CHE," said Joseph Squeri, president and chief operating officer of Choice. "By transferring the franchise operations from CHE to Choice, we are able to more closely direct the growth of our branded properties in Europe, while maintaining a strong relationship with CHE Hotel Group as a major franchisee of Choice."

Peter Cashman, director of asset management and European operations for CHE, added, "We look forward to our continued strong relationship with Choice as a franchisee of properties in Germany, France, and Belgium, as well as the master franchisor for Choice properties in the United Kingdom and Ireland."

For 2007, incremental revenues expected as a result of transitioning from a master franchising to direct franchising business model will be substantially offset by direct franchising costs associated with the acquired businesses. In addition, these acquisitions do not result in incremental international franchise system units or rooms on-line.