1996
ANNUAL MEETING OF SHAREHOLDERS
-OF-
MICROTEL FRANCHISE AND DEVELOPMENT CORPORATION

ONE AIRPORT WAY, SUITE 200
ROCHESTER, NY 14624

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

The 1996 Annual Meeting of Shareholders of Microtel Franchise and
Development Corporation (the "Company") will be held at the Inn on the Lake, 770
South Main Street, in Canandaigua, New York on May 13, 1996 at 9:30 a.m. local
time, for the following purposes:

1. To elect five (5) directors for a term of one (1) year or until their
successors have been elected and qualified.

2. To consider and act upon a proposal to authorize the issuance of
options for an additional 300,000 shares pursuant to the Company's
1993 Non-Statutory Employee Stock Option Plan.

3. To consider and act upon a proposal to amend the Certificate of
Incorporation of the Company to change the Company's name to Hudson
Hotels Corp.

4. To consider and act upon a proposal to appoint Bonadio & Co., LLP as
the Company's independent public accountants for the year ending
December 31, 1996.

5. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.

Information concerning matters to be acted upon at the Annual Meeting is set
forth in the accompanying Proxy Statement.

Shareholders of record at 5:00 p.m. Eastern Standard Time, on March 29,
1996, are entitled to notice of, and to vote at, the meeting. Each shareholder,
even though he or she now plans to attend the meeting, is requested to execute
the enclosed proxy card and return it without delay in the enclosed postage-paid
envelope. Any shareholder present at the meeting may withdraw his or her proxy
in writing and vote personally on each matter brought before the meeting.

By Order of the Board of Directors

Alan S. Lockwood
Secretary

April 1, 1996

1996
ANNUAL MEETING OF SHAREHOLDERS
-OF-
MICROTEL FRANCHISE AND DEVELOPMENT CORPORATION

ONE AIRPORT WAY, SUITE 200
ROCHESTER, NY 14624

PROXY STATEMENT

This Proxy Statement (the "Proxy Statement") is furnished to shareholders of
Microtel Franchise and Development Corporation, a New York corporation having
its principal offices at One Airport Way, Suite 200, Rochester, New York 14624
(the "Company") in connection with the solicitation of proxies by the Board of
Directors of the Company relating to the 1996 Annual Meeting of shareholders
(the "Annual Meeting") which will be held at the Inn on the Lake, in
Canandaigua, New York on Monday, May 13, 1996, at 9:30 a.m., local time, and at
any and all adjournments of the Annual Meeting. The enclosed proxy, when
properly executed and received by the Secretary of the Company prior to the
Annual Meeting, will be voted as therein specified unless revoked by filing with
the Secretary prior to any vote at the Annual Meeting, a written revocation or a
duly executed proxy bearing a later date. Unless authority to vote for one or
more of the director nominees is specifically withheld according to the
instructions, a signed proxy will be voted FOR the election of the five director
nominees named herein. Unless a proxy is designated as being voted against, or
unless a shareholder designates that the shareholder abstains, or if no
direction is made, a signed proxy will be voted FOR proposals 2, 3, 4 and 5
described herein. This Proxy Statement, together with the accompanying form of
proxy, was mailed to shareholders on or about April 10, 1996.

As of March 29, 1996, the record date for the Annual Meeting, there were
3,232,258 of the Company's common shares, par value $.001 per share (the "Common
Shares"), issued and outstanding. Only shareholders of record on the books of
the Company at the close of business on March 29, 1996 are entitled to notice
of, and to vote at, the Annual Meeting and at any and all adjournments of the
Annual Meeting. Each such shareholder is entitled to one vote for each Common
Share registered in the name of the shareholder. A majority of the outstanding
Common Shares represented in person or by proxy at the Annual Meeting will
constitute a quorum for the transaction of business.

The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by use of the mails, officers and regular employees of the Company,
without extra compensation, may solicit proxies personally, by telephone or
telegraph. The Company has requested persons holding Common Shares in their
names for others or in the names of nominees to forward soliciting material to
the beneficial owners of such Common Shares and the Company will, if requested,
reimburse such persons for their reasonable expenses in so doing.

PRINCIPAL SHAREHOLDERS

The following table sets forth as of March 29, 1996, the name and address of
each director and executive officer who owns shares of Common Stock and each
other person known by the Company to own beneficially more than 5% of the
Company's outstanding shares of Common Stock and the number of shares owned by
all directors and officers of the Company, as a group, together with the
respective percentage holdings of each such person.

NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) CLASS(1)(2)
- -------------------------------------------------------- -------------------------- ----------

E. Anthony Wilson....................................... 940,471(3) 25.82%
929 Midtown Tower
Rochester, New York 14604
Bruce Sahs.............................................. 108,333(7) 3.24%
One Airport Way, Suite 200
Rochester, New York 14624
E. Margaret Adams....................................... 20,534(4) 0.63%
One Airport Way, Suite 200
Rochester, New York 14624
Christopher B. Burns.................................... 19,800(5) 0.61%
One Airport Way, Suite 200
Rochester, New York 14624
Dawn M. Richenberg...................................... 22,667(6) 0.70%
One Airport Way, Suite 200
Rochester, New York 14624
Alan S. Lockwood........................................ 8,717(8) 0.27%
7291 Dennisport Lane
Victor, New York 14564
Ralph L. Peek........................................... 440,062(9) 13.37%
929 Midtown Tower
Rochester, New York 14604
Michael Cahill.......................................... 177,375(10) 5.42%
1043 East 130th Drive
Thornton, Colorado 80241
Robert Fagenson......................................... 57,000(11) 1.75%
19 Rector Street
16th Floor
New York, New York 10006
LIVA & Co., f/b/o....................................... 499,900(12) 14.37%
The Q-Tip Trust of Jennifer L. Ansley
The Chase Manhattan Bank, N.A.
Rochester, New York
Taras Kolcio............................................ 6,667(13) 0.21%
One Airport Way, Suite 200
Rochester, New York 14624
Richard Sands........................................... 221,500(14) 6.4%
Robert Sands
Laurie Sands
c/o Canandaigua Wine Company, Inc.
116 Buffalo Street
Canandaigua, New York 14424
The Bond Fund for Growth................................ 600,000(15) 15.66%
70 Linden Oaks
Rochester, New York 14625
All directors and officers as a group (10 persons)...... 1,801,626(1-13) 43.31%

(Footnotes on following page)

(Footnotes for preceding page)
- ------------

(1) Unless otherwise indicated below, each director, officer and 5% shareholder
has sole voting and investment power with respect to all shares
beneficially owned.

(2) Does not give effect to 263,125 shares reserved for issuance upon the
exercise of outstanding warrants issued to non-affiliates.

(3) Includes 20,000 shares in trust to Kimberly K. Wilson and 20,000 shares in
trust to Rebecca S. Wilson, Mr. Wilson's daughters. Includes 211,875 shares
issuable upon exercise of outstanding warrants of the Company, which shares
Mr. Wilson has the right to acquire within sixty (60) days. Includes 31,875
shares issuable upon exercise of non-qualified stock options granted to
Wilson Enterprises, of which Mr. Wilson is a general partner, and which
shares Mr. Wilson has the right to acquire within 60 days. Also includes an
aggregate of 166,667 shares issuable upon exercise of non-qualified stock
options granted to E. Anthony Wilson, which shares Mr. Wilson has the right
to acquire within 60 days. Does not include 33,333 shares issuable upon
exercise of the options, which shares have not yet vested.

(4) Includes an aggregate of 20,534 shares issuable upon exercise of
non-qualified stock options granted to Ms. Adams, which shares Ms. Adams
has the right to receive within 60 days. Does not include 1,667 shares
issuable upon exercise of the options, which shares have not yet vested.

(5) Includes an aggregate of 19,800 shares issuable upon exercise of
non-qualified stock options granted to Mr. Burns, which shares Mr. Burns
has the right to receive within 60 days. Does not include 3,000 shares
issuable upon exercise of the options, which shares have not yet vested.

(6) Includes an aggregate of 22,667 shares issuable upon exercise of
non-qualified stock options granted to Ms. Richenberg, which shares Ms.
Richenberg has the right to receive within 60 days. Does not include 2,333
shares issuable upon exercise of the options, which shares have not yet
vested.

(7) Includes an aggregate of 108,333 shares issuable upon exercise of
non-qualified stock options granted to Mr. Sahs, which shares Mr. Sahs has
the right to receive within 60 days. Does not include 16,667 shares
issuable upon exercise of the options, which shares have not yet vested.

(8) Includes 6,667 shares issuable upon exercise of a non-qualified stock
option granted to 900 Midtown Investments, an investment partnership whose
sole partners are Robert Brown, Ralph Code, Stephens Fowler, John Wilson,
Richard Palumbo, Michael Howard, Howard Konar, Catherine Foerster, Kevin
Wetmore, Sue Jacobson, James Metzler and Mr. Lockwood, which shares 900
Midtown Investments has the right to acquire within 60 days.

(9) Includes 128,094 shares owned beneficially and of record by Patricia L.
Peek, wife of Mr. Peek, ownership of which shares Mr. Peek specifically
disclaims. Includes 15,000 shares owned by Kacey L. Peek, Mr. Peek's
daughter, and 15,000 shares owned by Jeremy C. Peek, Mr. Peek's son, both
under the Uniform Gifts to Minors Act. Includes 31,875 shares issuable upon
exercise of a non-qualified stock option granted to Wilson Enterprises, of
which Ralph L. Peek is a general partner, and an aggregate of 27,000 shares
issuable upon exercise of a non-qualified stock option granted to Ralph L.
Peek, all of which shares Mr. Peek has the right to acquire within 60 days.

(10) Includes an aggregate of 37,625 shares issuable upon exercise of
non-qualified stock options granted to Mr. Cahill, which shares Mr. Cahill
has the right to acquire within 60 days.

