THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
                                           DATED AS OF JANUARY 31, 1992
                                                      BETWEEN
                                                 HFS INCORPORATED
                                               AND JOHN D. SNODGRASS



THIS  THIRD  AMENDMENT  entered  into as of October  __,  1996  between  JOHN D.
SNODGRASS (the "Employee") and HFS  INCORPORATED,  formerly known as Hospitality
Franchise Systems, Inc., a Delaware corporation ("HFS").

                                                    WITNESSETH:

WHEREAS,  the Employee and HFS desire to amend the Employment Agreement dated as
of January 31. 1992 (the "Agreement") between HFS and the Employee to extend the
term of the Agreement to December 31, 1998 and to provide  certain  supplemental
terms and provisions to the Agreement.

NOW, THEREFORE, in consideration of the respective promises contained herein and
the  agreement  of the  Employee  and  HFS  to  continue  the  employee-employer
relationship  through the date of the  execution  of this Third  Amendment  and,
thereafter,  to the extent the  parties so desire  pursuant  to the terms of the
Agreement,   the  parties  agree  that  the  Agreement   shall  be  amended  and
supplemented as follows:

         1.       Section 2 of the Agreement is amended to read in  its entirety
as follows:

                  "The term of the  Employee's  employment  under this Agreement
                  shall be for a period from the Effective Date through December
                  31, 1998,  unless  terminated  sooner as hereinafter  provided
                  (the "Term of this Agreement").

         2. In addition to all other  compensation and benefits  provided in the
Agreement,  the Employee shall be granted during or before May 1997 and May 1998
stock  options to purchase  250,000  shares of HFS Common Stock as of each grant
(or a total of 500,000  shares) under the HFS 1993 Stock Option Plan, as amended
(the "Plan"),  with exercise prices equal to the Fair Market Value of HFS Common
Stock (as  defined in the Plan) on the date of the  respective  grant;  provided
that the  obligation  to make such stock  option  grants shall be subject to the
availability  of an adequate  number of shares of HFS Common Stock  reserved for
stock option grants under the Plan at the time such options are provided  herein
to be granted.  Such stock options will be evidenced by stock option  agreements
substantially  in the form attached  hereto as Exhibit A and shall be subject to
the  provisions of the Amendment to Stock  Options,  dated the same date as this
Third Amendment, between HFS and the Employee. Unless otherwise requested by the
Employee prior to each stock option grant, the applicable stock option agreement
will  provide  for the  assignability  of such stock  options as provided in the
Plan.  Such number of shares of HFS Common Stock for which stock  options are to
be granted as provided


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herein shall be adjusted  appropriately  to give effect to stock  splits,  stock
dividends and similar changes in  capitalization  affecting the HFS Common Stock
taking effect prior to the grant of the respective stock options.

         3.  Notwithstanding  any  provisions  of the Agreement to the contrary,
from and after June 1, 1997 the Employee may relocate his personal  residence to
the Atlanta, Georgia area without being deemed to have breached the Agreement by
virtue of such relocation,  provided that he continues to comply with all of his
other obligations under the Agreement.  Notwithstanding any such relocation, the
Employee's  office and principal  place of business shall continue to be located
at the HFS headquarters which is currently in Parsippany, New Jersey.

         4. From and after June 1, 1997 HFS will make available to the Employee,
the use of a Hawker 800 aircraft (or similar aircraft) for personal and business
purposes,  the cost of which  will be  charged  to the  Employee  and/or  HFS in
accordance with the currently existing HFS policies governing such matters.  The
availability  and use of such  aircraft  shall be in  addition to the use of any
aircraft  owned or  leased  by HFS from time to time in  accordance  with  HFS's
policy relating to use of such aircraft in effect from time to time.

         5.  Notwithstanding  any  provisions  of the  Agreement to the contrary
(including  subparagraph (4) of the "Good Reason" definition in Section 8.3), it
is mutually  understood  and agreed that from and after  September 1, 1997,  the
persons directly reporting to the Employee may be limited to the senior officers
of HFS having  responsibility  over the hotel franchising group, the real estate
brokerage franchising group and the franchise sales function, which officers are
currently John Russell, Richard Smith and John Osborne, respectively.

         6.     Except to the extent modified and supplemented by the provisions
of this Third  Amendment,  the  Agreement shall  remain in effect as on the date
hereof.

         IN WITNESS  WHEREOF,  the  Employee  and HFS have  executed  this Third
Amendment as of the date first above written.




                                HFS INCORPORATED

                                            By:_________________________________


                                    EMPLOYEE

                                            ------------------------------------
                                                              John D. Snodgrass


                                                         

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