SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549

                             _____________________

                                   FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996].

For the fiscal year ended     December 31, 2000
                              -----------------
                                       OR
[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 [NO FEE REQUIRED].

For the transition period from__________________to_________________

                   Commission file number 001-13393
                                          ---------

                       CHOICE HOTELS INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
            (Exact Name of Registrant as Specified in Its Charter)


                                                            
                       DELAWARE                                     52-1209792
- -------------------------------------------------------------  -------------------
            (State or Other Jurisdiction                         (I.R.S. Employer
          of Incorporation or Organization)                    Identification No.)

     10750 Columbia Pike, Silver Spring, Maryland                     20901
- -------------------------------------------------------------  -------------------
       (Address of Principal Executive Offices)                     Zip Code


Registrant's telephone number, including area code  (301) 592-5000
                                                    ----------------------------
Securities registered pursuant to Section 12(b) of the Act:

      Title of Each Class            Name of Each Exchange on Which Registered
      -------------------            -------------------------------------------

Common Stock, Par Value $.01 per share             New York Stock Exchange
- --------------------------------------        ----------------------------------

Preferred Stock Purchase Rights                    New York Stock Exchange
- -------------------------------               ----------------------------------

Securities registered pursuant to Section 12(g) of the Act:


________________________________________________________________________________
                                (Title of Class)

________________________________________________________________________________
                                (Title of Class)

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed in Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months as for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X   No ___
                                               ---


     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [_]

     The aggregate market value of voting stock of Choice Hotels International,
Inc. held by non-affiliates was $303,365,792 as of March 20, 2001 based upon a
closing price of $11.87 per share.


             APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                 PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes__________  No_________

                  (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     The number of shares outstanding of Choice Hotels International, Inc.'s
Common Stock at March 20, 2001 was 45,311,738.

                     DOCUMENTS INCORPORATED BY REFERENCE.


Certain portions of Registrant's annual report to stockholders for the fiscal
year ended December 31, 2000 are incorporated by reference under Parts I and II.
Certain portions of Registrant's definitive proxy statement, to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A not later than
120 days after the close of the Registrant's fiscal year, are incorporated by
reference under Part III.

                                       2


TABLE OF CONTENTS


                                                               PAGE
                                                               ----
                                                            
PART I.....................................................     6
FORWARD LOOKING STATEMENTS.................................     6

ITEM 1. BUSINESS...........................................     6
Overview...................................................     6
Company History............................................     7
The Lodging Industry.......................................     8
Franchise Business.........................................     9
 Economics of Franchise Business...........................    10
Strategy...................................................    10
 Building Strong Brands....................................    10
 Deliver Exceptional Services..............................    11
 Reach More Consumers......................................    11
Franchise System...........................................    11
Brand Positioning..........................................    12
 Comfort...................................................    12
 Sleep Inn.................................................    13
 Quality...................................................    13
 Clarion...................................................    14
 Econo Lodge...............................................    14
 Rodeway...................................................    15
 MainStay Suites...........................................    15
International Franchise Operations.........................    16
 Europe....................................................    16
 Canada....................................................    18
 Australia.................................................    18
 Other International Relationships.........................    18
Franchise Sales............................................    18
Franchise Agreements.......................................    19
Franchise Operations.......................................    20
 Central Reservation System................................    20
 Property Management System................................    21
 Brand Name Marketing and Advertising......................    21
 Quality Assurance Programs................................    22
 Training..................................................    22
 Design and Construction...................................    23
 Financial Assistance Programs.............................    23
Competition................................................    23
Service Marks and Other Intellectual Property..............    24
Seasonality................................................    24


                                       3




                                                                  
Regulation......................................................      24
Impact of Inflation and Other External Factors..................      25
Employees.......................................................      25

ITEM 2.  PROPERTIES.............................................      25

ITEM 3.  LEGAL PROCEEDINGS......................................      26

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.........................................................      26
Executive Officers of the Company...............................      26

PART II.........................................................      28

ITEM 5.  MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS..........................      28

ITEM 6.  SELECTED FINANCIAL DATA................................      29

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS......................................................      29

ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK...................................      30

ITEM 8.  FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA..............................................      30

ITEM 9.  CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE........................................      30

PART III........................................................      30

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT...............................................      30

ITEM 11. EXECUTIVE COMPENSATION.................................      31

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT................................      31

ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS............................................      31



                                       4



                                                                   
PART IV.........................................................       31

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K.........................................       31
(a) Index to Financial Statements...............................       31
(b) Reports on Form 8-K.........................................       34
(c) Exhibits....................................................       32
Signatures......................................................       35


                                       5


                                     PART I

Forward-Looking Statements

Certain statements in this report that are not historical facts constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act. Words such as "believes," "anticipates," "expects,"
"intends," "estimates," "projects," and other similar expressions, which are
predictions of or indicate future events and trends, typically identify forward-
looking statements. Such statements are subject to a number of risks and
uncertainties which could cause actual results to differ materially from those
projected, including: competition within each of our business segments; business
strategies and their intended results; the balance between supply of and demand
for hotel rooms; our ability to obtain new franchise agreements; our ability to
develop and maintain positive relations with current and potential hotel owners;
the effect of international, national and regional economic conditions; the
availability of capital to allow us and potential hotel owners to fund
investments and construction of hotels; the cost and other effects of legal
proceedings; and other risks described from time to time in our filings with the
Securities and Exchange Commission, including those set forth under the heading
"Risk Factors" in our Report on Form 10-Q for the period ended June 30, 1999.
Given these uncertainties, you are cautioned not to place undue reliance on such
statements. We also undertake no obligation to publicly update or revise any
forward-looking statement to reflect current or future events or circumstances.

Item 1.    Business

Overview

          Choice Hotels International, Inc. (the "Company" or "Choice") is the
world's second largest franchisor of hotel properties with 4,392 hotels open and
operating in 38 countries at December 31, 2000. In addition, at December 31,
2000, we had 703 franchise properties currently under development representing a
total of 60,927 rooms. Choice franchises lodging properties under one of our
proprietary brand names (the "Choice brands"): Comfort(R), Quality(R),
Clarion(R), Sleep(R), Rodeway(R), Econo Lodge(R) and MainStaySM. We franchise
hotels in all 50 states, Puerto Rico and the District of Columbia and 37
additional countries, with 97% of our franchising revenue generated from hotels
franchised in the United States. With recognized brands and a diverse and
growing franchisee base, we believe we have a strong foundation for continued
growth.

          Choice is a lodging franchisor with limited real estate exposure and
low capital expenditure requirements. With a focus on hotel franchising versus
ownership, we benefit from the economies of scale inherent in the franchising
business. The fee and cost structure of our business provides significant
opportunities to increase profits by increasing the number of franchise
properties. We derive most of our revenues from franchise fees which consist of
an initial fee and ongoing royalty fees that are based as a percentage of the
franchisees' gross room revenues.

                                       6


          The principal factors that affect our results are: (i) growth in the
number of hotels under franchise; (ii) occupancies and room rates achieved by
the hotels under franchise; (iii) the number and relative mix of franchised
hotels; (iv) effective royalty rates achieved; and (v) our ability to manage
costs. The number of rooms at franchised properties and occupancies and room
rates at those properties significantly affect our results because royalty fees
are based upon room revenues at franchised hotels. The variable overhead costs
associated with franchise system growth are substantially less than incremental
royalty fees generated from new franchisees, therefore we are able to capture a
significant portion of these royalty fees as operating income. Continued growth
of our franchise business should enable us to capture increasing benefits from
the operating leverage in place which would improve operating margins.

Company History

          Prior to becoming a separate, publicly-held company on October 15,
1997 pursuant to the Company Spin-off (as defined below), the Company was known
as Choice Hotels Franchising, Inc. and was a wholly-owned subsidiary of Choice
Hotels International, Inc. ("Former Choice").  On October 15, 1997, Former
Choice distributed to its stockholders its hotel franchising business (which had
previously been primarily conducted by the Company) and its European hotel
ownership and franchising business through a pro rata distribution to its
stockholders of all of the stock of the Company (the "Company Spin-off").  At
the time of the Company Spin-off, the Company changed its name to "Choice Hotels
International, Inc.," and Former Choice changed its name to "Sunburst
Hospitality Corporation."  References herein to the Company's former parent
corporation prior to the Company Spin-off are to "Former Choice," and reference
to such corporation after the Company Spin-off are to "Sunburst."

          Prior to November 1996, Former Choice was a subsidiary of Manor Care,
Inc. ("Manor Care") which, directly and through its subsidiaries, engaged in the
hotel franchising business currently conducted by the Company as well as the
ownership and management of hotels (together with the hotel franchising
business, the "Lodging Business") and the health care business. On November 1,
1996, Manor Care separated the Lodging Business from its health care business
through a pro rata distribution to the holders of Manor Care's common stock of
all of the stock of Former Choice (the "Former Choice Spin-off"). In connection
with the Former

                                       7


Choice Spin-off, the Company became a wholly-owned subsidiary of Former Choice
and remained as such until consummation of the Company Spin-off.

The Lodging Industry/(1)/


          As of December 31, 2000, there were approximately 4.1 million hotel
rooms in the United States in hotels/motels containing twenty or more rooms. Of
those rooms, approximately 1.3 million rooms were not affiliated with a national
or regional brand, while the remaining approximately 2.8 million rooms were
affiliated with a brand either through franchise or the ownership/management of
a national or regional chain.

          During the late 1980s, the industry added approximately 500,000 hotel
rooms to its inventory due largely to a favorable hotel lending environment, the
ability of hotel operators to regularly increase room rates and the
deductibility of passive tax losses, which encouraged hotel development. As a
result, the lodging industry saw an oversupply of rooms and a decrease in
industry performance.

