Marketing and Reservations: The Company’s franchise agreements require the payment of franchise fees which include marketing and reservation fees. These fees, which are based on a percentage of the franchisees’ gross room revenues, are used exclusively by the Company’s marketing and reservation funds for expenses associated with providing such franchise services as central reservation and yield management systems, national marketing and media advertising. The Company is contractually obligated to expend the marketing and reservation fees it collects from franchisees in accordance with the franchise agreements; as such, no income or loss to the Company is generated.

The total marketing and reservation fees received by the Company were $162.4 million and $146.0 million for the years ended December 31, 2000 and 1999, respectively. Depreciation and amortization incurred by the marketing and reservation funds was $10.5 million and $9.6 million for the years ended December 31, 2000 and 1999, respectively. Interest expense incurred by the reservation fund was $4.8 million and $3.3 million for the years ended December 31, 2000 and 1999, respectively. Reservation fees and marketing fees not expended in the current year are carried over to the next fiscal year and expended in accordance with the franchise agreements. Shortfall amounts are similarly recovered in subsequent years. Excess or shortfall amounts from the operation of these programs are recorded as a payable or receivable from the particular fund. Under the terms of the franchise agreements, the Company may advance capital as necessary to the marketing and reservation funds and recover such advances through future fees. As of December 31, 2000, the Company’s balance sheet includes a receivable of $57.8 million related to advances made to the marketing ($ 24.9 million) and reservation ($ 32.9 million) funds. As of December 31, 1999, the Company’s balance sheet includes a receivable of $32.8 million related to advances made to the marketing ($ 12.5 million) and reservation ($ 20.3 million) funds. The Company has the ability under existing franchise agreements and expects to recover these advances through future marketing and reservation fees.

Product Sales: In the fourth quarter of 1998, the Company discontinued its group purchasing program as previously operated. The group purchasing program utilized bulk purchases to obtain favorable pricing from third party vendors for franchisees ordering similar products. The Company acted as a clearinghouse between the franchisee and the vendor, and orders were shipped directly to the franchisee. Sales made to franchisees through the Company’s group purchasing program were $3.9 million in 1999, with product cost of sales of $3.9 million.

Depreciation and Amortization: Depreciation and amortization increased to $11.6 million in 2000 from $7.7 million in 1999. This increase was primarily attributable to new computer systems installations and corporate office renovations.

Other: Interest expense of $18.5 million in 2000 is up $2.1 million from $16.4 million in 1999 due to higher interest rates. Included in 2000 and 1999 results is approximately $15.2 million and $14.2 million, respectively, of interest income earned on the note receivable from Sunburst. During 1999, the Company recorded $2.1 million in dividend income from Friendly. The Company’s investment in Friendly resulted in a $12.1 million equity loss in 2000 associated with Friendly’s comprehensive restructuring program. The Company recognized a $7.6 million loss in 2000 associated with the monetization of $137.5 million of the Sunburst note.