Choice Hotels Enhances Franchisee Support Services And Streamlines Operations

SILVER SPRING, Md., Dec. 21 /PRNewswire/ -- Choice Hotels International,
Inc. (NYSE: CHH), the world's second largest hotel franchiser, today announced
a corporate wide reorganization designed to provide more consistent service
for franchisees and create a more competitive overhead structure. Choice will
take a charge of up to $6.0 million related to this restructuring in the
fourth quarter.

The Company also announced that Sunburst Hospitality Corporation
(NYSE: SNB) intends to monetize $25 million of the remaining $60 million note
receivable from Sunburst. This monetization would lead to a charge in the
fourth quarter of approximately $4.0 million. As a result, the aggregate cash
proceeds Choice will receive from Sunburst will total approximately $102
million. These cash proceeds will be available in January 2001 and will be
used principally to pay down debt, pursue strategic investments and repurchase
shares. The Company will also take an equity loss of approximately $7.0
million related to its investment in Friendly Hotels plc, a U.K. based hotel
operator. The equity loss reflects the impact of Friendly's recently
announced restructuring and asset disposition plan.

These charges could result in a reduction in diluted earnings per share
for the fourth quarter of up to $0.19.

We are taking actions to make Choice a more focused and competitive
organization, said Charles A. Ledsinger, Jr., president and chief executive
officer of Choice Hotels. Taken together, these initiatives will improve our
operations, strengthen our balance sheet and better position us for growth,
allowing us to generate strong financial performance and deliver enhanced
value to our shareholders.

Reorganization
The reorganization of U.S. operations has two fundamental objectives: to
improve service and support to Choice's franchisees and to create a focused,
more competitive overhead structure. The reorganization will improve
communication between teams providing initial training and support for new
hotels and the teams that work with franchisees on an ongoing basis. In
addition, the number of regional offices will be reduced from five to three,
franchise sales activities will be centralized in Silver Spring, MD, and
marketing operations will be realigned to focus on developing new ways to
drive business to hotels. The level of property systems installation support
was also significantly decreased as the Company neared completion of the
deployment of its property management system. Brand management will be
consolidated into four segments: Emerging Brands (Sleep and MainStay);
Economy Brands (Econo Lodge and Rodeway Inn), and two core brands, one for
Quality and Clarion, the other for Comfort Inn and Comfort Suites. Several
overseas offices will be closed as a part of the Company's program to
streamline operations. The reorganization is expected to result in a net
reduction of nearly 140 positions. The reorganization charge also included
the costs related to the termination of an in-room internet initiative, which
the Company launched earlier in the year.

Ledsinger added: We looked across our company with an eye toward
creating a more value-added approach to serving franchisees and delivering
business to their hotels. We also examined how we can increase our
development of new hotels and improve our franchise sales operations. We
believe the reorganization will improve our operations while reducing
operating costs.

Sunburst Note
On September 16, 2000, Choice announced it would receive approximately
$76 million in cash plus accrued interest and a seven-year, 11-3/8% senior
subordinated note in the amount of $60 million from Sunburst Hospitality
Corporation. Sunburst has recently informed the Company of its intention to
monetize a portion of this subordinated debt, which will result in the Company
receiving in early January a total of approximately $102 million in cash and
an approximately $35 million senior subordinated note.

The monetizing of the note receivable will provide Choice with additional
resources to pay down debt, invest selectively in strategic initiatives, and
repurchase shares, said Ledsinger.

Friendly Hotels
In Europe, Friendly Hotels plc has announced a comprehensive restructuring
program to strengthen its balance sheet and improve its operations. Elements
of the restructuring program includes a revaluation of its real estate
portfolio, disposal of non-core assets, renegotiation of certain commercial
arrangements with Choice, and a future strategy focused on growth of its
franchising business. To improve Friendly's competitive position in Europe,
Choice has agreed to forgive certain royalty fees due over the next five years
and to provide Friendly with a letter of credit in an amount up to #7.8
million (approximately US $11.5 million) to guarantee additional credit
facilities from Friendly's banks. The Choice letter of credit will be secured
by substantially all of Friendly's assets in France and Germany, valued in
excess of #8 million (approximately US $11.8 million). In consideration for
this support, Friendly will increase the conversion rate from 0.67 ordinary
shares for each of Choice's convertible preferred shares to 1.67 ordinary
shares for each convertible preferred share. The effect of this change in
conversion price is to increase Choice's fully diluted ownership in Friendly
from the current level of 44% to approximately 69%. As a result of this
restructuring initiative, Choice will record an equity loss of approximately
$7.0 million.

About Choice Hotels
Choice Hotels International is the second largest hotel franchiser in the
world with 4,371 hotels open, representing 349,392 rooms, and another 694
hotels under development, representing 61,244 rooms, in 41 countries as of
September 30, 2000. Its Comfort, Quality, Clarion, Sleep Inn, Econo Lodge,
Rodeway Inn and MainStay Suites brands serve guests worldwide. Additional
corporate information may be found on the Choice Hotels' Internet site, which
may be accessed at http://www.choicehotels.com.

Comfort, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay
Suites and ChoiceBuys.com are registered trademarks and service marks of
Choice Hotels International, Inc.

Certain matters discussed in this press release may constitute forward-
looking statements within the meaning of the federal securities law. Such
statements are based on management's beliefs, assumptions and expectations,
which in turn are based on information currently available to management.
Actual performance and results could differ from those expressed or
contemplated by the forward-looking statements due to a number of risks,
uncertainties and other factors, many of which are beyond Choice's ability to
predict or control. For further information on factors that could impact
Choice and the statements contained therein, we refer you to the filings made
by Choice with the Securities and Exchange Commission, including its
registration statement on Form S-4 and report on Form 10-Q for the period
ended June 30, 1999.

SOURCE Choice Hotels International, Inc.

Logos, product and company names mentioned are the property of their respective owners.

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