          The lodging industry in recent years has recovered, demonstrating
strong performance, based on year-to-year increases in room revenues, average
daily rates, revenue per available room ("RevPAR"), and lodging industry
profitability. RevPAR is calculated by multiplying the percentage of occupied
rooms by the average daily room rate realized. Since 1993, the lodging industry
has been able to increase its average daily rate ("ADR") at a pace faster than
the increase in the Consumer Price Index ("CPI"), a common measure of inflation
published by the US Department of Labor. The following chart demonstrates the
recent trends:

The US Lodging Industry's Growth Trends Since 1995


               Increases in                   Average
                   Room                        Daily       Increase       Increase      Revenue Per
                  Revenue                       Room        in ADR         in CPI        Available                         New
                  Versus        Occupancy      Rates        Versus         Versus           Room           Profits        Rooms
Year            Prior Year        Rates        (ADR)      Prior Year     Prior Year       (RevPAR)      (in billions)     Added
- ----            -----------    ----------    --------    -----------    -----------     -----------     -------------  ---------
                                                                                                 
1995.........       6.7%         65.1%         $65.81         4.7%           2.9%          $42.83           $ 8.5        64,000
1996.........       8.9%         65.0%         $70.81         7.6%           2.9%          $46.06           $12.5       101,000
1997.........       8.8%         64.5%         $75.16         6.1%           1.9%          $48.50           $17.0       128,000
1998.........       7.7%         64.0%         $78.62         4.4%           2.3%          $50.29           $22.0       143,000
1999.........       7.4%         63.3%         $81.27         4.0%           2.7%          $51.44           $23.0       143,148
2000.........       8.6%         63.5%         $85.24         4.7%           3.4%          $54.13           $24.0       121,476


          We believe the lodging industry can be divided into three price
categories: luxury or upscale, mid-scale and economy. Typically, the luxury
category generally has room rates above $80 per night, the mid-scale category
generally has room rates between $50 and $79 per night and the economy category
generally has room rates less than $50 per night. Additionally, a new category
has emerged of extended-stay hotels that primarily serve guests who stay at a
hotel five consecutive nights. These hotels span the industry's three price
categories.


________________________
/(1)/ Source:  Smith Travel Research

                                       8


          Service is a distinguishing characteristic in the lodging industry.
Generally, there are three levels of service: full-service hotels (which offer
food and beverage services, meeting rooms, room service and similar guest
services); limited-service hotels (which offer amenities such as swimming pools,
continental breakfast, or similar services); and all-suites hotels (which
usually have limited public areas, but offer guests two rooms or one room with
distinct areas, and which may or may not offer food and beverage services).

          The Company's Econo Lodge(R) and Rodeway(R) brands compete primarily
in the limited-service economy market; the Company's Comfort(R), Quality(R) and
Sleep(R) brands compete primarily in the limited-service middle-market. The
Company's MainStay(SM) Suites brand competes primarily in the all-suites middle-
market. The Company's Clarion(R) brand competes primarily in the full-service
upscale market.

          New hotels opened in recent years typically have been hotels without
on-premise food and beverage, as these hotels are less costly to develop, enjoy
higher gross margins, and tend to have better access to financing. These hotels
typically operate in the economy and mid-scale categories and are located in
suburban or highway locations. From 1991 to 2000, the average room count in new
hotels declined from 122 to 103 primarily because hotel developers found it
difficult to obtain financing of more than $3 million from their primary lending
sources (local banks and Small Business Administration-guaranteed loan
programs).

          In recent years, operators of hotels not owned or managed by major
lodging companies have increasingly joined national hotel franchise chains as a
means of remaining competitive with hotels owned by or affiliated with national
lodging companies. Because the costs of owning and operating a hotel are
generally fixed, increases in revenues generated by affiliation with a franchise
lodging chain can improve a hotel's financial performance. Of approximately 976
hotel properties that changed their affiliation in 2000, 70.4% converted from
independent status to affiliation with a chain or converted from one chain to
another, while only 289 converted from affiliation with a chain to independent
status. A total of 223 independent properties switched to a franchise chain in
2000.

          The large franchise lodging chains, including the Company, generally
provide a number of services to hotel operators to improve the financial
performance of their properties including national reservation systems,
marketing and advertising programs, training and education programs, property
systems, revenue enhancement services, and direct sales programs. The Company
believes that national franchise chains with a larger number of hotels enjoy
greater brand awareness among potential guests than those with fewer numbers of
hotels, and that greater brand awareness can increase the desirability of a
hotel to its potential guests.

          We believe that hotel operators choose lodging franchisors based
primarily on the perceived value and quality of each franchisor's brand and its
services, and the extent to which affiliation with that franchisor may increase
the franchisee's reservations and profits.

Franchise Business

                                       9


Economics of Franchise Business. The fee and cost structure of the Company's
business provides significant opportunities for us to increase profits by
increasing the number of franchised properties. As a hotel franchisor, we derive
substantially all of our revenue from franchise fees. The Company's franchise
fees consist of an initial fee and ongoing royalty, marketing and reservation
fees which are based on a percentage of the franchisee's gross room revenues.
The royalty portion of the franchise fee is intended to cover our operating
expenses, such as expenses incurred in quality assurance, administrative support
and other franchise services and to provide the Company with operating profits.
The marketing and reservation portion of the franchise fee are used exclusively
by the Company's marketing and reservation funds for the expenses associated
with providing such franchise services as the central reservation system and
national marketing and media advertising.

          Much of the variable costs associated with our activities are
reimbursed by the franchisees through the initial fees, and marketing and
reservation fees. The royalty fees generated from franchisees more than cover
the fixed costs of the business at its current level. The variable overhead
costs associated with franchise system growth are substantially less than
incremental royalty fees generated from new franchisees, therefore we are able
to capture a significant portion of these royalty fees as operating income.

Strategy. Our business strategy is designed to aggressively grow our core hotel
franchising business by benefiting from Choice's well-known global hotel
products, proven franchise sales capabilities, effective reservations delivery,
many RevPAR enhancing services and technology, and financial strength created by
our significant free cash flow.

Specific elements of our strategy include building strong brands, delivering
exceptional services, and reaching more consumers.

   Build Strong Brands - Each of our brands has particular attributes and
strengths. Our strategy is to utilize the strengths of each brand for profit
growth.

 .  Use Financial Resources to Create Critical Mass in Growth Brands - Although
   we intend to rely mainly on hotel franchising versus ownership, we will
   strategically invest capital in select Choice-branded hotels, especially in
   primary markets where our distribution has been limited. We believe that
   investing in hotels to create a presence in these markets will generate
   increased brand visibility, higher quality product in key locations, improved
   system-wide revenue, increased brand consistency, and improved developer
   returns- leading to more guest stays and an ability to sell more franchises.
   We will also create new images for brands where necessary in order to create
   a more customer-focused and contemporary brand image.

 .  Protect Mature Brands -- Many Choice brands benefit from their large
   distribution and well-known names. These brands, while maintaining a standard
   of guest satisfaction and amenities, are not "cookie-cutter" in design or
   operations. We will ensure these brands remain appealing to hotel owners and
   guests alike by focusing on consumer-driven quality assurance and through
   terminating the poorest performing properties that do not meet standards and
   lower overall system performance.

                                       10


  Consider New Products and Acquisitions -  The Company will continue to
identify new niches into which we may expand, either through new product
development or acquisition.

  Deliver Exceptional Services. The Company has successfully created a wide
array of services and local customer touch points to help franchisees improve
performance. Marketing services help create effective positioning for brands and
drive guest stays. Reservations services deliver a high percentage of guests
directly to properties. Our field staff, in combination with strong technology
products, directly helps property owners effectively manage their properties to
improve RevPAR performance. These services create revenue gains for hotel owners
and translate into both higher royalty rates for Choice and improved returns for
owners, leading to further unit growth. These services also make Choice brands
attractive to both experienced hotel owners and owners and developers new to the
industry. We will continue to focus on aligning these services with customer
needs and creating efficient, effective, and coordinated service delivery
systems to create the most benefits for franchisees and ensure our overhead
costs are minimized.

  Additionally, the significant number of hotels in our system provides a
compelling opportunity to provide low-cost products and effective purchasing
technology to franchisees through partnerships with endorsed vendors while
creating enhanced cash flows for Choice. We intend to continue to expand this
business, both by increasing penetration internally, creating new vendor
relationships, and identifying opportunities for external growth.

  Reach More Consumers. Hotel owners greatly value the large delivery of guests
we provide through corporate and brand marketing, reservations, sales, and Guest
Privileges program. Our strategy is to continue to maximize the effectiveness of
these services and programs to deliver both leisure and business travelers to
Choice-branded hotels.

  New advertising campaigns for our company and updated signs and logos for our
Comfort, Sleep and Quality brands are designed to increase the awareness of
Choice Hotels and refresh our image. Our emphasis will be on improving overall
contributions from higher rate business travelers while continuing to stress our
very powerful leisure market. Programs such as 100% Satisfaction Guarantee and
alliances with major consumer groups such as AAA are designed to expand our
distribution. Our continued focus on overall brand quality coupled with these
new initiatives is designed to stimulate room demand for our franchised hotels
through improved guest satisfaction.

     Franchise System

          Our franchise hotels operate under one of the Choice brand names:
Comfort(R), Quality(R), Clarion(R), Sleep(R), Rodeway(R), Econo Lodge(R) and
MainStay(SM). The following table presents key statistics relative to our
domestic franchise system over the two fiscal years ended May 31, 1997, for the
seven-month period ended December 31, 1997 and for the four fiscal years ended
December 31, 2000.

                                      11



                      Combined Domestic Franchise System



                                                                    As of and for the
                                   As of and for the Year Ended    Seven Months Ended      As of and for the Year Ended
                                             May 31,                  December 31,                 December 31,
                                  ------------------------------------------------------------------------------------------
                                          1996         1997            1997         1997       1998       1999       2000
                                  ------------------------------------------------------------------------------------------
                                                                                            
Number of properties, end of
 period...........................        2,495        2,781        2,880        2,880       3,039       3,123       3,244
Number of rooms, end of period....      214,613      235,431      242,161      242,161     252,357     258,120     265,962
Royalty fees ($000)...............    $  82,239    $  91,724    $  65,271    $  99,144   $ 109,240   $ 120,932   $ 131,702
Average Royalty Rate(1)...........          3.3%         3.4%         3.5%         3.5%        3.6%        3.7%        3.8%
Average occupancy percentage......         63.9%        62.6%        66.2%        62.3%       61.0%       60.5%       59.8%
Average daily room rate (ADR).....    $   49.49    $   51.92    $   54.97    $   53.89   $   56.23   $   58.42   $   61.45
RevPAR(2).........................    $   31.60    $   32.52    $   36.39    $   33.56   $   34.30   $   35.33   $   36.72


(1)  Represents domestic royalty fees as a percentage of aggregate gross room
     revenues of all of the domestic Choice brand franchised hotels.

(2)  The Company's RevPAR figure for each fiscal year is an average of the
     RevPAR calculated for each month in the fiscal year. The Company calculates
     RevPAR each month based on information actually reported by franchisees on
     a timely basis to the Company.