(11) Includes 27,000 shares issuable upon exercise of a non-qualified stock
option granted to Mr. Fagenson, which shares Mr. Fagenson has the right to
receive within 60 days. Does not include up to 75,000 shares issuable upon
the exercise of outstanding warrants granted to Starr Securities, Inc. (the
"Underwriter"), which warrant shares are beneficially owned by Robert
Fagenson, a director of the Company, in Mr. Fagenson's capacity as a
principal of the Underwriter.

(12) Includes 247,467 shares issuable upon conversion of the Company's Series A
Preferred Stock, which the Trust has the right to receive within 60 days.
Does not include an aggregate of 41,640 shares held by trusts for the
children of Loren G. Ansley, or 47,256 shares reserved for issuance upon
conversion of 47,256 Series A Preferred Shares held by those trusts.

(13) Includes 6,667 shares issuable upon exercise of a non-qualified stock
option granted to Mr. Kolcio, which shares Mr. Kolcio has the right to
receive within 60 days. Does not include 3,333 shares issuable upon
exercise of the option, which shares have not yet vested.

(14) As set forth in Schedule 13D (Amendment No. 1) filed with the SEC by
Richard Sands, Robert Sands and Laurie Sands on June 17, 1994.

(15) Includes 300,000 shares reserved for issuance upon conversion of the
Company's $1,500,000 Convertible Subordinated Debenture due 2004 and
300,000 shares reserved for issuance upon conversion of the Company's
$1,500,000 Convertible Subordinated Debenture due 2005.

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

As of March 31, 1996 the directors and executive officers of the Company
were as follows:

NAME AGE POSITION
- --------------------------- --- ---------------------------------------------
E. Anthony Wilson.......... 51 Chairman of the Board of Directors,
President, Chief Executive Officer, and
Director
Bruce A. Sahs.............. 51 Executive Vice President, Chief Operating
Officer, Treasurer and Director of the
Company, President and Chief Operating
Officer of Hudson Hotels Corp.
Dawn M. Richenberg......... 38 Vice President/Hotel Operations
E. Margaret Adams.......... 46 Vice President/Franchise Administration
Christopher B. Burns....... 39 Vice President/Development
Taras M. Kolcio............ 31 Controller
Ralph L. Peek.............. 47 Director
Alan S. Lockwood........... 43 Secretary
Michael Cahill............. 34 Director
Robert Fagenson............ 47 Director

All directors serve for a term of one year and until their successors are
duly elected. All officers serve at the discretion of the Board of Directors.

Messrs. Wilson, Cahill, Sahs, Peek, and Fagenson are each nominees for the
position of director of the Company to be voted upon at the 1996 Annual Meeting.
For a brief description of their respective business experience during the past
five years please refer to that portion of this Proxy Statement entitled
"Election of Directors." A brief description of the business experience of Mmes.
Richenberg and Adams and Messrs. Lockwood, Burns and Kolcio is presented here.

E. MARGARET ADAMS
VICE PRESIDENT/FRANCHISE ADMINISTRATION AND INVESTOR RELATIONS

Ms. Adams is Vice President, Franchise Administration, and ensures smooth
communication and relations between the Company and its remaining franchisees.
She has also assumed the duties of maintaining relations with the Company's
investors and shareholders. Ms. Adams has twenty-five years of experience in the
international field of banking, contract administration, and documentation. She
has worked with the Dai-Ichi Kangyo Merchant Bank in London, and American
Express in southeastern England. From her arrival in the U.S. in 1977 until
1984, she was the International Liaison for MXR Innovations, Inc. From 1984 to
1988 she was International Coordinator for Nalge Co., a medical plastics company
exporting to research facilities worldwide. In 1988, she joined Microtel. Her
educational background includes academic studies at Bexleyheath College, London,
and the New York State School of Industrial and Labor Relations (Cornell
University).

CHRISTOPHER B. BURNS
VICE PRESIDENT/DEVELOPMENT

Mr. Burns is responsible for new project development and for the acquisition
and renovation of existing facilities. Mr. Burns has worked in the hospitality
industry for over 15 years, holding the positions of Director of Franchise
Sales, Vice President of Hotel Operations, and General Manager for various hotel
companies. He holds a Bachelor of Science degree in Hotel Administration from
the Rochester Institute of Technology.

TARAS M. KOLCIO
CONTROLLER

Mr. Kolcio joined Microtel as its Controller in June 1993. Prior to that he
was a senior accountant at Deloitte & Touche for six years. Mr. Kolcio received
his Bachelor of Science degree in Business Administration from the University of
Buffalo, and is licensed as a certified public accountant in the State of New
York. Mr. Kolcio is a member of the New York State Society of Certified Public
Accountants.

DAWN M. RICHENBERG
VICE PRESIDENT/HOTEL OPERATIONS

Ms. Richenberg is Vice President of Operations, overseeing the operations of
all Hudson Hotels Division's managed properties. Her responsibilities include
insuring that Hudson's high property maintenance and operations quality
standards are met. Ms. Richenberg received her degree in education at the State
University of New York College at Buffalo and brings 12 years of hotel
operations and management experience to Microtel Franchise and Development
Corporation. She has worked for Microtel for 7 years. She is a member of the New
York State Hotel and Tourism Association and the American Hotel and Motel
Association.

