Do you want to own a profitable hotel business without starting from scratch? If YES, here are 20 sure tips on how to buy a hotel franchise with no money down.

It has been estimated that for more than 40 years now, franchising has been the most popular method entrepreneurs use to obtain hotel ownership. Hotel franchising enables new hotel owners to attain instant identity so that they can start attracting customers even from the first day of starting the business.

In the United States, more than 70% of all hotels are affiliated to one chain or the other, with less than 30% being independent. With this statistics, it is then obvious that being part of a group of hotels that share a recognized brand and provide services like a central reservation system, marketing and defined operational procedures, might mean the difference between financial success and failure. If that were not true, then a lot of entrepreneurs would not be jumping on the bandwagon.

If you have decided to purchase a hotel franchise, you would know that the process is indeed very straightforward most of the time. Most entrepreneurs who can afford it often buy the franchise of a reputable hotel chain because they offer very safe investments as well as turnkey operations with thoroughly duplicable systems.

To buy into a hotel franchise, you will need the help of a business broker, an attorney, accountant, and other advisors. You also must thoroughly vet every franchise contract you want to go into and negotiate the details to develop an agreement that offers you the best chance at fast, profitable success. Do not forget to negotiate every offer you get as franchisors most times are willing to shift grounds on this issue or that just to make sure that you invest with them.

Buying a hotel franchise means following a series of basic steps regardless of the corporation offering the franchise. These are the steps you would typically follow if you want to own a hotel franchise.

20 Tips on How to Buy a Hotel Franchise With No Money

  1. Review your personal records

If you wish to own a hotel franchise, the very first thing you have to do is to analyze yourself to see if you qualify. You must have to review your personal records to determine your financial worth and the amount of available cash you have to invest in a hotel business. You equally have to check your credit score to determine if you qualify for a business loan.

2. Get your skills in line

Running a hotel requires certain skills without which you may not do well in the business. You need to make a list of the skills, trainings and experience you have in this line of business. Note how these skills relate to the ownership, management and operations of a hotel franchise.

If you feel that something is lacking, you may have to make up for it through additional training, but you have to first of all ensure that that training would not be part of your franchise offering so that you do not waste time and resources.

3. Know what type of hotel you want

They are different types of hotels demanding various skills and financial requirements. Before you proceed further, you have to know the type of hotel that interests you and matches your skills and experience. Are you able to handle a high-end luxury or moderately priced to budget hotel, or something in-between?

Some hotels feature hundreds of guest’s rooms, full-service dining and lounge facilities and thousands of square feet of meeting rooms, while others might have only a couple of dozen guest rooms and a snack machine in the check-in area.

Some hotels cater to tourists, while others cater to business travelers. Decide what works best for you. After that, decide where you might want to locate your hotel franchise. For example, if you are interested in a hotel that caters to business travelers, you might want to look at a location near an office park or commercial district.

4. Approach a lender

After you have made sure that your records are in order, and that you qualify to be given a business loan, you now have to select and approach a lender. For the meeting, you have to bring along your financial records, including your federal tax documents, bank statements and proof of income, to discuss the type of loans available to you. You also have to explain to your lender that you want to buy a hotel franchise and the type of hotel you are interested in.

5. Do your research

Having known the type of franchise hotel you want to buy into, it is now time to thoroughly research the industry. You need to go through hotel trade journals and information on the website. You equally have to research your type of hotel that offers franchises and note the ones that best match your skills, experience and interests. Alternatively, you can contact a commercial real estate agent or broker, or a franchise expert to review franchised hotels already on the market on your behalf.

6. Evaluate the various hotel franchise offerings

Once you get a list of hotels you intend to franchise with, you need contact the hotel’s corporate management about specific franchises for sale, or franchise-branding opportunities. Find the appropriate contact representative on the hotels’ franchise websites in order to obtain an email address, fax, telephone number and street address to request franchise portfolios.

7. Demand company details

You then need to go further to request franchise company questionnaires for your franchise selections. These questionnaires typically ask you to submit contact information, your proposed hotel location, and details about your ideal hotel operation.

You must also provide a narrative of your goals, details of your development and management experience, and your professional memberships and awards. If you want to convert a current hotel to a brand-name franchise, you must provide specific information about your hotel’s operation and location.

8. Obtain franchise disclosure document

You can now go ahead to obtain franchise disclosure documents from the hotel corporations that interest you. Federal law requires that the new franchisee have a 14-day disclosure examination period before signing a franchise purchase agreement or depositing any money with the corporation.

Some states also require separate franchise disclosure documents for franchise opportunities within state boundaries. Examine the Franchise Disclosure Document to learn about the details of the franchise you are considering investing in. The document contains operating and training manuals as well as financial statements from the franchise that would help you figure out how to run the hotel.