          We have over 2,300 domestic franchisees and operate in all 50 states
and the District of Columbia. Approximately 96% of the total royalty income is
generated from domestic franchise operations. Consequently, our analysis of our
franchise system is focused on the domestic operations. Currently, no master
franchisee or other franchisee accounts for 5% or more of Choice's royalty
revenues or total revenues. Sunburst is our largest franchisee with a portfolio
of 73 hotels containing 9,965 rooms located in 25 states as of December 31,
2000.

Brand Positioning

     Our brands offer consumers a wide range of choices from economy hotels to
upscale, full service properties.

Comfort. Our largest brand is Comfort. Comfort Inns offer rooms in the mid-scale
without food and beverage category and is targeted to business and leisure
travelers. Principal competitor brands include Baymont, Fairfield Inn, Hampton
Inn, Holiday Express and LaQuinta. Comfort Suites offer business and leisure
guests a large room with separate living and sleeping areas. This product
competes in the upper portion of the mid-scale without food and beverage
category against brands such as AmeriSuites, Hampton Inn and Suites and Spring
Hill. At December 31, 2000, there were 1,652 Comfort Inn properties and 288
Comfort Suites properties with a total of 126,440, and 22,846 rooms,
respectively, open and operating worldwide. An additional 278 Comfort Inn and
Comfort Suites properties with a total of 22,633 rooms were under development.
During 2000, we added 125 Comfort properties while terminating 24.

          Comfort properties are located in the United States and in Argentina,
Australia, the Bahamas, Belgium, Brazil, Canada, Cayman Islands, Czech Republic,
Denmark, Egypt, El Salvador, France, Germany, India, Ireland, Italy, Jamaica,
Japan, Lebanon, Norway, Portugal, Puerto Rico, Sweden, Switzerland, Thailand,
Turks & Caicos, the United Kingdom and the United Arab Emirates. The following
chart summarizes the Comfort system in the United States:

                                      12



                            COMFORT DOMESTIC SYSTEM



                                                                     As of and for the
                                   As of and for the Year Ended     Seven Months Ended       As of and for the Year  Ended
                                             May 31,                   December 31,                   December 31,
                                   ----------------------------------------------------------------------------------------
                                           1996         1997            1997         1997        1998       1999       2000
                                   ----------------------------------------------------------------------------------------
                                                                                              
Number of properties, end of
 period.........................          1,129        1,255           1,304        1,304       1,394      1,470      1,568
Number of rooms, end of period..         94,160      102,722         105,384      105,384     110,682    112,727    122,761
Royalty fees ($000s)............        $44,657     $ 50,758        $ 36,446     $ 55,261    $ 61,153   $ 68,177   $ 75,968
Average occupancy percentage....           68.7%        67.2%           71.3%        66.6%       65.4%      64.8%      63.7%
Average daily room rate (ADR)...        $ 51.13     $  54.17        $  57.15     $  55.74    $  58.19   $  60.57   $  63.77
RevPAR..........................        $ 35.11     $  36.39        $  40.75     $  37.15    $  38.03   $  39.26   $  40.60


Sleep Inn. Established in 1988, Sleep Inn is a new-construction hotel brand in
the lower portion of the mid-scale without food and beverage category. Sleep
Inns are targeted to the business and leisure traveler. Principal competitor
brands include Fairfield Inn, Holiday Express, LaQuinta and Red Roof.

          At December 31, 2000 there were 268 Sleep Inn properties with a total
of 20,771 rooms open and operating worldwide. An additional 121 properties with
a total of 8,956 rooms were under development. During 2000, 39 Sleep Inn
properties were added while 2 were terminated. The properties are located in the
United States, Brazil, Canada, Cayman Islands and Japan. The following chart
summarizes the Sleep system in the United States:

                             SLEEP DOMESTIC SYSTEM



                                                                    As of and for the
                                   As of and for the Year Ended    Seven Months Ended      As of and for the Year Ended
                                             May 31,                  December 31,                 December 31,
                                   -------------------------------------------------------------------------------------
                                           1996         1997           1997        1997       1998       1999       2000
                                   -------------------------------------------------------------------------------------
                                                                                           
Number of properties, end of
 period..........................            87          131            156         156        197        224        261
Number of rooms, end of period...         6,396        9,635         11,538      11,538     14,924     17,199     20,158
Royalty fees ($000s).............        $2,108       $3,343        $ 2,630     $ 3,926    $ 5,337    $ 7,241    $ 8,713
Average occupancy percentage.....          65.5%        63.9%          66.5%       63.0%      62.0%      60.6%      59.6%
Average daily room rate (ADR)....        $45.11       $48.11        $ 50.54     $ 49.41    $ 51.32    $ 53.91    $ 55.82
RevPAR...........................        $29.56       $30.75        $ 33.60     $ 31.11    $ 31.82    $ 32.66    $ 33.25


Quality. Certain Quality Inns, Quality Inns and Suites, and Quality Suites
hotels compete in the mid-scale with food and beverage category. Quality Inns,
Quality Inns and Suites, and Quality Suites are targeted to business and leisure
travelers. Principal competitor brands include Best Western, Holiday Inn, Howard
Johnson and Ramada Inn. At December 31, 2000, there were 716 Quality Inn and
Quality Inns and Suites properties with a total of 75,858 rooms, and 50 Quality
Suites properties with a total of 5,419 rooms open worldwide. An additional 167
Quality Inn, Quality Inns and Suites and Quality Suites properties with a total
of 17,912 rooms were under development. During 2000, a total of 45 Quality
properties were added while 41 were terminated.

          Quality properties are located in the United States and in Australia,
Brazil, Canada, Chile, Costa Rica, the Czech Republic, Denmark, Egypt, France,
Germany, India, Indonesia, Ireland, Italy, Jamaica, Malaysia, New Zealand,
Norway, Portugal, Russia, Sweden,

                                      13


Thailand, the United Kingdom and the United Arab Emirates. The following chart
summarizes the Quality system in the United States:

                            QUALITY DOMESTIC SYSTEM




                                                                    As of and for the
                                   As of and for the Year Ended     Seven Months Ended     As of and for the Year Ended
                                             May 31,                   December 31,                December 31,
                                  ----------------------------------------------------------------------------------------------
                                           1996         1997            1997        1997           1998        1999        2000
                                  ----------------------------------------------------------------------------------------------
                                                                                                    
Number of properties, end of
 period........................             362          409            419          419           430            431         436
Number of rooms, end of period.          45,967       50,487         50,674       50,674        50,151         49,331      49,191
Royalty fees ($000s)...........         $16,606      $17,623        $14,459      $18,488       $20,187        $21,034     $21,753
Average occupancy percentage               62.5%        61.3%          63.8%        60.2%         58.9%          58.0%       57.6%
Average daily room rate (ADR)..         $ 52.90      $ 54.61        $ 57.58      $ 56.79       $ 60.02        $ 61.89     $ 64.05
RevPAR.........................         $ 33.08      $ 33.46        $ 36.73      $ 34.19       $ 35.35        $ 35.90     $ 36.86


Clarion. Clarion Inns, Clarion Hotels, Clarion Resorts and Clarion Suites hotels
are full-service properties with on-premise food and beverage facilities and
operate in the upscale category. Clarion properties are targeted to business and
leisure travelers. Principal competitor brands include Crowne Plaza, Four Points
by Sheraton, Radisson, Courtyard by Marriott and Doubletree.

         At December 31, 2000, there were 153 Clarion properties with a total of
23,872 rooms open and operating worldwide and an additional 26 properties with a
total of 3,892 rooms under development. During 2000, 14 Clarion properties were
added while 15 were terminated. The properties are located in the United States,
Argentina, Australia, the Bahamas, Canada, Chile, China, Denmark, France,
Germany, Guatemala, Indonesia, Ireland, Italy, Japan, Norway, the United Kingdom
and Uruguay. The following chart summarizes the Clarion system in the United
States:

                            CLARION DOMESTIC SYSTEM



                                                                    As of and for the
                                   As of and for the Year Ended    Seven Months Ended      As of and for the Year  Ended
                                             May 31,                  December 31,                  December 31,
                                  ---------------------------------------------------------------------------------------
                                           1996         1997           1997        1997        1998       1999       2000
                                  ---------------------------------------------------------------------------------------
                                                                                            
Number of properties, end of
 period...........................           75           92             96          96         105        112        114
Number of rooms, end of period....       12,817       14,721         16,161      16,161      17,878     18,815     18,537
Royalty fees ($000s)..............      $ 3,602      $ 4,081        $ 2,957     $ 5,061     $ 5,447    $ 6,491    $ 7,796
Average occupancy percentage......         63.3%        63.3%          64.7%       62.3%       60.5%      59.0%      58.8%
Average daily room rate (ADR).....      $ 64.36      $ 67.76        $ 71.53     $ 70.67     $ 72.25    $ 74.17    $ 81.37
RevPAR............................      $ 40.74      $ 42.86        $ 46.29     $ 44.05     $ 43.73    $ 43.74    $ 47.86


Econo Lodge. Econo Lodge hotels operate in the economy category of the lodging
industry. Econo Lodges are primarily targeted to senior citizens and rely to a
large extent on strong roadside name recognition. Principal competitor brands
include Days Inn, Motel 6, Ramada Limited, Red Carpet Inn, Super 8 and
Travelodge.