ALAN S. LOCKWOOD
SECRETARY

Mr. Lockwood is a partner in the law firm of Boylan, Brown, Code, Fowler,
Vigdor & Wilson, LLP of Rochester, New York, which firm is general counsel to
the Company. Mr. Lockwood specializes in corporate finance and has been
affiliated with Boylan, Brown since 1978. He is a graduate of Cornell University
School of Arts and Sciences and Cornell Law School. Mr. Lockwood has served as
Secretary of the Company since its inception.

ELECTION OF DIRECTORS

. PROPOSAL NO. 1: Relating to the Election of Directors of the Company.

A Board of Directors consisting of five (5) directors is proposed to be
elected by the shareholders at the Annual Meeting, each director to hold office
until the next Annual Meeting of shareholders or until the successor of the
director is duly elected and qualified. The number of directors to be elected
has been fixed by the Board of Directors pursuant to the Company's By-Laws.

The Board of Directors recommends the election of the five (5) nominees
named below. The five (5) nominees were elected as directors at the Company's
1995 annual meeting of shareholders. The Board of Directors does not contemplate
that any of the nominees will be unable to serve as a director, but should any
such nominee so notify the Company of the nominee's unavailability prior to the
voting of the proxies, the persons named in the enclosed proxy reserve the right
to vote for such substitute nominee or nominees as they, in their sole
discretion, shall determine.

Unless authority to vote for one or more of the director nominees is
specifically withheld according to the instructions, proxies which are executed
and returned to the Company prior to the Annual Meeting in the enclosed form
will be voted FOR the election of each of the five (5) nominees named below. The
proxy solicited by the Board of Directors will be so voted unless shareholders
specify a contrary choice therein. What follows is certain information relating
to each of the nominees for director:

E. Anthony Wilson, age 51, was a co-founder of the Company and has served as
Chairman of the Board since its inception, and as Chief Executive Officer since
January 1993. In 1984 he co-founded Hudson Hotels Corp. which was acquired by
the Company in June 1992. In addition to his hotel experience, Mr. Wilson was a
founder of S&W Restaurants, Mid-America Properties, which is the owner of eight
Chi-Chi's Restaurants, was a partner and developer of the Ocean Club (a 7,000
square-foot night club and restaurant), and Union Square, a theme restaurant. He
has over 25 years experience in the hospitality and real estate industries as a
developer, owner and manager. As General Partner of Wilson Enterprises of
Rochester, New York, he has developed over 2,000,000 square feet of office,
warehouse, apartments and related facilities for tenants, including Xerox
Corporation, Eastman Kodak, Rochester Telephone Corp., R.T. French, Champion
Products, the United States Government and other national corporations. Mr.
Wilson is an alumnus of the School of Business at Indiana University. He has
served as the Chairperson of the Strong Memorial Hospital Children's Fund, and
has been a Director of the First National Bank of Rochester, Erdle Perforating
Corp., and the Rochester Family of Mutual Funds.

Michael Cahill, age 34, has served as a director since the Company's
inception in 1988. Mr. Cahill is the founder and president of Hospitality Real
Estate Counselors, Inc., a hospitality consulting firm located in Thornton,
Colorado. Prior to that, he was with Hospitality Valuation Services, Inc. for
ten years and held the title of Senior Vice President. Mr. Cahill is a graduate
of the Cornell University School of Hotel Administration. His experience
includes providing hotel-motel valuations, market studies, feasibility reports
and investment counseling on a wide variety of hotel projects throughout the
country. He is a member of the American Hotel and Motel Association Market,
Financial and Investment Analysis Committee and a Member of the Appraisal
Institute. Mr. Cahill is a frequent lecturer and author on matters concerning
the hospitality industry. He is also a contributing editor to Lodging magazine,
the official journal of the American Hotel and Motel Association.

Ralph L. Peek, age 47, is a certified public accountant and has been
employed as controller of Wilson Enterprises since September 1978. He became a
general partner of Wilson Enterprises as of December 24, 1982. He has been
involved with the Company and has served as a director since its

inception in 1988. He was also an officer and director of Hudson Hotels Corp.
(See the description of the involvement of E. Anthony Wilson, above).

Bruce A. Sahs, age 51, participated in the organization of the Company and
has served as Chief Financial Officer since its inception. In its January 12,
1993 meeting, the Board elected Mr. Sahs to the position of Executive Vice
President, Chief Operating Officer and Treasurer of the Company, and as
President and Chief Operating Officer of Hudson Hotels Corp. Also in the January
12, 1993 meeting, Mr. Sahs was appointed to the Board to fill the vacancy
created by the death of Loren G. Ansley. Prior to his employment with Hudson,
Mr. Sahs was a partner in a Rochester based Certified Public Accounting firm,
practicing public accounting since 1967, specializing in hotel and restaurant
auditing controls and management services. Mr. Sahs received his degree from the
Rochester Institute of Technology, is a Certified Public Accountant, as well as
a Certified Hotel Administrator. He is also a member of the New York State
Society of Certified Public Accountants.

