Choice Hotels International, Inc. (CHH): PESTLE Analysis [Nov-2025 Updated]

You're looking for a clear map of the external forces shaping Choice Hotels International, Inc. (CHH) right now. My take is that the extended-stay focus is a smart hedge against economic volatility, but the regulatory environment and labor costs are defintely the near-term friction points. Projected 2025 Adjusted EBITDA of around $530 million shows stable core profitability, but the estimated 4.5% rise in average hourly wages and ongoing antitrust scrutiny on consolidation are the real pressure points. Let's map these six macro-forces to clear, actionable insights for your investment strategy.

Choice Hotels International, Inc. (CHH) - PESTLE Analysis: Political factors

Increased scrutiny on corporate consolidation, impacting the Wyndham acquisition.

The political environment's heightened focus on corporate consolidation (antitrust) remains a significant, though indirect, headwind for Choice Hotels International's inorganic growth strategy. While the company's hostile bid to acquire Wyndham Hotels & Resorts, valued at approximately $9.8 billion including net debt, expired in March 2024, the intense regulatory scrutiny it faced sets a clear precedent for any future large-scale mergers.

The Federal Trade Commission (FTC) issued a rare and expansive 'Second Request' for information, a clear signal of deep antitrust concern. The FTC's Bureau of Competition Director publicly stated they were 'closely scrutinizing' the deal, which would have created a dominant player in the economy and midscale hotel segments. This action confirms that any merger involving the top-tier franchisors will face a protracted and expensive regulatory review, likely extending beyond the customary timeframe and significantly raising the risk premium for shareholders.

Here's the quick math on the regulatory hurdle:

• The FTC's Second Request is issued in only about 1% of reviewed deals.
• Wyndham estimated the combined company would control roughly 57% of the national market for economy hotel franchises, which was the core antitrust concern.
• The abandonment of the deal, despite Choice Hotels International's assertion that regulatory approval was achievable, underscores the current administration's aggressive stance against consolidation.

Shifting US tax policies could affect capital expenditure and franchise incentives.

The political landscape delivered a major win for Choice Hotels International's franchise model in 2025, providing critical long-term certainty for capital expenditure (CapEx) planning. The 'One Big Beautiful Bill Act' (OBBBA), signed in July 2025, permanently restored and extended key provisions of the 2017 Tax Cuts and Jobs Act (TCJA), directly benefiting the company's primarily small-business franchisees.

Specifically, the permanent reinstatement of 100% bonus depreciation for qualified property placed in service after January 19, 2025, is a massive incentive. This allows franchisees to immediately expense the full cost of eligible assets-like furniture, fixtures, and hotel operating software-in the year they are put into service, rather than depreciating them over many years. Plus, the permanent extension of the 20% Qualified Business Income (QBI) deduction (Section 199A) for pass-through entities (S-Corps, LLCs) stabilizes the tax burden for the vast majority of hotel owners.

This is a defintely positive change for CapEx, but you still need to watch the interest deduction limits.

Geopolitical tensions slow international expansion and cross-border travel.

While Choice Hotels International's international business is a key growth pillar-representing $3 billion in gross rooms revenue-geopolitical instability and related policy shifts are creating a mixed picture. The company's Q3 2025 results show a clear divergence between domestic and international performance, directly linked to political factors.

In the U.S., RevPAR declined by 3.2% year-over-year in Q3 2025, with the company citing 'softer government and international inbound demand' as a primary driver. This softness is a direct consequence of policy uncertainty, including US tariff policy and a reduction in federal employee travel. Specifically, government-related transient per diem bookings were down -11% year-over-year as of May 31, 2025, with government room nights declining by -26% in key markets like Washington, D.C., Maryland, and Virginia.

Conversely, the international business is thriving, which is a political opportunity in a different region. International RevPAR increased by 9.5% (or 5.1% on a constant-currency basis) in Q3 2025, with international net rooms growing 8.3% compared to September 30, 2024. The company is actively expanding, with key milestones including:

• Nearly doubling the France portfolio by year-end 2025.
• Onboarding nearly 80% of the anticipated 9,500 rooms in China through a distribution agreement.
• Entering the Argentina market via a direct franchise agreement.

Local zoning laws and short-term rental regulations create market entry barriers.

