How to decide if a hotel franchise is right for you?

Are you wrestling with the decision to join a franchise or go it alone?

It's a big choice that impacts your brand, operations, and bottom line.

Let’s unpack the options and considerations so you can make a well-informed decision that’s right for your hotel.

Here are your options in a nutshell

• Independent: You run the show—everything from branding to bookings.
• Standard Franchise: The usual route. You get branding and operational support.
• Manchise Agreement: Mix of management help and franchise stability. 
• Strategic Marketing Alliance: Use a fancy brand to add some glitz to your hotel.

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Thinking about a franchise?

Here's how to assess what's right for you:

• Analyze Your Guests: Who are they? What do they want?
  • If your hotel primarily serves business travelers who value consistency and quick booking processes across cities, a franchise known for these strengths could be beneficial. Conversely, if your clientele seeks unique, boutique experiences that vary from the norm, maintaining independence might preserve the unique charm that attracts your guests.
• Pros vs. Cons: What benefits a franchise offers against what it demands in return. How do these stack up against your current or potential independent operations?
  • Joining a franchise might give you access to a sophisticated reservation system and a loyalty program which can increase bookings. On the downside, it could also mean losing some control over your marketing and incurring ongoing franchise fees. Weigh these factors based on what aspects of your operation you value most and are willing to compromise on.
• Crunch the Numbers: Look at costs versus potential revenue increases. Does the math suggest a clear benefit?
  • Suppose the cost of franchising is 8% of your annual room revenue (usually, the franchise cost of room revenue is somewhere between 4% and 14%), but the expected increase in occupancy and average room rate from the franchise’s brand power and reservation system is projected to boost your revenue by 12%. This could be a compelling financial argument for franchising. However, if the numbers are tighter or the investment doesn't pay off significantly, sticking to independence might make more financial sense.
• Cultural Fit: Beyond the numbers, will this franchise mesh well with your business philosophy and long-term vision?
  • If you pride yourself on your hotel’s eco-friendly practices and personalized guest services, you'll need to assess whether a potential franchise will support these values or impose standardized practices that could dilute your brand’s identity.

Key Factors to Consider

Dive into these specifics to gauge the impact of franchising:

• Guest Preferences: Why do guests choose your hotel? Could a franchise enhance these factors or overshadow them?
  • If feedback indicates that guests choose your hotel for its unique décor and local flavour, franchising might risk standardizing those unique elements away. However, if guests indicate that unpredictability in service quality keeps them from returning, a franchise's standardized operations could be a benefit.
• Business Origins: Understand where your bookings come from and whether a franchise could effectively increase that flow.
  • If a significant portion of your business comes from walk-ins due to your prime location, and you already achieve high occupancy rates, the additional exposure from a franchise might not be necessary. However, if you’re off the beaten path and struggle with visibility, a franchise’s marketing muscle could be exactly what you need.
• Booking Efficiency: Evaluate if a franchise’s booking system would streamline your operations or complicate them.
  • If handling reservations is currently a big strain on your resources, and mistakes often lead to overbookings or lost bookings, the franchise's streamlined processes could significantly improve your operational efficiency. On the other hand, if you have a well-oiled booking system that your staff manages effectively, the benefit here may be minimal.
• Seasonality: Consider whether a franchise could help stabilize occupancy rates throughout the year.
  • If you notice a considerable drop in guests during the off-season, a franchise with a robust marketing network could help attract guests year-round. Conversely, if your business thrives throughout the year due to local attractions or events, the value added by a franchise might not justify the costs.

Franchising can offer significant advantages but comes with its own set of challenges and costs. It’s crucial to weigh these carefully against the autonomy and potential rewards of running an independent hotel. This decision should align not only with your financial goals but also with your personal values and the unique character of your property.

Think it over, do the homework, and choose the path that truly aligns with what you envision for your hotel’s future.

Going the franchise route isn't always the best option, at least not for everyone.