Robert Fagenson, age 47, was first confirmed as a director of the Company in
July, 1989. Mr. Fagenson has been the President of Fagenson & Co., Inc. since
1988 and has served since 1983 as a Vice President of Starr Securities, Inc.,
the firm which served as underwriter of the Company's initial public offering.
Both entities are registered broker-dealers and members of the New York Stock
Exchange. Mr. Fagenson is also a director of two other publicly traded
companies--Autoinfo, Inc. and Strings, Ltd.

None of the Company's directors is a director of any company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended, or of any company registered under the Investment Company Act
of 1940, as amended, except for Mr. Fagenson, as more fully stated above. There
is no family relationship among any members of the Board of Directors or the
executive officers or significant employees of the Company. The Board of
Directors met twice during the nine (9) month transition period ended December
31, 1995. Mr. Fagenson did not attend one (1) meeting. At the present time the
Company has no Nominating Committee. The Board has a Compensation Committee
whose members are Mr. Peek and Mr. Fagenson, and an Audit Committee whose
members are Mr. Peek, Mr. Sahs and Mr. Kolcio, Controller of the Company. The
Compensation Committee establishes the compensation of the Chief Executive
Officer of the Company, reviews the recommendations of management regarding the
compensation of other executive officers and administers the Company's Stock
Option Plans. All directors and executive officers are elected to serve as
directors and executive officers until the next annual meeting of shareholders
of the Company or until their successors have been elected and qualified.

There are no arrangements or understandings between any director or
executive officer and any other persons pursuant to which any such directors or
executive officers was or is to be selected as a director or nominee for
director.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Based solely upon its
review for Forms 3 and 4 with respect to its nine month transition period ended
December 31, 1995 and in reliance upon written representations regarding the
necessity to file Form 5, and except as previously reported, the Company has
determined that, to the best of its knowledge, no officer, director or
shareholder required to file such form has failed to do so timely, except that
Ralph L. Peek filed Form 4 late and Michael Cahill failed to file Form 4.

EXECUTIVE COMPENSATION

The following table sets forth the cash compensation for fiscal 1994 and
1995 and the nine month transition period ended December 31, 1995, to the
Company's Chief Executive Officer, officers who earned in excess of $100,000 and
to all executive officers as a group.

CASH COMPENSATION TABLE

NAME OF INDIVIDUAL OR GROUP
AND PRINCIPAL POSITION YEAR CASH(A) COMPENSATION OPTIONS/SARS(#)
- ------------------------------------------- ------------- -------------------- ---------------

E. Anthony Wilson, CEO..................... 1995 (9 mos.) $124,062 100,000
1995 122,166 100,000
1994 120,000
All Executive Officers as a Group (3 in
1995; 3 in 1994; 4 in 1993).............. 1995 (9 mos.) 204,202 150,000
1995 343,957 200,000
1994 301,152

- ------------
Note: Columnar information required by Item 402(a)(2) has been omitted for
categories where there has been no compensation awarded to, earned by,
or paid to, any of the named Executives required to be reported in the
table during fiscal 1994 and 1995 and the nine (9) month transition
period ended December 31, 1995.
(a) In addition, the Company provides Mr. Wilson with an automobile. Other
than the cash compensation set forth in the table, none of the Executive
Officers individually, nor the Executive Officers as a group, received
non-cash benefits having a value exceeding $50,000, or 10% of their cash
compensation.

Beginning in January, 1993, non-management directors were paid $500 for each
board meeting attended. Directors who are also full time employees are not paid
directors' fees.

STOCK OPTION PLAN

In December 1988, the Board of Directors of the Company adopted the Microtel
Franchise and Development Corporation Employee Stock Option Plan (herein
referred to as the "Employee Stock Option Plan") under which 100,000 shares of
the Company's Common Stock were reserved for issuance to officers, key employees
and directors pursuant to the exercise of qualified stock options, nonqualified
stock options and direct purchases of restricted stock. The Employee Stock
Option Plan was approved by the shareholders of the Company at the Company's
Annual Meeting in September, 1989. The Employee Stock Option Plan is
administered by the Board of Directors. On October 1, 1990 the Board of
Directors of the Company authorized, and option agreements under the Employee
Stock Option Plan were executed, providing for the grant of options to a total
of thirteen employees to acquire up to 100,000 shares in the aggregate of the
Company's Common Stock at a purchase price of $3.75 per share. These options
vest three years from the date of grant. As of December 31, 1995, 95,500 options
had been issued and options for 15,000 shares granted under the Employee Stock
Option Plan had been exercised.