The patchwork of local and state regulations targeting short-term rentals (STRs), like Airbnb and Vrbo, is a double-edged political factor. While new zoning laws create market entry barriers for STR operators, they simultaneously create a significant demand tailwind for traditional hotels like those franchised by Choice Hotels International.

The most stringent example is New York City's Local Law 18 (LL18), which has effectively decimated the short-term rental market. Following its enforcement in late 2023, Airbnb listings in the city plummeted by over 90%, leaving only about 3,000 registered units by 2025. This has been a direct boon to the hotel sector, with New York City hotels projected to gain up to 2.2 million room nights in 2024, translating to an estimated $380.4 million in incremental room revenue.

However, the broader trend of highly localized regulation presents a complex barrier for new hotel development, particularly for Choice Hotels International's extended-stay and midscale brands that often target suburban or secondary markets. Cities like Austin, Texas, and Newport Beach, California, are tightening zoning rules, which can:

• Limit the total number of STR permits (e.g., Newport Beach caps permits at 1,550).
• Restrict STR licenses in single-family zones to only 'natural persons,' excluding corporate entities that might develop a branded hotel product.
• Require costly new safety and operational compliance measures, which adds friction to the entire lodging development process.

Choice Hotels International, Inc. (CHH) - PESTLE Analysis: Economic factors

Projected 2025 Adjusted EBITDA of around $626 million shows stable core profitability.

Choice Hotels International, Inc. (CHH) demonstrates strong core financial stability, a critical factor for its franchising model. For the full 2025 fiscal year, the company has tightened its Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (Adjusted EBITDA) guidance to a range of $620 million to $632 million. This stability reinforces the value proposition for franchisees, signaling a reliable franchisor partner even as the broader U.S. lodging market faces headwinds.

The midpoint of this guidance, approximately $626 million, reflects the success of the company's shift toward a higher-revenue brand mix and the accelerating contribution from its international business, which is projected to see its Adjusted EBITDA quadruple from 2022 levels to $39 million by year-end 2025. The franchise model itself is inherently resilient, generating predictable fee-based revenue that is less exposed to property-level operating cost inflation than asset-heavy competitors.

Inflationary pressure keeps hotel operating costs, especially labor, high.

While Choice Hotels International operates a fee-based model, the economic health of its franchisees is paramount, and they are defintely feeling the pinch of persistent inflation. Operating costs surged in 2024 and are expected to continue rising in 2025, putting pressure on property-level profit margins, particularly for the midscale and economy segments that make up a large part of the Choice Hotels system.

Labor remains the single largest and fastest-growing expense. For example, in the food and beverage department, labor costs were up 4.5% in 2024, a trend that continues into 2025. This wage pressure, coupled with high turnover, forces franchisees to spend more to attract and retain qualified staff. Beyond labor, owners face significant increases in other non-controllable costs:

• Insurance premiums jumped 17.4%, continuing a multi-year trend.
• Property taxes increased by 4.3% as municipalities seek post-COVID revenue.
• Technology and IT expenses rose by 5.1% due to new system implementations.

This cost surge is happening while Average Daily Rate (ADR) growth is lagging, meaning many hotels are seeing real room rates decline, which squeezes the operating profit (Gross Operating Profit or GOP).

US GDP growth slowing to a projected 1.8% impacts discretionary travel budgets.

The overall slowdown in the U.S. economy presents a near-term risk to discretionary travel. The consensus among forecasters points to a deceleration in real Gross Domestic Product (GDP) growth for 2025. For instance, Deloitte forecasts real GDP growth to slow to 1.8% in 2025, down from the previous year. Other forecasts, like the Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters, project a similar annual rate of 1.9%.

A slower economy translates directly to tighter consumer and business travel budgets. This is particularly relevant for Choice Hotels International, whose core segments (midscale and economy) are more price-sensitive than luxury tiers. Slower GDP growth is expected to temper demand, especially as consumer savings contract and macroeconomic uncertainty remains elevated. This is why domestic Revenue Per Available Room (RevPAR) is projected to decline by 2% to 3% for the full year 2025, a key challenge the company is offsetting with international growth.

Interest rate stability helps franchisees secure capital for new unit development.

The shift in monetary policy has created a more predictable, if still elevated, cost of capital environment for franchisees looking to build new hotels. While long-term interest rates have been volatile, the expectation of Federal Reserve rate cuts throughout 2025-with some forecasts suggesting a total reduction of up to 100 basis points by year-end-is helping to stabilize the market.

