Selecting an appropriate franchise affiliation affects a property’s ability to compete in its local market, generate profits, and achieve desirable image and market orientation. Since a hotel’s success relies primarily on the cash flow it generates, owners and lenders must weigh the benefits of a brand affiliation against the total cost of such a commitment.
HVS has extensive experience in assisting clients in selecting the appropriate franchise and / or management brand for their proposed or existing hotels. This service also includes assistance or management of negotiations in coordination with experienced lawyers and other industry professionals.
Types of hotel franchise fees
Brand attributes play a crucial role in choosing a franchise hotel investor’s affiliation. One of the important economic considerations when evaluating a potential hotel franchise is the structure and amount of the franchise fee. After payroll, franchise fees are among the biggest operating expenses for most hotels.
Hotel franchise fees are compensation paid by the franchisee to the franchisor for the use of the brand’s name, logo, marketing, and referral and reservation systems. Franchise fees normally include an upfront fee with the franchise application, as well as an ongoing fee paid periodically throughout the term of the agreement.
Summary of Findings
Hotels are complicated investments. Selecting an appropriate franchise affiliation for a property involves exhaustive research and investigation on the part of an investor. The information presented in this guide has been developed to provide an overview of franchise rights structures and should not be viewed by an investor other than as a preliminary resource. HVS has researched and collected data from authoritative sources, and every effort has been made to verify the accuracy of this data; however, given the differences in reporting methods and franchise conditions, HVS cannot guarantee the accuracy of all data contained in this study. Finally, it should be noted that version 2016/17 of this guide is not necessarily comparable to previous versions due to the new methodology for calculating franchise costs, which takes into account the historical data of each brand and does not submit not all brands have uniform assumptions.
Click here for a free copy of the 2016/17 HVS Franchise Fee Guide
Kasia M. Russell
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