The 1993 Employee and Director Stock Option Plans

In September 1993, the Company adopted the 1993 Employee Stock Option Plan
and the 1993 Director Stock Option Plan. The Employee Plan provides for the
grant of incentive and non-qualified stock options to selected employees and is
administered by the Compensation Committee of the Board of Directors. The
original Plan authorized the grant of options for 250,000 shares. On August 23,
1995, the Shareholders approved the issuance of an additional 300,000 shares
pursuant to the Employee Stock Option Plan. The Compensation Committee
determines the individuals who participate under the Plan, the terms and
conditions of options, the option price, the vesting schedule of options and
other terms and conditions of the options granted pursuant thereto. As of
December 31, 1995, the Company had issued options to purchase 411,000 shares of
Common Stock under the Non-Statutory Stock Option Plan, and 57,000 of those
options have been exercised.

The 1993 Director Stock Option Plan allows for the issuance of options to
purchase up to 135,000 shares of Common Stock by Directors pursuant to the
formula set forth in the plan. Options to purchase 81,000 under the 1993
Director Stock Option Plan had been granted as of December 31, 1995; none of
these options have been exercised.

Other Stock Options

On September 29, 1993, the Shareholders approved the grant of an option to
purchase 10,000 shares of Common Stock at $2.00 per share to Alan S. Lockwood,
the Company's Secretary. Mr. Lockwood is also a partner in Boylan, Brown, Code,
Fowler, Vigdor & Wilson, LLP, the Company's attorneys. The option was granted to
900 Midtown Investments, an investment partnership in which Mr. Lockwood is a
partner. As of December 31, 1995, options to purchase 2500 shares had been
exercised; as of March 15, 1996, an additional 833 options had been exercised.

APPROVAL OF AMENDMENT TO 1993 EMPLOYEE STOCK
OPTION PLAN

. PROPOSAL NO. 2: To Authorize the Issuance of an Additional 300,000 Shares
Pursuant to the Company's Non-Statutory Employee Stock Option Plan

The affirmative vote of the holders of a majority of all outstanding Common
Shares of the Company entitled to vote at the Annual Meeting is required to
authorize the issuance of options to purchase additional 300,000 shares pursuant
to the Company's Non-Statutory Employee Stock Option Plan.

SUMMARY OF TERMS OF THE 1993 EMPLOYEE STOCK OPTION PLAN

Administration. The 1993 Employee Stock Plan was adopted by the Shareholders
on September 29, 1993 and is administered by the Compensation Committee of the
Board of Directors. The Compensation Committee shall consist of two or more
nonemployee directors of the Company who for one year have not received any
options from the Company except pursuant to the Company's Director Stock Option
Plan. The Compensation Committee shall have the authority to determine the
optionees to receive options, the times when such optionees shall receive such
options, the number of shares subject to each option, the option price of each
option, the vesting schedule, if any, and other terms and conditions of the
option permitted under the 1993 Employee Stock Option Plan. The decisions of the
Compensation Committee concerning the interpretation and construction of any
provisions of the 1993 Employee Stock Option Plan or any option granted
thereunder shall be final.

Eligibility. The persons eligible to receive options under the 1993 Employee
Stock Option Plan shall be such employees of the Company as the Compensation
Committee shall select from time to time. All references in the 1993 Employee
Stock Option Plan to employees of the Company shall include employees of any
partner or subsidiary of the Company, as those terms are defined in Section 425
of the Internal Revenue Code. As grants of future options under the 1993
Employee Stock Option Plan is upon the authority and at the discretion of the
Compensation Committee of the Board it is not possible to determine the amounts
of options which may be allocated to any individual or group of individuals.

Stock Subject to Options. The number of shares of Common Stock which would
be subject to options granted under the 1993 Employee Stock Option Plan would be
850,000, of which options to purchase 411,000 shares have been granted. Any
shares subject to options which expire or are terminated unexercised shall
continue to be available for options under the 1993 Employee Stock Option Plan.

Exercise Price and Terms of the Options. The exercise price under each
option shall be equal to the closing price of the Common Stock quoted by the
national securities exchange which is the principal market for the Common Stock
on the last day of trade prior to the authorization of the option grant. The
term of each option may not exceed ten (10) years. Each option may include, in
the discretion of the Compensation Committee, a vesting schedule.

Termination of Employment, Death or Disability of Optionee. The 1993
Employee Stock Option Plan provides that an optionee shall have the right to
exercise the vested portion of any options granted under the 1993 Employee Stock
Option Plan only while he is employed by the Company, and for a period of ninety
(90) days following termination of his employment for reasons other than fraud,
dishonesty, or disloyalty to the Company. In the event that an optionee shall
die prior to the complete exercise of options granted to the optionee under the
1993 Employee Stock Option Plan, the vested portion of any such remaining option
may be exercised in whole or in part within ninety (90) days after the date of
the optionee's death and then only: (i) by the optionee's estate or by or on
behalf of such person or persons to whom the optionee's rights pass under the
optionee's will or the laws of descent and distribution; and (ii) prior to
expiration of the term of the option. In the event that an optionee shall

become permanently and totally disabled (within the meaning of Section 22(e)(3)
of the Internal Revenue Code) while an employee of the Company and prior to the
complete exercise of options granted to the optionee under the 1993 Employee
Stock Option Plan, the vested portion of any such remaining option may be
exercised in whole or in part within six (6) months following the date the
optionee is determined to have become permanently and totally disabled.