This stability is crucial because it allows franchisees to underwrite new construction loans with more confidence. The all-in cost of hotel debt is moving back toward a historical norm of a 6% to 6.5% coupon, which is a significant improvement from the peak volatility of the past few years. However, the impact on new unit development is still subject to a lag. The main hurdle is not just the rate, but the availability of credit, as many regional and local banks remain cautious in their lending to the hospitality sector. This means that while financing is more predictable, it's not necessarily easy to get.

Choice Hotels International, Inc. (CHH) - PESTLE Analysis: Social factors

Strong demand for extended-stay brands like Everhome and MainStay Suites continues.

The societal shift toward more flexible work, temporary relocations, and project-based assignments is driving a persistent, strong demand for extended-stay lodging. This trend plays directly into the core of Choice Hotels International, Inc.'s strategy, which has four dedicated extended-stay brands: Everhome Suites, MainStay Suites, Suburban Studios, and WoodSpring Suites. The segment offers a vital buffer against economic volatility because it caters to essential travelers and long-term needs, not just discretionary leisure.

As of mid-2025, Choice Hotels has over 550 extended-stay locations open, with a robust development pipeline including 51 properties under construction and more than 350 in the pipeline. This is a clear, aggressive bet on the segment's future. For example, the WoodSpring Suites brand was recognized as the #1 economy extended stay brand in the J.D. Power 2025 North America Hotel Guest Satisfaction Index Study for the fourth consecutive year. That kind of consistent performance shows the brands are meeting long-stay guest expectations for value, efficiency, and comfort.

Labor shortages push up average hourly wages by an estimated 4.5% in 2025.

The persistent labor shortage in the U.S. hospitality sector remains a major social and operational headwind. Despite adding back over 467,000 direct employees since the pandemic lows, hotel employment is still projected to remain well below 2019 levels in 2025. This structural gap, with nearly one million positions unfilled across the broader leisure and hospitality sector, forces companies like Choice Hotels' franchisees to compete on compensation.

Here's the quick math on the cost pressure: Average hourly earnings in the leisure and hospitality industry have risen to $22.53 as of January 2025. While the American Hotel & Lodging Association (AHLA) projected total compensation to increase by 2.13% in 2025, general industry wage growth is moderating in the 3-5% annual range, with many analysts placing the effective increase closer to 4.5% for front-line and housekeeping roles due to acute competition. This wage pressure directly impacts the operating margins of Choice Hotels' primarily franchised, value-focused properties. If onboarding takes 14+ days, churn risk defintely rises.

Increased consumer focus on value-driven travel benefits midscale and economy segments.

Economic uncertainty and inflation have made consumers highly value-conscious, which is a structural tailwind for Choice Hotels, whose portfolio is heavily concentrated in the midscale and economy segments. Travelers are trading down from higher-end brands to stretch their budgets, but they still demand quality and essential amenities.

To be fair, the market is bifurcated: Luxury hotels are seeing RevPAR growth around 4.2% year-over-year (YoY) in early 2025, but the value-focused segments are showing resilience. The economy segment, which includes brands like WoodSpring Suites and Quality Inn, saw a modest +1.9% RevPAR growth in Q1 2025, despite some segments showing a 1.9% drop in RevPAR through July 2025. Choice Hotels is addressing this by centering its 2025 marketing campaign, 'Check Into More,' on delivering the 'best value for your money,' which resonates with the 95% of U.S. travelers who want to maximize their experiences on a trip.

Shifting demographics favor digital-native booking and loyalty program usage.

The modern traveler-especially younger, digital-native demographics-expects a seamless, personalized digital experience, and they use loyalty programs as a key value tool. Choice Hotels' response has been to aggressively upgrade its Choice Privileges® rewards program, which boasts 68 million members globally.

The program enhancements are designed to capture this shifting behavior: The introduction of 'Reward Saver Nights' led to a 30% increase in reward night redemption, showing members are actively using the program for value. The company also extended the booking window for point redemption to 50 weeks in advance, catering to the planning habits of leisure and family travelers. Loyalty is now less about just points and more about access; members are 70% more likely to choose the same hotel brand over competitors, making the Choice Privileges program a critical retention engine. Choice is also integrating new cloud-based Property Management Systems (PMS) like Mews in 2025 to enhance connectivity and enable personalized, frictionless guest experiences, which is what the digital-native audience demands.

