How to buy a hotel franchise
- Assess your finances The first step that you need to take when considering buying a hotel franchise is the cost. ...
- Research hotel franchises ...
- Match your skills (and finances) to the right hotel franchise ...
- Consider a loan ...
- Request a hotel franchise questionnaire ...
- Obtain hotel franchise disclosure documents ...
- Consult with a hotel franchise attorney ...
- Review the hotel franchise agreement ...
Full Answer
Is a hotel franchise profitable?
Of course, it's no huge secret that buying a hotel is quite expensive, not to mention the ongoing costs of operation. But, if run properly, a travel franchise or hotel business can deliver big profits and even turn you into a millionaire.
How much do hotel franchisees make?
Franchise Hotel Owner's Salary The hotel owner salary for a franchise property is modest. According to Shmoop.com, the owner of a chain hotel can expect an average hotel owner's salary of $50,000, with a range of $40,000 to $60,000 a year. Don't forget, the owner is paying a 4% to 6% franchise fee.
Can hotels be franchise?
Hotel franchises are a popular option, since as long as vacations, honeymoons, and business trips exist, you'll have a market for your services.
How much money do I need to buy a hotel?
The average cost of starting a hotel in the US ranges from $750,000-$1,000,000 for a small motel, to the national average being around $22,000,000 for a hotel with around 115 rooms, and much higher for luxury and high-rise hotels (source.)
Who is the richest hotel owner?
Here are five of the richest hotel owners:Sheldon Adelson. With a net worth of $21.8 billion, Sheldon Adelson is the 12th wealthiest American and the 24th richest man on Earth. ... Donald Trump. ... William Barron Hilton. ... Phillip Ruffin. ... Ty Warner.
Is hotel a good investment?
The hotel industry is generally considered to be high risk and high reward, which means hotel investors that follow the right steps have the potential to benefit greatly from high returns. A well-managed hotel asset can deliver annual returns far exceeding those connected with many other real estate forms.
How much does it cost to own a Marriott?
How much does a Marriott franchise cost? Marriott has a franchise fee of up to $100,000, with a total initial investment range of $82,965,890 to $136,885,490. The initial cost of a franchise includes several fees -- Unlock this franchise to better understand the costs such as training and territory fees.
How do you start a hotel business?
How to Start a Hotel Business: Everything You Need to KnowStep 1: Find a market need.Step 2: Craft your strategic goals.Step 3: Run the numbers.Step 4: Review financing options.Step 5: Do your paperwork.Step 6: Hire and train your team.Step 7: Draft a marketing plan.Step 8: Launch your hotel business.
What are the disadvantages of owning a franchise hotel?
Hotel Franchise DisadvantagesStartup Costs and Franchise Fees. ... Less Control Over Your Business. ... Locked Into a Contract. ... Not Free of Risk. ... Exploring Franchise Hotel Advantages.
Do hotels make a lot of money?
Owning a hotel can be profitable if you have the right combination of location, price point, quality of the physical asset, marketing strategy, dedicated employees, and supportive investors and management partners. However, a hotel isn't profitable by default, so you can expect a lot of hard work to generate profit.
How do you purchase a hotel?
If you're interested in learning how to buy a hotel or a hotel franchise, you've come to the right place....How To Buy a HotelSearch for Property. ... Locate a Hotel. ... Conduct Due Diligence. ... Evaluate Financing Options. ... Negotiate Final Terms. ... Close on Financing and Purchase.More items...•
Do motels make good money?
How much profit can a motel business make? Profits for motels can be substantial, especially if the demand is high. Room rates can conceivably triple during major events and peak tourist season. However, average profits have fallen in the last few years for motels from around 35% to 25%.
Do hotel owners make a lot of money?
A well run hotel should typically run ~25-40% EBITDA Margins meaning that if you purchase a hotel doing $1M in annual revenue you could expect to make $250k - $400k per year which is about 3-5x the average salary of a hotel manager.
How much do Marriott owners make?
2021 Marriott Hotel We estimate the average Marriott franchise owner makes $8.1M in sales a year. The above estimated sales do not include the cost of financing, depreciation, and taxes.
What are the disadvantages of owning a franchise hotel?
Hotel Franchise DisadvantagesStartup Costs and Franchise Fees. ... Less Control Over Your Business. ... Locked Into a Contract. ... Not Free of Risk. ... Exploring Franchise Hotel Advantages.
Is owning a motel profitable?
How much profit can a motel business make? Profits for motels can be substantial, especially if the demand is high. Room rates can conceivably triple during major events and peak tourist season. However, average profits have fallen in the last few years for motels from around 35% to 25%.
What does it mean to buy a hotel franchise?
Buying a hotel franchise means following a series of basic steps regardless of the corporation offering the franchise.
How to get a hotel franchise agreement?
If you have made all your sundry research and you still want to go ahead and acquire the franchise, you can then request to have a meeting with the hotel’s corporate representative to draw up a franchise agreement. The agreement should meet your requirements for hotel type and geographic location.