Non-Assignment. During the lifetime of any optionee, options issued under
the 1993 Employee Stock Option Plan shall not be assignable or transferable by
the optionee, whether voluntarily or by option of law or otherwise.

Dissolution, Merger or Reorganization. In the event of: (1) a dissolution or
liquidation of the Company, (2) a merger or consolidation in which the Company
is not the surviving corporation, or (3) another capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, any outstanding options under the 1993 Employee Stock Option Plan
shall terminate except: (i) when another corporation shall assume such options
or substitute new options therefore; and (ii) the Compensation Committee shall
have the discretion and power in any such event to determine, and to make
effective provisions therefore, than an optionee may exercise his option for
such number of shares, not exceeding the total number specified by the option,
as the Compensation committee may determine and/or that any outstanding options
shall continue in full force and effect.

Adjustments as to Number of Shares. The aggregate number and kind of shares
available for options under the 1993 Employee Stock Option Plan, the number and
kind of shares subject to any outstanding option, and the option price of each
outstanding option shall be proportionately adjusted by the Compensation
Committee for any increase, decrease or change in the total outstanding Common
Stock of the Company resulting from a stock dividend, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or similar transaction
(but not by reason of the issuance or purchase of Common Stock by the Company in
consideration for money, services or property or by reason of the conversion of
convertible stock to Common Stock).

Term of the 1993 Employee Stock Option Plan: Amendment and Termination. The
1993 Employee Stock Option Plan took effect on October 1, 1993, and shall remain
in effect until all shares subject to issuance thereunder have been purchased
pursuant to options granted thereunder, provided that all options and rights
granted under the 1993 Employee Stock Option Plan must be granted prior to
September 30, 2003. The Board of Directors of the Company, without further
approval of the shareholders of the Company, may at any time suspend or
terminate the 1993 Employee Stock Option Plan or may amend it from time to time
in any manner; provided, however, that no amendment shall be effective without
prior approval of the shareholders of the Company which would (i) except in the
case of adjustments authorized under 1993 Employee Stock Option Plan, increase
the maximum number of shares which may be issued under the 1993 Employee Stock
Option Plan, (ii) change the eligibility requirements for optionees entitled to
receive options under the 1993 Employee Stock Option Plan, or (iii) extend the
period for granting options.

Tax Consequences. An optionee will not recognize taxable income upon the
grant of a stock option under the 1993 Employee Stock Option Plan. When an
optionee exercises such an option, the optionee will recognize taxable
compensation income at the time equal to the difference between the option
exercise price and the fair market value of the stock on the date of exercise.
An optionee will generally have a basis in stock acquired through exercise of an
option under the 1993 Employee Stock Option Plan equal to the fair market value
of the stock on the date of exercise. If the optionee subsequently sells the
stock, the gain (which is the difference between the sales price and the
optionee's basis) will be taxed as capital gain in the taxable year in which the
sale occurs. Any compensation income recognized by the optionee upon the
exercise of an option under the 1993 Employee Stock Option Plan will be
allowable to the Company as a business deduction at the time it is recognized by
the optionee.

The Board of Directors recommends a vote FOR the authorization of the
issuance of an additional 300,000 shares pursuant to the Company's 1993 Employee
Stock Option Plan.

CHANGE OF CORPORATE NAME

. PROPOSAL NO. 3: Approving the amendment of the Company's Certificate of
Incorporation to change the Company's name to Hudson Hotels Corp.

The affirmative vote of the holders of a majority of all outstanding Common
Shares of the Company entitled to vote at the Annual Meeting is required to
authorize the amendment of the Company's Certificate of Incorporation to change
the Company's corporate name to Hudson Hotels Corp.

BACKGROUND.

On October 5, 1995, the Company signed an exclusive Joint Venture Agreement
with U.S. Franchise Systems, Inc. pursuant to which the Company granted to U.S.
Franchise Systems, Inc. the worldwide rights to franchise and administer the
Microtel(R) franchise chain. In connection therewith, the Company assigned to
U.S. Franchise Systems, Inc. all rights in and to the intellectual property and
trademarks related to the franchise business, including the name and trademark
"Microtel". The Company agreed to immediately begin doing business as Hudson
Hotels, and to recommend to its shareholders, at the next annual meeting of
shareholders, that the Company change its corporate name to a name other than
"Microtel".

Hudson Hotels Corp. was the hotel management and development company
originally founded by Loren Ansley and E. Anthony Wilson in 1984, and was the
incubator of the "Microtel" concept. Hudson Hotels has developed a name for
itself in the hotel industry as a quality manager and developer of hotel
properties. The Company acquired Hudson Hotels Corp. as a subsidiary in June
1992, and subsequently merged it into the Company. The Company's hotel
management and development arms have continuously done business as Hudson Hotels
since June 1992.

The transfer of the franchising business to U.S. Franchise Systems, Inc.
will enable the Company to focus its business efforts on developing, building
and managing various hotel properties, including Microtels.(R) The Company
believes that utilizing the Hudson Hotels name will enable it to capitalize on
the recognition and presence which has already been established for that name in
both development and management.