             At December 31, 2000, there were 716 Econo Lodge properties with a
total of 44,220 rooms open and operating in the United States and Canada, and an
additional 57

                                      14


properties with a total of 3,765 rooms under development in those two countries.
During 2000, 38 Econo Lodge properties were added while 55 were terminated. The
following chart summarizes the Econo Lodge system in the United States:

                          ECONO LODGE DOMESTIC SYSTEM


                                                                       As of and for the
                                     As of and for the Year Ended     Seven Months Ended      As of and for the Year  Ended
                                                May 31,                   December 31,                  December 31,
                                    ----------------------------------------------------------------------------------------
                                           1996         1997           1997         1997        1998       1999       2000
                                    ----------------------------------------------------------------------------------------
                                                                                             
Number of properties, end of
 period..........................           641          682            692          692         698        691        684
Number of rooms, end of period...        42,726       44,636         45,050       45,050      44,458     43,754     42,611
Royalty fees ($000s).............       $12,760      $13,288        $ 8,991      $13,687     $13,975    $14,313    $14,490
Average occupancy percentage.....          58.0%        56.4%          60.7%        56.1%       54.3%      54.0%      52.9%
Average daily room rate (ADR)....       $ 39.97      $ 41.33        $ 43.86      $ 42.35     $ 43.55    $ 45.01    $ 46.33
RevPAR...........................       $ 23.17      $ 23.30        $ 26.63      $ 23.75     $ 23.65    $ 24.32    $ 24.51


Rodeway. The Rodeway brand competes in the economy category and is primarily
targeted to senior citizens. Principal competitor brands include Ho-Jo Inn,
Ramada Limited, Red Roof Inn, Shoney's Inn, Super 8 and Motel 6. At December 31,
2000, there were 151 Rodeway Inn properties with a total of 9,868 rooms, open
and operating in the United States and Canada, and an additional 17 properties
with a total of 1,152 rooms under development in those two countries. During
2000, 8 Rodeway properties were added while 23 were terminated. The following
chart summarizes the Rodeway system in the United States:

                            RODEWAY DOMESTIC SYSTEM



                                                                 As of and for the
                                   As of and for the Year Ended    Seven Months         As of and for the Year  Ended
                                             May 31,                   Ended                     December 31,
                                                                   December 31,
                                  ---------------------------------------------------------------------------------------
                                           1996         1997               1997        1997      1998      1999      2000
                                  ---------------------------------------------------------------------------------------
                                                                                            
Number of properties, end of
 period.........................            201          217                209         209       196       166       147
Number of rooms, end of period..         12,547       13,509             12,997      12,997    12,447    10,613     9,605
Royalty fees ($000s)............        $ 2,506      $ 2,631            $ 1,756     $ 2,671   $ 2,678   $ 2,552    $2,391
Average occupancy percentage....           52.7%        52.7%              54.7%       51.4%     50.1%     50.7%     50.3%
Average daily room rate (ADR)...        $ 40.66      $ 41.15            $ 44.11     $ 43.15   $ 44.03   $ 45.57    $48.25
RevPAR..........................        $ 21.48      $ 21.68            $ 24.13     $ 22.20   $ 22.04   $ 23.09    $24.25


MainStay Suites. MainStay Suites, our newest hotel brand, is a midscale
extended-stay lodging product targeted to travelers who book hotel rooms for
five nights or more. The first MainStay Suites hotel, which Sunburst owns and
manages, opened in Plano, Texas, in November 1996. As of December 31, 2000,
there were 34 open hotels with 3,099 rooms and an additional 26 properties with
2,044 rooms under development. During 2000, 5 MainStay Suites properties were
added.

          The MainStay/SM/ Suites brand is designed to fill the gap in the
midscale category between existing upscale and economy extended-stay lodging
products. Principal competitors brands include Candlewood Suites, Homestead
Village, Sierra Suites and TownePlace Suites.


                                      15

International Franchise Operations

     We conduct our international business through master franchise
arrangements, direct franchise agreements, and investments in overseas
hospitality companies that are involved with both hotel management and
franchising. The use of our brands by third parties overseas are governed by
master franchising agreements which generally provide the master franchisee with
the right to the brands in a specific geographic region, usually for a fee. As
of December 31, 2000, we had 1,148 franchise hotels in 37 countries outside of
the United States. The following table illustrates the growth of our
international operations over the two fiscal years ended May 31, 1997, for the
seven month period ended December 31, 1997 and for the four fiscal years ended
December 31, 2000.

                   COMBINED INTERNATIONAL FRANCHISE SYSTEM(1)



                                                                  As of and for the
                                        As of and for the Year    Seven Months Ended    As of and for the Year  Ended
                                                Ended                December 31,                December 31,
                                               May 31,
                                       ------------------------------------------------------------------------------
                                              1996        1997         1997        1997      1998      1999      2000
                                       ------------------------------------------------------------------------------
                                                                                        
Number of properties, end of
 period.............................           557         563          605         605       632     1,125     1,148
Number of rooms, end of period......        46,843      47,603       50,639      50,639    53,095    80,134    84,389
Royalty fees ($000s)................       $ 1,586     $ 1,672      $   958     $ 2,303   $ 4,902   $ 6,949   $ 5,286


(1) Master franchise contracts do not currently require the reporting of
    operating statistics (e.g. average occupancy percentage and average daily
    room rate) of the underlying hotels, thus RevPAR is not calculated for
    foreign hotels.

     Europe. Through our relationships with Friendly Hotels, PLC ("Friendly")
and Choice Hotels Scandinavia ("CHS"), we are the second largest branded hotel
chain in Europe. As of December 31, 2000, Friendly's portfolio consisted of 305
properties which were owned, managed or franchised. CHS had 107 open properties
at December 31, 2000.

     In May 1996, we granted to Friendly a master franchise agreement for the
United Kingdom and Ireland. In January 1998, we also granted Friendly the master
franchise rights for the Comfort, Quality, Clarion, and Sleep brands throughout
continental Europe (excluding Scandinavia) for a ten-year period. In exchange,
we received shares of common stock and were to receive an $8.0 million payment,
payable in eight equal annual installments.

     As of December 31, 2000, we held 1,083,333 shares of common stock and
23,624,742 shares of 5.75% convertible preferred stock in Friendly. The
preferred shares were convertible for one new Friendly common share for every
150 pence nominal of the preferred convertible shares.

     We have the right to appoint three directors to the board of Friendly.
Given our ability to exercise significant influence over the operations of
Friendly, the equity method of accounting is applied.

     On January 19, 2001, the shareholders of Friendly approved a capital
reorganization and new strategic direction for Friendly. The capital
reorganization is intended to provide Friendly with a stronger financial
structure that will enable it to achieve its new strategic plan and to leverage
its close association with us.

                                      16


     Pursuant to the capital reorganization, we waived all master, royalty, and
marketing fees due from Friendly under the continental European and United
Kingdom and Republic of Ireland master franchise agreements for the period
between December 27, 1999 and December 31, 2005 and provided a 7.8 million
[British Pounds] secured Letter of Credit, in consideration for, among other
things, a reduction in the conversion price of our convertible preferred shares
from 150 pence to 60 pence. Other modifications to our convertible preferred
shares include a change in the dividend rate from 5.75% (payable in cash) to 2%
per annum, if payable in additional convertible preferred shares. Friendly may
alternatively elect to pay cash dividends at the rate of 3.5% per annum up until
January 30, 2013 and thereafter at the rate of 5.75%. In addition, accrued
dividends due to us as of February 7, 2001 were converted to additional
convertible preferred shares of Friendly. Additionally in 2001, Friendly had
drawn down 5.5 million [British Pounds] on the secured Letter of Credit.

     The impact of the reduction in the conversion price together with the
conversion of dividend arrearage to additional convertible preferred shares, is
to increase our fully diluted-ownership of Friendly, on a converted basis, from
44% to 69%. Friendly was also granted an option to settle the deferred
consideration of $4.0 million pursuant to the January, 1998 transaction, in
additional convertible preferred shares. In the event that Friendly settles this
obligation before maturity, the amount payable shall be discounted at a rate of
10% per annum.

     We do not control Friendly nor have the requirement to consolidate Friendly
for financial reporting purposes. Our fully diluted holding in Friendly is 69%,
but voting rights in that percentage would only be granted to us if we converted
the convertible preferred shares to ordinary shares. Currently we only have 5.4%
of the voting rights. Additionally, we have appointed three of the eight
existing directors to the board of Friendly, and therefore cannot control any
vote. These appointed directors do not have the legal right under English law to
vote on resolutions regarding matters where we are a related party.

     In addition to the capital reorganization, Friendly has entered into new
arrangements with its bank group and commenced a non-core real estate asset
disposal program to de-leverage its balance sheet. In order to enable its
disposal program, Friendly revalued its real estate portfolio at December 31,
2000 and recognized a non-cash write-down of 49.1 million [British Pounds]
pursuant to this revaluation. We recognized an equity loss of $(12.1) million
for the year ended December 31, 2000 related to Friendly's revaluation and
capital restructuring.

     Since the closing of the restructuring transaction in January 2001, we
continue to closely monitor strategic options with respect to our investment in
Friendly. In the event that Friendly's financial condition deteriorates, there
may not be sufficient cash from operations and available credit lines to fund
the business. In the event that Friendly cannot secure additional borrowings or
equity, we will consider our strategic and financial options, including, but not
limited to, i) stand-aside to additional funding requirements which would likely
result in the insolvency of Friendly, a further or complete write-down of our
investment in Friendly and taking back our franchising rights for the UK,
Ireland and continental Europe, or ii) conversion of our convertible preferred
shares into ordinary equity resulting in control of and full consolidation of
Friendly.

                                      17


Canada. We conduct our operation in Canada through Choice Hotels Canada, Inc. a
joint venture owned 50% by us and 50% by W-westmont, a subsidiary of Westmont
Hospitality. Choice Hotels Canada is the largest lodging organization in Canada
with 236 franchised properties open as of December 31, 2000.

Australia. In June 1998, we entered into a strategic alliance with Flag
International Limited ("FIL"). Pursuant to the transaction, a subsidiary of FIL,
Flag Choice Hotels ("FCH"), was formed to conduct franchise operations in
Australia. Through July 2002, we are obligated to provide a loan facility to FCH
in an amount up to A$5.0 million, of which A$3.75 million may be converted to an
additional 15% equity holding in FCH. As of December 31, 2000, we held 15% of
FCH through the conversion of A$1.875 million in notes and held one seat on
FCH's board of directors. Upon conversion of the remaining amounts, we will be
entitled to an additional board seat. As of December 31, 2001, FCH had 55
franchised properties opened under the Choice brands and 356 franchised hotels
under the Flag brands. Through ongoing discussions with individual property
owners, FCH will continue its efforts to convert appropriate Flag branded
properties to the appropriate Choice brands.

Other International Relationships. We have various master franchise and area
representative arrangements in place with local hotel management and franchising
companies located in South America, India, New Zealand, Central America, Japan,
Indonesia, and Egypt. In addition, the Company has direct franchise
relationships with six properties in the Caribbean, two properties each in
Thailand, Malaysia, and Lebanon, and one property each in China, Dubai, and
Tunisia.


Franchise Sales

          We have identified key market areas for hotel development based on
supply/demand relationships and strategic objectives. Development opportunities
are first offered; (i) to existing franchisees; and then to (ii) developers of
hotels; (iii) owners of independent hotels and motels; (iv) owners of hotels
affiliated with other franchisors' brands; and; (v) contractors who construct
any of the foregoing. In considering hotels for conversion to one of the Choice
brands, or sites for development of new hotels, We consider locations which are
close to major highways, airports, tourist attractions and business centers that
attract travelers.