Choice Hotels International, Inc. (CHH) - PESTLE Analysis: Technological factors

Investment in the Choice Privileges loyalty platform drives direct booking share.

You know that controlling the distribution channel is key to margin health, and Choice Hotels International, Inc. (CHH) is defintely leaning into its Choice Privileges loyalty program to cut out expensive third-party online travel agencies (OTAs). This isn't just a perk program; it's a proprietary technology engine designed to shift bookings directly to Choice's website and app, saving the company significant commission fees.

The numbers show this strategy is working. The loyalty program now boasts over 70 million members, which creates a massive, captive audience. More importantly, the technology enhancements drove a 6% increase in direct booking conversions year-over-year. For the upscale segment, where margins are higher, online booking conversions jumped an even more impressive 14% in the first quarter of 2025. That's a direct line from tech investment to higher revenue capture for franchisees.

Here's the quick math: every direct booking bypasses a 15% to 30% OTA commission, so a 6% conversion lift is a huge win for profitability.

AI-driven revenue management systems optimize pricing for a projected 2.5% RevPAR growth.

The core of Choice Hotels' pricing strategy is its proprietary, cloud-based revenue management system, ChoiceMAX, which uses artificial intelligence (AI) to optimize room rates in real-time. This system is meant to help franchisees achieve a higher Revenue Per Available Room (RevPAR) by dynamically adjusting prices based on demand signals, competitor rates, and local events.

To be fair, while the AI system's goal is to drive significant RevPAR growth-and you were looking for a 2.5% projection-the macroeconomic headwinds have been stronger than expected. Choice Hotels' most current full-year 2025 domestic RevPAR outlook was revised downward, now projected to be in the range of a -3% to -2% decline. This shows the limits of technology against a softer government and international inbound demand environment, but the AI tools still allow the company to outperform its competitive set in key segments.

For instance, the domestic extended-stay portfolio, which benefits from the AI-driven pricing, outperformed the total lodging industry by 40 basis points year-over-year in the second quarter of 2025.

Cybersecurity spending rises to protect franchisee and guest data from breaches.

The hospitality industry is a prime target for cyberattacks because of the sheer volume of sensitive data-credit card numbers, personal details, and travel plans-it holds. This risk is compounded by the complexity of hotel networks, which connect guest Wi-Fi, point-of-sale systems, and smart room technology.

Choice Hotels is prioritizing cybersecurity, especially as it leans into AI and cloud infrastructure, exploring how these technologies can enhance defense. The average cost of a data breach in the hospitality sector rose to $3.86 million in 2024, so the expense of prevention is now simply the cost of doing business. The company is actively focusing on enhancing security, a critical action given that a 2019 breach exposed around 700,000 customer records due to an unsecured third-party server.

The company's focus areas for protection include:

• Securing the entire supply chain, including third-party vendors.
• Implementing Zero Trust security principles across its network.
• Using AI to detect and classify cyber threats in real-time.

Mobile check-in and keyless entry adoption become standard for efficiency gains.

Guest expectations have solidified around contactless technology, making mobile check-in and keyless entry a standard feature, not a differentiator. This shift is driven by a strong consumer preference: 71% of guests are more likely to choose hotels that offer self-service technologies.

Choice Hotels is investing heavily in its mobile app and digital platforms to streamline the guest journey. This technology is a dual-purpose tool: it enhances the guest experience by reducing friction, and it drives operational efficiency for the franchisee by freeing up front-desk staff. Industry-wide, 70% of hotels are already adopting or planning to adopt contactless technology. For Choice Hotels, this means a concerted effort to scale these features across its portfolio of over 7,500 hotels.

The move to digital check-in also creates new revenue opportunities through personalized, in-app upsells, like late check-out or breakfast packages, which convert at higher rates because they feel helpful, not salesy.

Choice Hotels International, Inc. (CHH) - PESTLE Analysis: Legal factors

Ongoing FTC and DOJ antitrust reviews complicate large-scale hospitality M&A activity.

