Here is a quick review of the basic pros and cons of buying a hotel franchise. Every investor is different. Depending on who you are some of the “pros” may really be “cons” and vice versa. Consider this a starting point in your assessment of hotel franchise opportunities.
Starting with the good stuff, let’s look at the Pros:
Reduction of startup risk – you are working with someone who has done this before successfully.
Turnkey operation – again no reinventing the wheel on processes, procedures or procurement. Your franchisor has built the system already.
Standardized systems – backend accounting, IT and financial systems already in place so you aren’t spending your time implementing reservations systems.
Buying power – as part of a larger whole, you get the benefit of volume buying.
Consulting readily available – experience counts and your franchisor has been around the block. Ask for as much help as they are willing to give.
Marketing – the brand image and marketing is out there already. You aren’t chasing one-off travel reviewerers to get your name out.
Financial assistance – some franchisors are willing to help you with funding these high capital projects.
You are your own boss – the glory of that goes without saying!
Now let’s take a look at the downsides:
Less Freedom – You are married to your franchisor – for better or worse!
Royalty Payments – as a franchisee you pay for the supports above.
Costs – Hotels are high capital and operating cost businesses.
Lack of Support – if your franchisor doesn’t help as you expect, you may be out in the cold.
Inflexible Systems – even if you have a better way to manage reservations, you are using their method.
Unbalanced Contract – all franchising contracts, not just for hotels, are tilted toward the franchisor.
Dependent on Franchisor – their performance is your performance.
These are all things to consider as you step toward a decision about buying a franchise or hotel business.…Read more