          At December 31, 2000, we employed approximately 35 sales directors,
each of whom is responsible for a particular region or geographic area. Sales
directors contact potential franchisees directly and receive compensation based
on sales generated. Franchise sales efforts emphasize the benefits of
affiliating with one of the Choice brands, our commitment to improving RevPAR,
our television, radio and print brand advertising campaigns, the Choice
reservation system, our training and support systems (including our proprietary
property management system) and our history of growth and profitability. Because
the Choice brands cover a broad spectrum of the lodging marketplace, we are able
to offer each prospective franchisee a brand that fits its needs, lessening the
chances that the prospective franchisee would need to consider a competing
franchise system.

                                      18


          Because retention of existing franchisees is important to our growth
strategy, we created a formal Impact Policy in 1992, which was revised in July,
1999, which offers existing franchisees the right to object to a same-brand
property within a 15 mile radius. The Impact Policy protects franchisees from
the opening of a same-brand property within a specific distance, which can range
from one to seven miles, depending upon the market in which the property is
located. We believe that it is the only major franchise company to routinely
offer such territorial protection to its franchisees.

          During fiscal 2000, Choice received 801 franchise applications, signed
298 franchise agreements and placed 274 new properties into operation in the
United States under the Choice brands. Of those placed into operations, 170 were
newly constructed hotels. By comparison, during the twelve month period ended
December 31, 1999, we received 788 franchise applications, signed 318 franchise
agreements and added 279 new properties into operation in the U.S. An
application received may not always result in a signed franchise agreement
during the year received or at all due to an applicant being unable to obtain
financing or because the Company and the applicant are unable to agree on the
financial terms of the franchise agreement.

          In 2000, we continued to place great focus on enforcing quality
standards. Terminations for properties on-line that failed to meet quality
assurance standards and contractual obligations were 161 properties in 2000 and
193 properties in 1999.


Franchise Agreements

          Our standard franchise agreement grants a franchisee the right to non-
exclusive use of our franchise system in the operation of a single hotel at a
specified location, typically for a period of 20 years, with certain rights to
each of the franchisor and franchisee to terminate the franchise agreement
before the twentieth year. When the responsibility for development is sold to a
master franchisee, that party has the responsibility to sell to local
franchisees the Choice brands and the master franchisee generally must manage
the delivery of necessary services (such as quality assurance, reservations and
marketing) to support the franchised hotels in the master franchise area. The
master franchisee collects the fees paid by the local franchisee and remits an
agreed share to us. Master franchise agreements generally have a term of at
least 10 years. We have only entered into master franchise agreements with
respect to franchise hotels outside the United States.

          Either party to a franchise agreement, other than master franchise
agreements, can terminate a franchise agreement prior to the conclusion of their
term under certain circumstances, such as at certain anniversaries of the
agreement or if a franchisee fails to bring properties into compliance with
contractual quality standards within specified periods of time. Early
termination options give us flexibility in eliminating or re-branding properties
which become weak performers for reasons other than contractual failure by the
franchisee. Master franchise agreements typically contain provisions permitting
us to terminate the agreement for failure to meet a specified development
schedule.

                                      19


          Franchise fees vary among the different Choice brands, but generally
are competitive with the industry average within their market group. Franchise
fees usually have four components: an initial, one-time affiliation fee; a
royalty fee; a marketing fee; and a reservation fee. Proceeds from the marketing
fee and reservation fee are used exclusively to fund marketing programs and the
Company's central reservation system, respectively. Most marketing fees support
brand-specific marketing programs, although we occasionally contribute a portion
of such fees to marketing programs designed to support all of the Choice brands.
Royalty fees and affiliation fees are the principal sources of profits for us.

          The standard franchise agreements typically require our franchisees to
pay the following fees:

                              Quoted Fees by Brand



                                                    Initial Fee
                                                     Per Room/           On-Going Fees as a Percentage of Gross Room Revenues
                                                                      -------------------------------------------------------------
                  Brand                               Minimum            Royalty Fees         Marketing Fees      Reservation Fees
                  -----                             ---------------   -------------------    ----------------    ------------------

                                                                                                     
Comfort Inn...............................            $300/$50,000                  5.25%              2.1%             1.75%
Comfort Suites............................            $300/$50,000                  5.25%              2.1%             1.75%
Quality Inn...............................            $300/$35,000                   4.0%              2.1%             1.75%
Quality Suites............................            $300/$50,000                   4.0%              2.1%             1.25%
Sleep Inn.................................            $300/$40,000                   4.5%              2.1%             1.75%
Clarion...................................            $300/$40,000                  3.75%              1.0%             1.25%
Econo Lodge...............................            $250/$25,000                   4.0%              3.5%(1)            --
MainStay Suites...........................            $300/$30,000                   4.5%              2.5%(1)            --
Rodeway...................................            $250/$25,000                   3.5%             1.25%             1.25%


___________________

(1)  Fee includes both Marketing and Reservation Fees.

          We have increased our average royalty rate since fiscal year 1993,
primarily by raising the quoted royalty fee for Comfort Inn franchisees to 5.25%
of annual gross room revenues ("GRR") from 4.0% of GRR in 1993, and by
increasing the number of higher royalty fee contracts in the franchise system.
For the twelve months ended December 31, 2000, our average royalty rate for all
Choice domestic brand hotels was 3.85%. We believe that our average royalty rate
will continue to increase by adding new franchisees at higher royalty rates.

Franchise Operations

          Our operations are designed to improve RevPAR for our franchisees, as
this is the measure of performance that most directly impacts franchisee
profitability. We believe that by helping our franchisees to become more
profitable we will enhance our ability to both retain our existing franchisees
and attract new franchisees. The key aspects of our franchise operations are:

Central Reservation System.

          On average, approximately 37.6% of the room nights booked at
franchisees' properties are reserved through a central reservation system, which
is supported by

                                      20


our toll-free telephone reservation system, our proprietary Internet site, and
global distribution systems. Our reservation system consists of a computer
reservation system known as CHOICE 2001, three reservation centers in North
America and several international reservation centers run by us or our master
franchisees. Operators trained on the CHOICE 2001 system can match each caller
with a Choice-branded hotel meeting the caller's needs. It provides an instant
data link to our franchised properties as well as to the Amadeus, Galileo, SABRE
and Worldspan airline reservation systems that facilitates the reservation
process for travel agents. We also offer our rooms for sale on our own
proprietary Internet site as well as those of other travel companies.

          To define more sharply the market and image for each of our brands, we
began advertising separate toll-free reservation numbers for all of our brands
in fiscal year 1995, although we allow our reservation agents to cross-sell the
Choice brands. If a room in the Choice hotel brand requested by a customer is
not available in the location or price range that the customer desires, the
agent may offer the customer a room in another Choice-branded hotel that meets
the customer's needs. Cross-selling enables Choice and its franchisees to
capture additional business.

          On-line reports generated by the CHOICE 2001 system enable franchisees
to analyze their reservation patterns over time. In addition, we provide a yield
management product for our franchisees to allow them to improve the management
of their mix of rates and occupancy based on current and forecasted demand on a
property-by-property basis. We also market to our franchisees a property
management product. Such products are designed to manage the financial and
operations information of an individual hotel and improve its efficiency.

Property Management System. Our proprietary property and yield management
system, Profit Manager by Choice Hotels, is designed to help franchisees
maximize profitability and compete more effectively by managing their rooms
inventory, rates and reservations. The Profit Manager system synchronizes each
hotel's inventory with the CHOICE 2001 system, giving reservation sales agents
last room sell capabilities at every hotel. Profit Manager includes a revenue
management feature that calculates and suggests optimum rates and length of
stays based on each hotel's past performance and projected occupancy. We believe
that Profit Manager provides Choice Hotels with a competitive advantage over
hotels and franchise systems that do not have standardized property and yield
management systems.

          As of March 9, 2001, 2,353 hotels in the United States and Canada are
using Profit Manager, with 1,562 of those hotels utilizing the revenue
management function.

Brand Name Marketing and Advertising. Our marketing and advertising programs are
designed to heighten consumer awareness of the Choice brands. Marketing and
advertising efforts are focused primarily in the United States and include
national television and radio advertising, print advertising in consumer and
trade media and promotional events, including joint marketing promotions with
vendors and corporate partners.

          Numerous marketing programs are conducted which target specific
groups, including senior citizens, motorist club members, families, government
and military employees, and meeting planners. Other marketing efforts include
domestic and international trade show

                                       21


programs, publication of group and tour rate directories, direct-mail programs,
centralized commissions for travel agents, fly-drive programs in conjunction
with major airlines, and annual publication of a Travel and Vacation Directory.

          In 1998, we launched a program called Guest Privileges at four of our
brands (Comfort, Clarion, Quality and Sleep) to attract and retain frequent
travelers. As of December 31, 2000, the program had 899,200 members. In 2001,
Choice intends to rename the program to Choice Privileges.

          Marketing and advertising programs are directed by our marketing
department, which utilizes the services of independent advertising agencies. We
also employ sales personnel at our Silver Spring, Maryland, headquarters and in
our Phoenix, Arizona office. These sales personnel use telemarketing to target
specific customer groups, such as potential corporate clients in areas where our
franchised hotels are located, the motor coach market, and meeting planners.
Most of these sales personnel sell reservations and services for all of the
Choice brands.

          Our franchise service directors work with franchisees to maximize
RevPAR. These directors advise franchisees on topics such as marketing their
hotels, improving quality and maximizing the benefits offered by the Choice
reservations system.

Quality Assurance Programs. Consistent quality standards are critical to the
success of a hotel franchise. We have established quality standards for all of
our franchised brands which cover housekeeping, maintenance, brand
identification and level of services offered. We inspect properties for
compliance with our quality standards when application is made for admission to
the franchise system. The compliance of existing franchisees with quality
standards is monitored through scheduled and unannounced Quality Assurance
Reviews conducted at least once per year at each property. Properties which fail
to maintain a minimum score are reinspected on a more frequent basis until
deficiencies are cured, or until such properties are terminated.