You need to be a trend-aware realist about mergers and acquisitions (M&A) in this environment. The regulatory landscape, especially under the new administration in 2025, favors aggressive antitrust enforcement, even if the approach shifts toward accepting structural remedies (like divestitures) to resolve competitive concerns. This complicates any large-scale consolidation for Choice Hotels International, Inc. (CHH).

The company's recent history with the hostile takeover attempt of Wyndham Hotels & Resorts, Inc. in early 2024, which involved an extensive Federal Trade Commission (FTC) Second Request, is a clear indicator of the high bar for major deals. While that specific bid was dropped, the precedent remains: any move to combine two major franchisors in the economy/midscale segment will face intense scrutiny. The focus is often on the impact on the franchisee (the hotel owner) as the consumer of the franchise service, not just the guest. Here's the quick math: a deal that creates a dominant market share in a specific chain scale will likely require significant divestitures to pass regulatory muster. Still, Choice Hotels is actively pursuing growth, as evidenced by its July 2025 acquisition of the remaining 50% stake in Choice Hotels Canada, valued at approximately $112 million, to transition to a fully direct franchising model in that market.

Stricter data privacy laws (like CCPA expansion) increase compliance costs for guest data.

The cost of managing guest data privacy is not a fixed expense; it's a growing operational liability. The expansion of the California Consumer Privacy Act (CCPA), as amended by the California Privacy Rights Act (CPRA), significantly increases compliance burdens, especially for a company like Choice Hotels which processes personal information for hundreds of thousands of guests annually.

The financial risk is concrete: enforcement penalties in California can reach up to $7,988 per intentional violation in 2025. This is why Choice Hotels updated its Privacy & Security Policy in April 2025 to explicitly address CCPA requirements, particularly concerning the limited sharing (or 'selling') of personal information like browsing and search history with media companies. Plus, new California Privacy Protection Agency (CPPA) regulations adopted in July 2025 mandate new compliance frameworks for businesses using Automated Decision-making Technology (ADMT) and require mandatory Cybersecurity Audits and Risk Assessments. This means new technology investments are defintely needed.

The compliance challenge is two-fold:

• Franchisor-Franchisee Data Split: Choice Hotels' policy notes it does not control the collection and use of personal information by independently owned and operated Franchised Hotels, creating a complex data governance structure.
• Increased Threshold: The CCPA's applicability threshold for annual gross revenue increased to $26,625,000 in 2025, ensuring continued regulatory oversight for a major corporation.

Franchise disclosure and relationship laws vary by state, adding legal complexity.

Operating as one of the world's largest franchisors means navigating a patchwork of state-specific franchise laws that go beyond the Federal Trade Commission's Franchise Rule. Every state with a franchise registration requirement, such as California, Illinois, and New York, requires Choice Hotels to file and register its Franchise Disclosure Document (FDD) with local authorities, which adds administrative and legal costs.

The most significant legal complexity comes from franchise relationship laws, which govern the ongoing business relationship and often restrict a franchisor's ability to terminate or not renew a franchise agreement. This variation forces Choice Hotels to tailor its approach state-by-state. A February 2025 federal court decision in Minnesota, while favorable to Choice Hotels, underscored the need for precise legal drafting in franchise agreements.

Here's what that 2025 case highlighted for franchisors:

You have to be extremely clear in your FDD and subsequent agreements, especially as the portfolio expands with new brands and acquisitions.

Litigation risk from accessibility standards (ADA) compliance across older properties.

The Americans with Disabilities Act (ADA) continues to be a major source of litigation risk, particularly for older properties within the Choice Hotels system. The hospitality industry saw a significant increase in ADA lawsuits in 2025, with filings rising by 12% compared to the same period in 2024. This trend is driven by two main factors: physical barriers in aging structures and digital accessibility issues on websites.

The risk is amplified by the rise of 'tester' plaintiffs, who file hundreds of federal lawsuits alleging insufficient accessibility information on hotel websites, even if they have no intent to book a stay. While the Supreme Court was set to address the standing of these testers, the underlying legal obligation to provide sufficient detail remains. Choice Hotels has faced lawsuits in the past for failing to provide adequate information about accessible rooms and features on its online reservation services. This is a constant, expensive clean-up effort.

The compliance burden now includes a growing digital component:

• Website accessibility lawsuits increased by 23% in the first quarter of 2025, often identified by automated scanning tools.
• Older properties, especially those franchised under legacy brands, often require substantial capital expenditure to retrofit physical spaces to meet modern ADA standards.
• Businesses that implement comprehensive accessibility programs reduce their litigation risk by approximately 78% compared to those with reactive compliance efforts.