9. Understand the total cost of affiliation

The actual franchise or royalty fee is only part of the cost of becoming part of a hotel chain. You will probably also be charged an initial fee for joining the chain, an annual cost of your reservations, various marketing and frequent guest programs, and a liquidated damage fee should you want to terminate the affiliation before the term ends. When you compare the cost of one franchise with another, be sure to include all the expenses that will be incurred over the entire life of the agreement. All these would help you decide whether to proceed or back out.

10. Negotiate your offering

After you find the hotel franchise that best suits your needs, you’re ready to start negotiating. If you buy an established hotel and want to continue running the hotel under the same franchise, you may want to negotiate for a reduction in the improvements the franchisor requires, or request for a longer period of time to get them done.

The most important thing to know when you go to the table with a franchisor is that you are not at their mercy; the two of you are making a mutual business agreement, and the agreement needs to be agreeable to both parties.

Whenever you have a problem or concern with the agreement, tell the franchisor what it is and what you want. You have to know that it is as much in their interest that they accommodate you as it is in yours that you accommodate them – and they usually have more leeway than they let on.

11. Talk to Other Franchisees

To know the real state of the hotel you want to go into franchise with, you have to talk with other franchisees of the hotel. This is a good step for someone starting a franchise in any industry. Your interest as a potential franchisee should not only be on the businesses popularity, but also on how the business treats its guests and especially its franchisees and staff.

The only way to learn this is to go and talk with men and women who are currently in the business. Find some nearby franchises and ask to talk to the owners. Ask them about what they like and what they would like to change about the way their franchisor relates to them, how the purchase process went, and what kinds of ongoing support the franchisor still provides.

12. Hire a professional to help out

Hire a marketing professional with experience in hotel franchising to review the information included as part of the disclosure information. Experts recommend that a new franchisee should never make high capital franchise deals without finding wise advisors to help influence the decision-making process.

You really need to seek the help of seasoned business people to help you navigate the negotiation process with your franchisor, and if you can do so before the deal term sheet is printed by your franchisor, you’ll have a lot more leverage in the long run.

13. When taking over an older hotel endeavor to inspect it

This a really straightforward and valuable recommendation. If you are remodeling an old hotel instead of building a new one, be sure to get every nook and cranny inspected. The last thing any franchisee wants is to spend his or her money investing in the perfect business only to find that there are structural, sewage, or electrical problems with the facility halfway through the opening year. Save yourself future headaches by being sure the real estate investment is sound.

14. Research the Local Competition

When it comes to choosing the placement of the hotel franchise you are going to buy, it is important to know all you can about the area you’re looking at, and competition is a big part of that. Know if the competition is something that you can comfortably handle or if the area is too choked up.

15. Set up a meeting with the hotel management

If you have made all your sundry research and you still want to go ahead and acquire the franchise, you can then request to have a meeting with the hotel’s corporate representative to draw up a franchise agreement. The agreement should meet your requirements for hotel type and geographic location.

16. Prepare your business plan

A business plan is very important when intending to start a business, no to talk of a franchise of the magnitude of a hotel. Your business plan would not only serve you when opening the business, but it would serve you all through the life of your business. So, you should endavour to prepare an in-depth business plan that can guide you all the way. Your business plan, if well written would help you get loan to finance the purchase of your franchise.

17. Complete your franchise loan application

You now have to complete your franchise loan application with the loan broker or bank agent which you have earlier located. If there are still issues left, now is time to sort them out. Submit the franchise agreement and disclosure to the bank for loan approval. Once your loan has been approved, you are now on your way to start a new business.

18. Go for training

As you are putting together modalities, you are now ready to begin your compulsory training if the hotel has any of such requirements. The training can last anywhere between 8 and 12 weeks or more, and you may be trained in marketing, negotiating with suppliers, filling permits, bookkeeping, hiring employees and lots more.

19. Get ready to open

When you are done with your trainings, you should now face the business squarely. You need to complete your remodeling, leasing or purchasing of equipment, filling inventory, hiring and training employees and other fine points. Ensure that every single detail has been taken care of in preparation for the opening day.

20. Open in a big way

Once everything is all set, then it is time to open your hotel. You are advised to spend up to 20 or even 25 percent of your marketing budget in preparations because a Grand Opening gives you better and faster publicity. After the Grand Opening, the franchise is now in place, and your business has started. You then need to put in all efforts to ensure the success of the business henceforth.

Conclusion

There are indeed a lot of advantages in owning a hotel franchise. One of them is that the head office support helps you select a location and determine which amenities you should provide. Being part of a franchise provides the opportunity for stable financials, allowing you to reasonably estimate the possibility of income and expenses.

With a large selection of hotel chains to choose from, it is possible to own a small budget hotel or a luxury five star establishment.

If you are going to purchase a hotel, you should partner with a group you know will be capable of providing the level of support you require. Owning a hotel franchise is a large investment so it is natural to feel hesitant. Purchasing a hotel franchise means that you won’t be alone in your journey, as the franchisor will support you every step of the way.