How long do you have to disclose a hotel franchise?
Federal law requires that the new franchisee have a 14-day disclosure examination period before signing a franchise purchase agreement or depositing any money with the corporation.
What is franchising in hotels?
Hotel franchising enables new hotel owners to attain instant identity so that they can start attracting customers even from the first day of starting the business. In the united states, more than 70% of all hotels are affiliated to one chain or the other, with less than 30% being independent.
How to get a business loan for a hotel?
After you have made sure that your records are in order, and that you qualify to be given a business loan, you now have to select and approach a lender. For the meeting, you have to bring along your financial records, including your federal tax documents, bank statements and proof of income, to discuss the type of loans available to you. You also have to explain to your lender that you want to buy a hotel franchise and the type of hotel you are interested in.
How long does hotel training last?
The training can last anywhere between 8 and 12 weeks or more, and you may be trained in marketing, negotiating with suppliers, filling permits, bookkeeping, hiring employees and lots more.
What information do you need to convert a hotel to a franchise?
If you want to convert a current hotel to a brand-name franchise, you must provide specific information about your hotel’s operation and location.
What to consider when buying a hotel franchise?
The first step that you need to take when considering buying a hotel franchise is the cost. Investing in a hotel franchise is no small matter. In exchange for a proven business model and recognizable brand name to operate under, you’ll need to shell out a hefty upfront investment—often hundreds of thousands of dollars.
What is a hotel franchise?
A franchise is a type of business where a business owner (the franchisor) shares their brand products, services, and business plan with a third-party (the franchisee) so the franchisee can open their own branch of the franchise. The franchisee pays a franchise fee to the franchisor to use their brand and receive support in operating their business.
What is the first step in a hotel franchise application?
The first step in a franchise application is the hotel franchise questionnaire. This questionnaire will include questions about your basic information, your proposed location for the hotel, and how you would operate the hotel. The franchisor will also want to know information about your background, your experience in operating a business or hotel, why you’re interested in owning a hotel franchise, and any management experience you have.
What is included in a hotel franchise agreement?
The franchise agreement includes everything from the type of hotel, the geographic location for the hotel, the marketing budget, the operating documents that will be provided by the franchisor, and the amount of supervision and control the franchisor has over you and your franchise.
How many IHG franchises are there?
Even with their exorbitant price tag, this group of hotel franchises is seeing significant growth. IHG has more than 5,000 franchises around the world.
What is Intercontinental Hotels Group?
The InterContinental Hotels Group or IHG is actually a collection of different franchises. If you’re looking to work with IHG, you could be working with hotel franchises such as Holiday Inn, Crowne Plaza, or Intercontinental.
Why do people worry about starting their own business?
One of the many concerns that people face when considering starting their own business is the worry that their business might fail. While there are many factors that can cause a business to fail, some of the major concerns are simply that the demand isn’t there or the business model isn’t sustainable.
The ins and outs of buying the best hotel on the market
When thinking about your next big business move, the hospitality industry may come to mind. After all, hotels are a thriving enterprise in the current economy. In the last year, the U.S. hotel industry generated $208 billion in revenue with a record-breaking occupancy rate of 65.9 per cent.
Determine Your Ideal Hotel Type
When buying and operating your own hotel, you have two major hotel property options. The first is buying an existing hotel or hotel franchise and putting your own spin on it. The second is buying a different business or property type with the intention of converting it into a hotel.
Solidify Your Financing
When you shop for a hotel it’s important to hire professional financial assistance. Ensure you have both an experienced accountant and business broker to help you assess your current and prospective financial situation.
What to Look For
When buying an existing hotel it’s important to look through years of previous records to indicate whether the location, property, and market have been successful. This is also an easy way to determine why the property is up for sale. Obtain the hotel’s financial and occupancy records from the past three years.
Get Licensed
One of the most important — yet often overlooked — aspects of buying and operating your own business is licensing and regulations. Other than getting standard businesses licenses and permits, you may need a specific hotel license on the federal, state, and local level depending on your business’s location.
For the seller: How to deal with liquidated damages
Most hotel franchise agreements require an owner/seller to pay a termination fee or liquidated damages on termination of a franchise. Often this amount will be a multiple of the average annual franchise fee earned by the franchisor over the prior years.
HOW TO BUY A HOTEL – Free handbook
Until the free handbook on HOW TO BUY A HOTEL is published (expected in Summer 2014), you can access all the materials on this subject at www.HotelLawyer.com. Look on the right hand side of the home page and click on "Buying & Selling a Hotel."
Jim Butler
Jim Butler is a founding partner of JMBM, and the founder and chairman of JMBM’s Global Hospitality Group® and Chinese Investment Group™. He is recognized as one of the top hotel lawyers in the world and has authored or co- authored The HMA & Franchise Agreement Handbook, How to Buy a Hotel Handbook, and The Lenders Handbook.
