If you are evaluating a hotel franchise opportunity, you may be wondering why you are supposed to come up a considerable chunk of money as a franchise fee. What do hotel franchise fees cover and how do they benefit a franchisee? This is a good question that should be looked into.
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First, studies have shown that franchise businesses rarely fail unlike new startups that are not franchises. The reason of course is due to the fact that the franchisor (hotel franchise owner) has eliminated many risks associated with starting a new business, by spending years trying to come up with a successful business model that is easy to duplicate. This is the reason why franchisors demand a franchise fee.
As a potential hotel franchisee you need to understand what benefits you will get in exchange for your franchise fee payments. There are four major benefits that franchisees accrue from the franchisor that come directly from the franchise fee that he pays.
The first one obviously is the use of an established and successful brand. This is what makes franchise fees to greatly vary from one hotel franchise to another. Established household brands like the Hilton and the Intercontinental have high franchise fees while lesser known brands like Hampton Inns and Suites are good bargains.
The second benefit that is covered by hotel franchise fees is suppliers’ discounts. The franchise fee enables you to buy the hotel supplies especially food, from the franchisor’s special suppliers who offer pre-arranged discounts with the franchisor due to the bulk sales that are brought about by the numerous outlets. As more franchises open more of these discounts are given.
The third benefit that is financed directly by the hotel franchise fee is training and support. This training is invaluable to the franchisee especially if you are operating the franchise business for the first time. Most hotel franchisors give two weeks intensive training which is conducted at their headquarters. The training is given to you (the prospective franchisor) and key members of staff. Continued training on various developments in business processes and procedures is offered in form of training workshops and conventions. Also, you will get access to franchisor’s infrastructure like 24/7 phone support and experienced staff who may be availed to you in some instances. The franchise fee enables the franchisor’s to prepare operations manual which covers topics such as accounting and billing, vendor and employee relations, royalties and how they are paid, safety, community relations and scheduling.
Lastly hotel franchise fees are used by the franchisor to cover the cost of advertising and marketing. The franchisor is the one who conducts national marketing campaigns through advertisements that are carried out on print media, radio and television. As a hotel franchisee, your business will grow exponentially due to these vigorous national marketing campaigns. You will develop your marketing skills by making use of the franchisor’s training.