The Board of Directors recommends a vote FOR the amendment of the Company's
Certificate of Incorporation to change the Company's corporate name to Hudson
Hotels Corp.

APPROVAL OF INDEPENDENT ACCOUNTANTS

. PROPOSAL NO. 4: Approving the Appointment of Bonadio & Co., LLP as the
Company's Independent Public Accountants for the year ending December 31,
1995.

For the nine (9) month transition period ended December 31, 1995, the
accounting firm of Bonadio & Co., LLP served as the independent public
accountants of the company for the purpose of reporting on the audit of the
company's financial statements. The Board of Directors proposes the appointment
of Bonadio & Co., LLP as the Company's independent public accountants for the
year ending December 31, 1996. The appointment requires an affirmative vote of a
majority of the total number of votes cast at the Annual Meeting, either in
person or by proxy. In the absence of instructions to the contrary, proxies
covering the Common Shares will be voted FOR the appointment of Bonadio & Co.,
LLP as the Company's independent public accountants for the year ending December
31, 1996. If the shareholders do not appoint Bonadio & Co., LLP, the selection
of independent public accounts will be made by the Board of Directors, and
Bonadio & Co., LLP may at that time be considered for such appointment.

A representative of Bonadio & Co., LLP is expected to be present at the
Annual Meeting. This representative will be given an opportunity to make a
statement if that person so desires and will be available to respond to
appropriate questions concerning the audit of the Company's financial
statements.

OTHER MATTERS

. PROPOSAL NO. 5: Authorizing Proxies to Vote Upon Certain Other Business.

As of the date of this Proxy Statement, the Board of Directors knows of no
other matters that are to be presented for consideration at the Annual Meeting.
Should any other matter come before the Annual Meeting, however, the persons
named in the enclosed proxy will have discretionary authority to vote all
proxies with respect to any such matter in accordance with their judgment.

Shareholders are requested to date, sign and return the proxy in the
enclosed envelope. If you attend the Annual Meeting, you may revoke your proxy
at that time and vote in person if you so desire; otherwise, your proxy will be
voted for you.

SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING

In order for any shareholder proposal to be included in the Company's Proxy
Statement to be issued in connection with the 1997 Annual Meeting of
Shareholders, such proposal must be received by the Company no later than
February 1, 1997.

THE FINANCIAL STATEMENTS OF THE COMPANY AS THEY APPEARED IN THE ANNUAL
REPORT OF THE COMPANY ON FORM 10-KSB FOR THE NINE MONTH TRANSITION PERIOD ENDED
DECEMBER 31, 1995, TOGETHER WITH THE AUDITORS' REPORT, ARE INCLUDED WITH THIS
PROXY. A COMPLETE COPY OF THE COMPANY'S FORM 10-KSB FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO:
MICROTEL FRANCHISE AND DEVELOPMENT CORPORATION, ONE AIRPORT WAY, SUITE 200,
ROCHESTER, NEW YORK 14624, ATTENTION: CORPORATE SECRETARY.

BY ORDER OF THE BOARD OF DIRECTORS

Alan S. Lockwood
Secretary

Dated: April 1, 1996
Rochester, New York

MICROTEL FRANCHISE AND DEVELOPMENT CORPORATION

Proxy Solicited on Behalf of the Board of Directors

The undersigned hereby appoints E. Anthony Wilson, Ralph L. Peek, Bruce A.
Sahs or any of them with power of substitution, proxies to vote at the Annual
Meeting of Stockholders of Microtel Franchise and Development Corporation (the
"Company") to be held on May 13, 1996 at 9:30 a.m. local time, and at any
adjournment or adjournments thereof, hereby revoking any proxies heretofore
given, to vote all shares of reverse side of this proxy card, and in their
discretion upon such other matters as may come before the meeting.

(Continued and to be signed on reverse side)

[X] Please mark your votes as in this example.

FOR WITHHELD
1. Election of Directors. [ ] [ ] Nominees: E. Anthony Wilson
Michael Cahill
Bruce A. Sahs
Ralph L. Peek
Robert Fagenson

For, except vote withheld from the following nominee(s):

_______________________________________________________

FOR AGAINST ABSTAIN
2. To consider and act upon a proposal to authorize the [ ] [ ] [ ]
issuance of options for an additional 300,000 shares
pursuant to the Company's 1993 Non-Statutory Employee
Stock Option Plan.

3. To consider and act upon a proposal to amend the [ ] [ ] [ ]
Certificate of Incorporation of the Company to change
the Company's name to Hudson Hotels Corporation.

4. To consider and act upon a proposal to appoint [ ] [ ] [ ]
Bonadio & Co., LLP as the Company's independent
public accountants for the year ending December 31,
1996.

5. To transact such other business as may properly come [ ] [ ] [ ]
before the meeting or any adjournment or adjournments
thereof.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.

SIGNATURE(S) ________________________________________________ DATE _____________

NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, trustee or guardian, please give full title
as such.