          To encourage compliance with quality standards, various brand-specific
incentives are offered to franchisees who maintain consistent quality standards.
We identify franchisees whose properties operate below minimum quality standards
and assist them in complying with brand specifications. Franchisees who fail to
improve on identified quality matters may be subject to consequences ranging
from written warnings to termination of the franchisee's franchise agreement.
During the twelve months ended December 31, 2000, 79 domestic properties were
terminated for failure to maintain minimum quality assurance scores.

Training. We maintain a training department which conducts mandatory training
programs for all franchisees and their employees. Regularly scheduled regional
and national training meetings are also conducted for both property-level staff
and managers. Training programs teach franchisees how to take advantage of the
Choice reservation system and marketing programs, and fundamental hotel
operations such as housekeeping, maintenance, and inventory yield management.

          Training is conducted by a variety of methods, including group
instruction seminars and video programs. We have developed an interactive
computer-based training system

                                       22


that will train hotel employees at their own pace. Franchisees will be required
to purchase hardware to operate the training system, and will use software
developed by us.

Design and Construction. We maintain a design and construction department to
assist franchisees in refurbishing, renovating, or constructing their properties
prior to or after joining the system. Department personnel assist franchisees in
meeting our brand specifications by providing technical expertise and cost-
savings suggestions.

Financial Assistance Programs. From time to time, we establish programs or help
franchisees obtain financing through; (i) a wholly owned subsidiary; (ii)
strategic partnerships with hotel lenders; and (iii) by referral to hotel
lenders for hotel refinancing, acquisition, renovation and development.

          Some of the past programs include: (i) a Second Mortgage Financing
program under which the Company offered second mortgage financing for the
development and construction of Quality Inn, Quality Suites, Quality Inn and
Suites, Main Stay Suites and Sleep Inns; (ii) an Econo Lodge exterior renovation
program under which forgivable loans up to an amount of $17,500 per property
were given to qualified Econo Lodge franchisees for standardized exterior
renovation; and (iii) a "Construction to Permanent Financing" program under
which Salomon Smith Barney together with Suburban Capital Markets Inc. offered
$100 million in financing per year to qualified franchises and the Company
guaranteed such loans with a maximum guarantee amount of $10 million. At
December 31, 2000, loans outstanding under the above programs were $2.2 million,
$4.4 million and $6.0 million, respectively, and the Company's guarantee covered
$3.0 million in loans.


Competition

          Competition among franchise lodging chains is intense, both in
attracting potential franchisees to the system and in generating reservations
for franchisees.

          We believe that hotel operators choose lodging franchisors based
primarily on the perceived value and quality of each franchisor's brand and
services, and the extent to which affiliation with that franchisor may increase
the franchisee's reservations and profits. We believe that hotel operators
select a franchisor in part based on the franchisor's reputation among other
franchisees, and the success of its existing franchisees.

          Choice is the second largest hotel franchisor in the world in terms of
number of open hotels. In the United States, Cendant Corporation (formerly HFS,
Inc.), with over 6,200 franchised hotels, is the largest franchisor. Bass Hotels
& Resorts has 2,221, Hilton has 1,824, Marriott International, Inc. has 1,777,
Accor has 1,174, Carlson Hospitality has 500, and Starwood Hotels and Resorts
has 396 properties./(1)/

_____________________________
/(1)/ Source: Smith Travel Research

                                       23


          Our prospects for growth are largely dependent upon the ability of our
franchisees to compete in the lodging market, since our franchise system
revenues are based on franchisees' gross room revenues.

          The ability of a hotel to compete may be affected by a number of
factors, including the location and quality of its property, the number and
quality of competing properties nearby, its affiliation with a recognized name
brand, and general regional and local economic conditions. The effect of local
economic conditions on our results is substantially reduced by the geographic
diversity of our franchised properties, which are located in all 50 states and
in 37 other countries, as well as its range of products and room rates.


Service Marks and Other Intellectual Property

          The service marks Quality, Comfort, Clarion, Sleep, Econo Lodge,
Rodeway, MainStay and related marks and logos are material to our business. We,
directly and through our franchisees, actively use these marks. All of the
material marks are registered with the United States Patent and Trademark
Office. In addition, we have registered certain of our marks with the
appropriate governmental agencies in over 100 countries where we are doing
business or anticipate doing business in the foreseeable future. We seek to
protect our brands and marks throughout the world, although the strength of
legal protection available varies from country to country.

Seasonality

          Our principal sources of revenues are franchise fees based on the
gross room revenues of our franchised properties. We experience seasonal revenue
patterns similar to those of the lodging industry in general. This seasonality
can be expected to cause quarterly fluctuations in our revenues, profit margins
and net income.

Regulation

          Our franchisees are responsible for compliance with all laws and
government regulations applicable to the hotels they own or operate. The lodging
industry is subject to numerous federal, state and local government regulations,
including those relating to the preparation and sale of food and beverage (such
as health and liquor license laws), building and zoning requirements and laws
governing employee relations, including minimum wage requirements, overtime,
working conditions and work permit requirements.

          The Federal Trade Commission (the "FTC"), various states and certain
other foreign jurisdictions (including France, Province of Alberta, Canada, and
Mexico) regulate the sale of franchises. The FTC requires franchisors to make
extensive disclosure to prospective franchisees but does not require
registration. A number of states in which our franchises operate require
registration or disclosure in connection with franchise offers and sales. In
addition,

                                       24


several states have "franchise relationship laws" or "business opportunity laws"
that limit the ability of the franchisor to terminate franchise agreements or to
withhold consent to the renewal or transfer of these agreements. While our
franchising operations have not been materially adversely affected by such
regulation, we cannot predict the effect of future regulation or legislation.

Impact of Inflation and Other External Factors

          Our principal sources of revenues are franchise fees. Franchise fees
can be impacted by external factors, including, in particular: the supply of
hotel rooms within the lodging industry relative to the demand for rooms by
travelers, and inflation.

          Although we believe industry-wide supply and demand for hotel rooms
recently has been fairly balanced, any excess in supply that might develop in
the future could unfavorably impact room revenues at our franchised hotels
either by reducing the number of rooms reserved at such franchised properties or
by restricting the rates hotel operators can charge for their rooms. In
addition, an excess supply of hotel rooms may discourage potential franchisees
from opening new hotels, reducing the franchise fees received by us. However, we
benefit from an increasing supply of hotels as it serves to increase franchise
fees.

          Although we believe that increases in the rate of inflation will
generally result in comparable increases in hotel room rates, severe inflation
could contribute to a slowing of the national economy. Such a slowdown could
result in reduced travel by both business and leisure travelers, potentially
resulting in less demand for hotel rooms, which could result in a temporary
reduction in room rates and fewer room reservations, negatively impacting our
revenues. A weak economy could also reduce demand for new hotels, negatively
impacting the franchise fees received by us.

          Among the other unpredictable external factors which may affect our
fee stream are wars, airline strikes, gasoline shortages and severe weather.


Employees

          We employ domestically approximately 1,915 people as of December 31,
2000. None of our employees are represented by unions or covered by collective
bargaining agreements.  We consider our relations with our employees to be
satisfactory.

Item 2.   Properties

          Our principal executive offices are located at 10750 Columbia Pike,
Silver Spring, Maryland 20901. The offices are leased from a third party. We own
our reservation system offices in Phoenix, AZ, Minot, ND, and two call centers
in Grand Junction, CO, which we had previously leased. We also occupy additional
space in Toronto, Canada, on a month-to-month basis. In addition, we lease 6
sales offices across the United States. Management believes that its executive,
reservation systems and sales offices are sufficient to meet its present needs
and

                                       25


does not anticipate any difficulty in securing additional or alternative space,
as needed, on terms acceptable to the Company.

          In September 2000, we acquired three MainStay Suites hotels from
Sunburst. The hotels are located in Brentwood, TN, Pittsburgh, PA and Greer, SC.

Item 3.   Legal Proceedings

          The Company is not a party to any litigation, other than routine
litigation incidental to its business. None of such litigation, either
individually or in the aggregate, is expected to be material to the business,
financial condition or results of operations of the Company.

Item 4.   Submission of Matters to a Vote of Security Holders

          No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 2000.

EXECUTIVE OFFICERS OF CHOICE HOTELS INTERNATIONAL, INC.

     The name, age, title, present principal occupation, business address and
other material occupations, positions, offices and employment of each of the
executive officers of the Company are set forth below. The business address of
each executive officer is 10750 Columbia Pike, Silver Spring, Maryland 20901,
unless otherwise indicated.



          Name                                      Age      Position
          ----                                      ---      --------
                                                       
Stewart Bainum, Jr........................          54       Chairman of the Board of  Directors
Charles A. Ledsinger, Jr..................          51       Chief Executive Officer and President
Steven T. Schultz......................             54       Executive Vice President, Franchise Operations
Thomas Mirgon.............................          44       Senior Vice President, Administration
Bruce N. Haase............................          40       Senior Vice President, International
Michael J. DeSantis.......................          42       Senior Vice President, General Counsel and Secretary
Joseph M. Squeri..........................          35       Senior Vice President, Chief Financial Officer and Treasurer
Gary Thomson..............................          46       Senior Vice President, Chief Information Officer
Wayne Wielgus.............................          46       Senior Vice President, Marketing
Daniel Rothfeld...........................          41       Senior Vice President, E-Commerce & Emerging Business
Gregory Bublitz...........................          45       Vice President, Finance and Controller


Background of  Executive Officers:

     Stewart Bainum, Jr., Chairman of the Board of the Company from March 1987
to November 1996 and since October 1997; Director of the Company since 1977;
Chairman of the Board of Sunburst since November 1996; Chairman of the Board of
Manor Care, Inc. since September, 1998; Chairman of the Board and Chief
Executive Officer of Manor Care, Inc. from March 1987 to September, 1998; Chief
Executive Officer of Manor Care, Inc. and its subsidiary ManorCare Health
Services, Inc. ("MCHS") from March 1987 to September, 1998 and President from
June 1989 to September, 1998; Vice Chairman of the Board of Vitalink Pharmacy
Services,

                                       26


Inc. ("Vitalink") from December 1994 to September, 1998; Vice Chairman of the
Board of Manor Care and subsidiaries from June 1982 to March 1987; Director of
Manor Care from August 1981 to September 1998, of Vitalink from September 1991
to September, 1998, of MCHS from 1976 to September 1998; Chairman of the Board
and Chief Executive Officer of Vitalink from September 1991 to February 1995 and
President and Chief Executive Officer from March 1987 to September 1991.