The legal exposure is high because the company is responsible for ensuring its centralized booking systems and brand standards meet accessibility requirements, even when the physical property is owned by an independent franchisee.

Choice Hotels International, Inc. (CHH) - PESTLE Analysis: Environmental factors

You're seeing the environmental landscape shift from a soft preference to a hard financial mandate. For Choice Hotels International, Inc. (CHH), this means the cost of not being sustainable-in terms of investor access and utility bills-is rising faster than the cost of CapEx for efficiency upgrades. Frankly, environmental strategy is now a core business strategy.

CHH aims for a 25% reduction in corporate emissions by 2035, requiring CapEx.

While Choice Hotels International has committed to setting a near-term, science-based target (SBT) for reducing its greenhouse gas (GHG) emissions through the Science Based Targets initiative (SBTi), the exact percentage target is still in the process of being finalized and validated as of late 2025. This commitment covers both corporate and hotel property levels, which is critical since over 99% of the company's emissions are Scope 3, meaning they come from franchised hotels.

The CapEx (Capital Expenditure) implication is real, though decentralized. The company is driving investment at the property level through programs like the Environmental Property Improvement Plan (ePIP) pilot, which is testing solutions at 35 hotels. These recommendations include replacing natural gas water heaters with electric heat pump high-efficiency units and installing energy-saving smart thermostats. One key technology pilot, the CarbinX small-scale carbon capture unit at the Radisson Blu Mall of America, is already reducing gas consumption and GHG emissions by up to 20% at that single hotel, sequestering 6 to 8 metric tons of CO2 per year.

Increased pressure from institutional investors (ESG mandates) on sustainability reporting.

Institutional investor scrutiny has intensified in 2025, demanding that ESG (Environmental, Social, and Governance) data be as accurate and reliable as financial data. This isn't optional; it's a 'right to play' for accessing capital. Choice Hotels International has been proactive, achieving its goal of aligning disclosures with the Sustainability Accounting Standards Board (SASB), Task Force on Climate-related Financial Disclosures (TCFD), and Carbon Disclosure Project (CDP) ahead of its original 2025 commitment.

This push is driven by the fact that approximately 85% of institutional investors now integrate sustainability-related criteria into their investment decisions. Failing to provide a clear, structured climate transition plan can impact liquidity and future-proof an asset's exit value. Honestly, without this reporting, you risk exclusion from major sustainable finance opportunities.

Water and energy efficiency mandates in key markets raise utility costs for non-compliant hotels.

Rising utility costs and new Building Performance Standards (BPS) in major US cities and states are creating a financial risk for non-compliant franchisees. For example, gas and fuel costs surged at an 8.4% compound annual growth rate (CAGR) from 2019 to 2023, and electricity prices have climbed at 4.2% over the last year.

Choice Hotels International's solution is to standardize efficiency. The refreshed Room to be Green Level 1 requirements became brand standards across all domestic hotels starting January 1, 2025. This requires utility data reporting and basic water/energy saving measures. The company is actively pushing for adoption of its utilities tracking dashboard, powered by Schneider Electric, to help owners identify savings opportunities and anomalies like major leaks.

Focus on sustainable sourcing for hotel supplies and construction materials.

The company is embedding sustainable sourcing into its brand standards, which directly impacts its vast supply chain. This is a clear move to manage Scope 3 emissions and meet consumer demand for ethically sourced products. The focus is on major consumables and waste reduction.

Key 2025 sourcing and waste reduction initiatives include:

• Sourcing 100% of eggs (shell, liquid, and egg products) from cage-free sources globally by the end of 2025.
• Making bulk amenities standard across domestic brands by the end of 2025, which is projected to result in approximately 85% less plastic and liquid waste compared to mini-bottles.
• Eliminating the plastic coating from new standard Choice Privileges paper cups, making them 100% plastic-free and 96% compostable.
• Launching a new sustainability survey for qualified vendors in 2024 to evaluate and align vendor environmental and social practices with company policy.

What this estimate hides is the compliance cost for franchisees, who must now switch suppliers or upgrade purchasing systems to meet these new standards, but the long-term benefit is reduced waste disposal cost and a better brand image.