Calculation of Continuing Franchise Fees.
The assessment of continuing franchise fees is determined using several different formulas. In general, royalty fees are calculated based on a percentage of rooms revenue. However, a few hotel operators charge an additional royalty fee based on a percentage of food and beverage revenue. For 2012, the ratio of royalty fee to rooms revenue ranged from 1.0% to 7.0%. Advertising and marketing fees are usually calculated as a percentage of rooms revenue, and ranged from 1.0% to 5.0%.
In some cases, reservation fees are based on a combination of a percentage of rooms revenue (ranging from 0.0% to 7.0%) and/or a dollar amount per available room per month (ranging from $0.14 to $8.65), which depends on the source of booking.
Many franchisors now require franchisees to bear their fair share of the costs associated with operating a frequent traveler program. Frequent traveler program assessments are typically based on a percentage of total or rooms-only revenue (ranging from 1.0% to 5.1%) generated by a program member staying at a hotel, or a fixed dollar amount (ranging from $2.30 to $6.35) for each room occupied by a program member. Many brands also require hotels to contribute a one-time participation fee, while others use a combination of the three methods. In determining the frequent traveler program fees, we have not considered any costs associated with frequent flyer miles.
Generally, these various fee formulas are applied individually, but in some cases, franchisors combine a number of formulas. Many also have first-month contingency fees in lieu of recorded revenues (e.g., a royalty fee of $24.00 per room for the first month and then 5.0% of gross revenue in the ensuing months).
Each fee structure offers advantages and disadvantages; a fee based entirely on a percentage of rooms revenue is favorable for hotels that derive significant income from food and beverage sales. Fees based on an amount per available room are fixed, and tend to benefit high-volume hotels and penalize properties with lower operating results. Paying a reservation fee based on the number of reservations received is equitable, as long as the reservations equate to occupied room nights and not to no-shows.
A potential franchisee should first carefully evaluate the fee structure and project the total cost of initial and continuing franchise fees, and then determine whether or not the price/value relationship warrants the acquisition of the franchise. Because the Federal Trade Commission regulates the sale of franchises, information regarding each franchise fee structure is readily available through disclosure documents known as either a Uniform Franchise Offering Circular (UFOC) or Franchise Disclosure Document (FDD). Franchisors must reveal and adhere to all terms of the franchise agreement as set forth in these documents, thereby eliminating (in theory) any potential for negotiating a more or less favorable contract. For purposes of this study, we collected and reviewed UFOCs and FDDs published in 2012 for all brands represented herein.
|
|
|
The Biggest Trends in Hotel Franchising - 2017 Edition.
As 2017 comes to a close, it is important to reflect on some of the key trends in the franchised hotel space this year. With purchase and sale activity continuing to slow, owners are focusing more on new development and renovating and maintaining their existing properties in order to keep their portfolios fresh and competitive heading into 2018 and beyond.
Capitalization Rates
Capitalization rates rise as profits and asset quality decline, and they are often subject to cyclical underlying economic trends which drive inflation and interest rates overall. As has been the case for the last several years now, cap rates in 2017 remained flat to slightly up across most select and full-service property types.
According to Chris Williams, Managing Director of Western Alliance Bank’s Hotel Franchise Finance department, cap rates will remain relatively stable in 2018, but the risk for rising cap rates will continue to increase as the economic expansion continues into its later stages. In general across the U.S., blended cap rates for full-service franchised hotels remained stable year-over-year, at or around 8%, while select-service properties saw a slight increase to about 9% over the same period.
Дата добавления: 2018-06-01; просмотров: 599; Мы поможем в написании вашей работы! |
Мы поможем в написании ваших работ!