          Charles A. Ledsinger, Jr., President, Chief Executive Officer and
Director of the Company since August, 1998; President and Chief Operating
Officer of St. Joe Company from February 1998 to August 1998, Senior Vice
President and Chief Financial Officer of St. Joe Company from May 1997 to
February 1998; Senior Vice President and Chief Financial Officer of Harrah's
Entertainment, Inc. from June 1995 to May 1997; Senior Vice President and Chief
Financial Officer of Promus Companies Incorporated from August 1990 to June
1995. Director: FelCor Lodging Trust, Inc., Friendly's Ice Cream Corporation and
TBC.

          Steven T. Schultz.  Executive Vice President, Domestic Hotels of the
Company since May 1999; Executive Vice President and Chief Development Officer
of La Quinta Inns, Inc. from 1997 to April 1999; Senior Vice President-
Development of La Quinta Inns, Inc. from 1992 to 1997.

          Bruce N. Haase, Senior Vice President, International of the Company
since October 2000.  He was Vice President - Finance and Treasurer from April
2000 until October 2000.  He was Vice President, Finance and Treasurer of The
Ryland Group, Inc., in Columbia, Maryland, from August 1999 until March 2000 and
Vice President and Treasurer from October 1995 until August 1999.

          Thomas Mirgon. Senior Vice President, Administration since April 1998;
Senior Vice President, Human Resources of the Company from March 1997 to April
1998 and of Former Choice from March 1997 to October 1997; Vice President,
Administration of Interim Services from August 1993 to February 1997; employed
by Taco Bell Corp. from January 1986 to August 1993, last serving as Senior
Director, Field Human Resources from February 1992 to August 1993.

          Michael J. DeSantis. Senior Vice President, General Counsel and
Secretary of the Company since June 1997 and of Former Choice from June 1997 to
October 1997; Senior Attorney for Former Choice from November 1996 to June 1997;
Senior Attorney for Manor Care from January 1996 to October 1996; Vice
President, Associate General Counsel and Assistant Secretary for Caterair
International Corporation from April 1994 to December 1995; Assistant General
Counsel of Caterair International from May 1990 to March 1994. Director:
Friendly Hotels, plc.

          Joseph M. Squeri. Senior Vice President and Chief Financial Officer of
the Company since June 1999; Treasurer of the Company since April 1998; Vice
President, Finance and Controller of the Company from March 1997 to June 1999
and of Former Choice from March 1997 to October 1997; Director of Investment
Funds, The Carlyle Group, from November 1994

                                       27


to February 1997; various positions with Arthur Andersen LLP from July 1987 to
November 1994, most recently as Manager.

     Gary Thomson. Senior Vice President and Chief Information Officer of Choice
since August 2000. He was Vice President - Information Systems Technologies from
November 1993 until August 2000.

     Wayne Wielgus. Senior Vice President, Marketing of Choice September 2000.
He was Vice President, Marketing of Best Western International, Inc., in
Phoenix, Arizona, from 1996 until September 2000.

     Daniel Rothfeld. Senior Vice President, E-Commerce and Emerging Business
Opportunities since December 2000. He was Vice President - Partner Services from
December 1997 until December 2000 and Vice President of Corporate Services of
Interim Services, Inc., in Ft. Lauderdale, Florida, from January 1987 until
December 1997.

     Gregory Bublitz. Vice President, Finance and Controller of Choice since
December 2000. He was Vice President - Finance from January 2000 until December
2000. He was an independent business consultant in Columbia, Maryland, from
February 1999 until December 1999. He was Vice President and CFO of Wise Metals
Co., Inc., in Linthicum, Maryland, from October 1996 until January 1999 and Vice
President, Marketing & Customer Service for Alumax Primary Aluminum Corporation,
in Norcross, Georgia, from August 1995 until September 1996.


                                    PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.

          Prior to the Spin-off, the Company was a wholly-owned subsidiary of
Former Choice. In the Spin-off, Former Choice distributed to its shareholders
all of its interest in the Company on the basis of one share of Company common
stock for each share of Former Choice common stock. The Spin-off resulted in
approximately 60 million shares of Company common stock outstanding as of
October 16, 1997.

          The shares of the Company's Common Stock are listed and traded on the
New York Stock Exchange. The following table sets forth information on the high
and low prices of the Company's Common Stock for the two most recent fiscal
years.


                 QUARTERLY MARKET PRICE RANGE OF COMMON STOCK
                                  (Unaudited)

         Quarters Ended                      Market Price Per Share
         ----------------------------------------------------------

                                       28


                                                 High            Low
           -----------------------------------------------------------
           FISCAL 2000
             March                            $ 17.375     $   13.50
             June                               15.9375         9.9375
             September                          11.1875         7.50
             December                           14.25           8.875

           FISCAL 1999
              March                           $ 14 3/8     $   12 5/6
              June                              19 3/4         13 3/16
              September                         17 1/2         15 1/8
              December                          17 3/16        13 11/16


     The Company paid no dividends during the twelve month period ended December
31, 2000. The Company does not anticipate the payment of any cash dividends on
its common stock in the foreseeable future. Payment of dividends on Company
common stock will also be subject to limitations as may be imposed by the
Company's credit facilities from time to time. The declaration of dividends will
be subject to the discretion of the Board of Directors.

     As of March 20, 2001, there were 3,436 record holders of Company common
stock.

     Item 6.   Selected Financial Data.


               The required information is included on page 1 of the 2000 Annual
Report and is incorporated herein by reference.

     Item 7.   Management's Discussion and Analysis of Financial Conditions and
               Results of Operations.

The required information is included in the 2000 Annual Report and is
incorporated herein by reference.

                                       29


Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed to market risk from changes in interest rates
and the impact of fluctuations in foreign currencies on the Company's foreign
investments. The Company manages its exposure to this market risk through the
monitoring of its available financing alternatives including in certain
circumstances the use of derivative financial instruments. The Company's
strategy to manage exposure to changes in interest rates and foreign currencies
remains unchanged from 1997. Furthermore, the Company does not foresee any
significant changes in exposure in these areas or in how such exposure is
managed in the near future.

At December 31, 2000 and 1999, the Company had $297.2 million and $307.4 million
of debt outstanding at effective interest rates of 7.3% and 6.6%, respectively,
after the impact of interest rate swaps is taken into account. A hypothetical
change of 10% in the Company's effective interest rate from year-end 2000 levels
would increase or decrease interest expense by $1.4 million. The Company will
refinance the $150 million variable rate term loan as it amortizes throughout
the expected maturity dates. Upon expiration of the Credit Facility in 2002, the
Company expects to refinance its obligations. For more information related to
the Company's use of interest rate instruments, see Long-Term Debt and Notes
Payable, Interest Rate Hedges and Fair Value of Financial Instruments in the
Notes to the Consolidated Financial Statements.

The Company is also exposed to fluctuations in foreign currency relating to its
preferred stock investment in Friendly Hotels, PLC which is denominated in
British Pounds. The Company does not have any derivative financial instruments
related to its foreign investments.

Item 8.   Financial Statements and Supplementary Data.

          The required information is included in the 2000 Annual Report and is
incorporated herein by reference.  See Item 14 for the Index to Financial
Statements and Schedules.

Item 9.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure.

          None.

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant.

          The required information on directors will be contained in the
Company's Proxy Statement, and reference is expressly made to the Proxy
Statement for the specific information incorporated in this Form 10-K. The
required information on executive officers is set forth in Part I of this Form
10-K under an unnumbered item captioned "Executive Officers of Choice Hotels
International, Inc."

                                       30


Item 11.  Executive Compensation.

          The required information will be set forth under "Executive
Compensation" and "Board Compensation Committee Report on Executive
Compensation--Compensation of the Chief Executive Officer" in the Company's
Proxy Statement, and reference is expressly made to the Proxy Statement for the
specific information incorporated in this Form 10-K.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

          The required information will be set forth under "Security Ownership
of Certain Beneficial Owners and Executive Officers" and "Board of Directors" in
the Company's Proxy Statement, and reference is expressly made to the Proxy
Statement for the specific information incorporated in this Form 10-K.

Item 13.  Certain Relationships and Related Transactions.

          The required information will be set forth under "Certain
Relationships and Related Transactions" and "Board of Directors--Compensation
Committee Interlocks and Insider Participation" in the Company's Proxy
Statement, and reference is expressly made to the Proxy Statement for the
specific information incorporated in this Form 10-K.


                                    PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.

   (a)    List of Documents Filed as Part of this Report

          1.   Financial Statements

          The following information is included on the corresponding pages of
the 2000  Annual Report:


          Report of Independent Public Accountants.........     p. 31
          Consolidated Statements of Income................     p. 32
          Consolidated Balance Sheets......................     p. 33
          Consolidated Statements of Cash Flows............     p. 34
          Consolidated Statements of
          Shareholders' Equity and Comprehensive Income....     p. 35
          Notes to Consolidated Financial Statements....... pp. 36-50

          2    Financial Statement Schedules

                                       31


          The following reports are filed herewith.

          Report of Independent Public Accountants on Schedule.............
          Consent of Independent Public Accountants........................
          Schedule II -- Valuation and Qualifying Accounts..................

          All other schedules are not applicable.

          3.  Exhibits



Exhibit
Number                                    Description
- ------                                    -----------

3.01(a)    Restated Certificate of Incorporation of Choice Hotels Franchising,
           Inc.

3.02(a)    Amended and Restated Bylaws of Choice Hotels International, Inc.

4.01(c)    Credit Agreement dated October 15, 1997 among Choice Hotels
           International, Inc., Chase Manhattan Bank, as Agent and certain
           Lenders

4.02(c)    First Amendment to Credit Agreement dated February 13, 1998 among
           Choice Hotels International, Inc., Chase Manhattan Bank, as Agent,
           and certain Lenders.

4.03(j)    Second Amendment to Credit Agreement, dated as of March 30, 1998
           among Choice Hotels International, Inc., Chase Manhattan Bank, as
           agent, and certain Lenders.

4.04(j)    Third Amendment to Credit Agreement, dated as of April 9, 1998 among
           Choice Hotels International, Inc., Chase Manhattan Bank, as agent,
           and certain Lenders.

4.05(j)    Fourth Amendment to Credit Agreement, dated as of December 16, 1998,
           among Choice Hotels International, Inc., Chase Manhattan Bank, as
           agent, and certain Lenders.

4.06(k)    Fifth Amendment to Credit Agreement dated March 19, 1999 among Choice
           Hotels International, Inc., Chase Manhattan Bank as agent, and
           certain lenders.

