Hotel Franchise

The hotel franchise business is similar to the self-storage franchise, when you think of it. The only difference is you’re storing people overnight! The same other requirements apply, you still need acres of space and a sound building upon it. But beyond these simple requirements, hotels need a staff of maids, security guards, bellhops, and clerks at the very least. More likely, you will need some kind of food service, even if it’s just coffee and danish in the lobby every morning. Really, a hotel will feel like running several smaller businesses under one roof.

It is not cheap! Taking on a hotel franchise is one of the most expensive investments of all of the kinds of business franchise. How steep can it get? Well, Comfort Inn and Suites requires a net worth of $4 million and and liquid capital of $1.2 million. Hawthorne Suites requires both net income and liquid capital to be $1.5 million. Even a low-end one, like Econo Lodge, has a net worth requirement of $2 million. Generally, you have to be in the big tax brackets before they’ll even talk to you.

If you’re taking over an existing hotel, this is a much less demanding endeavor, but you’re still into the big bucks. The hospitality industry has always done well, so if you find somebody desperate to sell, chances are something’s wrong. Maybe it’s out in the middle of nowhere, or the property is falling apart. Also, existing hotels tend to be located very close to other existing hotels. Count on competition.

If you already own a hotel and are interested in rebranding it as a franchise, that’s a different story. Obviously you already have the capital and surely you’re doing some kind of business. Shop around in that case - remember, it is in the best interest of any single hotel chain to have as many locations as possible. It’s one big Monopoly game out there, so if you’re offering a company to take over your existing establishment, you actually hold a lot of cards. You’ve probably gotten offers already.

Managing a hotel is challenging. You have all of the problems of an apartment landlord, but even more so, because people tend to behave a little worse when they’re only staying a night. Some of your constant concerns will be property damage, theft, evicting unruly guests, keeping the rooms clean, buying and repairing furniture and fixtures, and training and retaining staff, to name just a few. If a guest’s car gets stolen from the parking lot at night, that’s your problem. If some teens rent a room for a night of underage drinking, that’s your problem. Somebody’s kid brings a pet mouse and it gets loose, that’s your problem. There’s a reason that hotels have been the subject of so many television sitcoms.

Deciding whether a hotel franchise is worth it is entirely up to you. Of course, even a modest hotel makes big money in keeping with the high buy-in prices. A typical hotel room which costs $70 a night will be in an area where an apartment would cost about $1000 per month. Now figure for 125 units, with 100 rooms booked (hotels ideally have 80% occupancy average, or they’re in the wrong place), that’s $7000 for one night. Now consider the annual money… yes, that explains the high price. And this is just for a small road-side sleeper between cities!