4.07*      Sixth Amendment to Credit Agreement dated February 2, 2001 among
           Choice Hotels International, Inc., Chase Manhattan Bank as agent, and
           certain lenders.

4.08(h)    Registration Agreement dated April 28, 1998 between Choice Hotels
           International, Inc. and Salomon Brothers, Inc., Bear Stearns & Co.
           Inc. and Lehman Brothers Inc.

4.09(h)    Indenture dated as of May 4, 1998, by and among the Company, Quality
           Hotels Europe, Inc., QH Europe Partnership and Marine Midland Bank,
           as Trustee, with respect to the 7.125% Senior Notes due 2008 of the
           Company.

4.10(h)    Specimen certificate of 7.125% Senior Note due 2008 (Original Note)
           (Attached as an exhibit to the Indenture set forth as Exhibit 4.08)

4.11(h)    Specimen certificate of 7.125% Senior Note due 2008 (Exchange Note)
           (Attached as an exhibit to the Indenture set forth as Exhibit 4.08)

4.12(b)    Guarantee Agreement dated October 15, 1997 between Quality Hotels
           Europe, Inc. and The Chase Manhattan Bank.

4.13(b)    Supplement No. 1 to the guarantee Agreement dated April 28, 1998
           among Choice Hotels International, Inc., Quality Hotels Europe, Inc.,
           QH Europe Partnership and The Chase Manhattan Bank.

4.14(b)    Indemnity, Subrogation and Contribution Agreement, dated April 28,
           1998 among Choice Hotels International, Inc., Quality Hotels Europe,
           Inc., QH Europe Partnership and The Chase Manhattan Bank.

4.15(g)    Rights Agreement, dated as of February 19, 1998, between Choice
           Hotels International, Inc. and ChaseMellon Shareholder Services,
           L.L.C., as Rights Agent.

10.01(l)   Amended and Restated Employment Agreement between Choice Hotels
           International, Inc. and Charles A. Ledsinger, Jr. dated April 13,
           1999.

10.02(d)   Distribution Agreement dated as of October 15, 1997 by and between
           Choice Hotels International, Inc. (renamed Sunburst Hospitality
           Corporation) and Choice Hotels Franchising, Inc. (renamed Choice
           Hotels International, Inc.)

                                       32


10.03(d)   Tax Sharing Agreement dated as of October 15, 1997 by and between
           Choice Hotels International, Inc. (renamed Sunburst Hospitality
           Corporation) and Choice Hotels Franchising, Inc. (renamed Choice
           Hotels International, Inc.)

10.04(d)   Employee Benefits Allocation Agreement dated as of October 15, 1997
           by and between Choice Hotels International, Inc. (renamed Sunburst
           Hospitality Corporation) and Choice Hotels Franchising, Inc. (renamed
           Choice Hotels International, Inc.)

10.05(d)   Strategic Alliance Agreement dated as of October 15, 1997 by and
           between Choice Hotels International, Inc. (renamed Sunburst
           Hospitality Corporation) and Choice Hotels Franchising, Inc. (renamed
           Choice Hotels International, Inc.)

10.07(d)   Amended and Restated Employment Agreement dated as of October 15,
           1997 by and between Choice Hotels Franchising, Inc. (renamed Choice
           Hotels International, Inc.) and Stewart Bainum, Jr.

10.08(i)   Amended and Restated Employment Agreement dated April 13, 1999 by and
           between Choice Hotels International, Inc. and Thomas Mirgon

10.09(j)   Omnibus Amendment Agreement dated December 28, 1998 between Choice
           Hotels International, Inc. and Sunburst Hospitality Corporation.

10.10(m)   Second Omnibus Amendment Agreement dated February 29, 2000 between
           Choice Hotels International, Inc. and Sunburst Hospitality
           Corporation.

10.11(f)   Choice Hotels International, Inc. Non-Employee Director Stock Option
           and Deferred Compensation Stock Purchase Plan.

10.12(f)   Choice Hotels International, Inc. 1997 Non-Employee Director Stock
           Compensation Plan.

10.13(f)   Choice Hotels International, Inc. 1997 Long-Term Incentive Plan.

10.14(i)   Second Amended and Restated Employment Agreement dated April 13, 1999
           between Choice Hotels International, Inc. and Michael J. DeSantis.

10.15(j)   Commercial Lease dated May 29, 1998 among Columbia Pike I, LLC and
           Colesville Road, LLC (each an assignee of Manor Care, Inc.) and
           Choice Hotels International, Inc.

10.16(i)   Employment Agreement dated May 13, 1999 between Choice Hotels
           International, Inc. and Steven T. Schultz.

10.17(i)   Employment Agreement dated June 3, 1999 between Choice Hotels
           International, Inc. and Joseph M. Squeri.

10.18(n)   Employment Agreement dated May 3, 2000 between Choice Hotels
           International, Inc. and Daniel Rothfeld.

10.19(n)   Employment Agreement dated August 18, 2000 between Choice Hotels
           International, Inc. and Wayne Wielgus.

10.20*     Amended and Restated Supplemental Executive Retirement Plan.

13.01*     Annual Report to Shareholders

21.01*     Subsidiaries of Choice Hotels International, Inc.

23.01*     Consent of Arthur Andersen LLP

27.01*     Financial Data Schedule

- -----------------------

*  Filed herewith

(a)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Registration Statement on Form S-4,
     filed August 31, 1998 (Reg. No. 333-62543).

(b)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Amendment No. 1 to Registration
     Statement on Form S-4, filed October 14, 1998 (Reg. No. 333-62543).

(c)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Transitional Report on Form 10-K dated
     June 1, 1997, to December 31, 1997, filed on March 31, 1998.

                                       33


(d)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Current Report on Form 8-K dated
     October 15, 1997, filed on October 29, 1997.

(e)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Current Report on Form 8-K dated
     October 15, 1997, filed on December 16, 1997.

(f)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Registration Statement filed on Form S-
     8, filed on December 2, 1997 (Reg. No. 333-41357).

(g)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Current Report on Form 8-K dated
     February 19, 1998, filed on March 11, 1998.

(h)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Quarterly Report on Form 10-Q filed for
     the quarterly period ended March 31, 1998, filed on May 15, 1998.

(i)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Quarterly Report on Form 10-Q filed for
     the quarter ended June 30, 1998, filed on August 11, 1998.

(j)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Annual Report on Form 10-K for the year
     ended December 31, 1998, filed on March 30, 1999.

(k)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Quarterly Report on Form 10-Q for the
     quarter ended March 31, 1999, filed on May 4, 1999.

(l)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Quarterly Report on Form 10-Q for the
     quarter ended June 30, 1999, filed on August 16, 1999.

(m)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Annual Report on Form 10-k for the year
     ended December 31, 1999, filed March 30, 2000.

(n)  Incorporated by reference to the identical document filed as an exhibit to
     Choice Hotels International, Inc.'s Quarterly Report on Form 10-Q for the
     quarter ended September 30, 2000, filed November 14, 2000.

(b)      No reports on Form 8-K were filed during the last quarter of the fiscal
year ended December 31, 2000.

                                       34


                                   SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                              CHOICE HOTELS INTERNATIONAL, INC.



                              By:     /s/ Charles A. Ledsinger, Jr.
                                    ------------------------------------
                                    Charles A. Ledsinger, Jr.
                                    President and Chief Executive Officer

Dated:  March 30, 2001

                                       35


          Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.



             Signature                                Title                                    Date
             ---------                                -----                                    ----
                                                                                    
  /s/ Stewart Bainum, Jr.                      Chairman, Director                         March 30, 2001
- ------------------------------------
      Stewart Bainum, Jr.

  /s/ Charles A. Ledsinger, Jr.          President, Chief Executive Officer &             March 30, 2001
- ------------------------------------
   Charles A. Ledsinger, Jr.                         Director

     /s/ Barbara Bainum                              Director                             March 30, 2001
- ------------------------------------
        Barbara Bainum

  /s/ Larry R. Levitan                               Director                             March 30, 2001
- ------------------------------------
        Larry R. Levitan

  /s/ William L. Jews                                Director                             March 30, 2001
- ------------------------------------
      William L. Jews

   /s/ Gerald W. Petitt                              Director                             March 30, 2001
- ------------------------------------
       Gerald W. Petitt

   /s/ Raymond E. Schultz                            Director                             March 30, 2001
- ------------------------------------
      Raymond E. Schultz

  /s/ Jerry E. Robertson                             Director                             March 30, 2001
- ------------------------------------
      Jerry E. Robertson

  /s/ Joseph M. Squeri                     Senior Vice President, Chief                   March 30, 2001
- ------------------------------------
      Joseph M. Squeri                    Financial Officer and Treasurer


                                       36


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Choice Hotels International, Inc.:

We have audited in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements included in Choice Hotels
International, Inc.'s and Subsidiaries ("the Company") annual report to
shareholders incorporated by reference in this Form 10-K, and have issued our
opinion thereon dated February 2, 2001. Our audit was made for the purpose of
forming an opinion on those consolidated financial statements taken as a whole.
The schedule listed in the index under Item 14(a)2 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.




                                                     /s/ Arthur Andersen LLP


Vienna, Virginia
February 2, 2001



              CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
               SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                           (In thousands of dollars)



                                                                       Charges (Credits) to                       Balance at
                                               Balance at Beginning           Profit            Write-Offs/           End
                 Description                         of Period               and Loss           Deductions         of  Period
                 -----------                         ---------               --------           ----------         ----------
                                                                                                      
Accounts Receivable:

Year ended December 31, 2000
    Allowance for doubtful accounts                  $6,691                  $ (585)             $  (352)            $5,754
                                                     ======                  ======              =======             ======
Year ended December 31, 1999
    Allowance for doubtful accounts                  $8,082                  $  588              $(1,979)            $6,691
                                                     ======                  ======              =======             ======
Year ended December 31, 1998
    Allowance for doubtful accounts                  $7,608                  $1,473              $ (999)             $8,082
                                                     ======                  ======              ======              ======




                                                                       Charges (Credits) to                       Balance at
                                               Balance at Beginning           Profit            Write-Offs/           End
                 Description                         of Period               and Loss           Deductions         of  Period
                 -----------                         ---------               --------           ----------         ----------
                                                                                                       
Restructuring Liability:

Year ended December 31, 2000
    Restructuring allowance                          $      -               $5,637               $ (537)              $ 5,100
                                                     ========               ======               ======               =======