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
Table of Content
- Review your personal records
- 2. Get your skills in line
- 3. Know what type of hotel you want
- 4. Approach a lender
- 5. Do your research
- 6. Evaluate the various hotel franchise offerings
- 7. Demand company details
- 8. Obtain franchise disclosure document
- 9. Understand the total cost of affiliation
- 10. Negotiate your offering
- 11. Talk to Other Franchisees
- 12. Hire a professional to help out
- 13. When taking over an older hotel endeavor to inspect it
- 14. Research the Local Competition
- 15. Set up a meeting with the hotel management
- 16. Prepare your business plan
- 17. Complete your franchise loan application
- 18. Go for training
- 19. Get ready to open
- 20. Open in a big way
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.
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.
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.
Frequently Asked Questions
How Would You Go About Buying A Hotel?
To buy a hotel, here are key issues to consider;
- Determine your acquisition criteria
- Identify the right target
- Manage the bid process
- Determine the right price
- Determine the right structure
- Ensure that your financing is in place
- Carry out proper due diligence
- Assess your management options
Can You Really Buy A Hotel Room?
Yes, in the real estate industry, these are known as condo hotels. Hotel rooms boast higher occupancy rates and greater monthly returns than regular condominiums.
How Much Does It Cost To Buy A Hotel?
The average cost of acquiring a hotel in the US ranges from $750,000-$1,000,000 for a small motel, to the national average being around $22,000,000 for a hotel with around 115 rooms, and much higher for luxury and high-rise hotels. Buying a franchise hotel will cost at least $195,000, according to entrepreneur.com. And that’s just the start-up cost.
How Much Does It Cost To Live In A Hotel?
These will depend on the size of the city, how hotels in the market are doing, whether or not you insist on your room being cleaned every day, etc. However, the cheapest weekly rate hotels range from $90 to $125 a week — but they aren’t always in the safest neighbourhoods and they don’t include any amenities. The most expensive weekly rate hotels range from $325 to $450 a week — and they include lots of amenities.
Can You Buy A Hotel Room Permanently?
Yes, but It’s very, very rare in this day and age, but as recent as the 40’s and 50’s you might have eccentric and wealthy people “grandfathered in” to staying at the property, etc. Now, there are business models that finance the hotel by selling condos, but they wouldn’t be considered hotel rooms.
How Do You Price A Hotel For Sale?
Metrics such as the revenue per available room (RevPAR), the average daily rate (ADR) or the average occupancy rate (OCC) can be used to measure sales performance and evaluate a suitable price when buying a hotel. The market penetration index (MPI) and the revenue generated index (RGI) can help evaluate how a hotel is performing on the market.
What Is It Like To Live In A Hotel?
With hotels, everything is taken care of; there is furniture, and someone who will clean your room. Quite often you can get a hotel with a mini kitchen so living in a hotel will feel similar to living in an apartment.
How Does Hotel Make Money?
Clearly hotels generate revenue from selling out their rooms. However, other key sources of revenue to consider are food and alcohol sales, and selling conference and meeting rooms.
What Are The Pros And Cons Of Buying Into A Hotel Franchise?
- Reduction of start-up risk
- Turnkey operation
- Standardized systems
- Buying power
- Consulting readily available
- Financial assistance
- You are your own boss
- Less Freedom
- Royalty Payments
- Lack of Support
- Inflexible Systems
- Unbalanced Contract
- Dependent on Franchisor
How Do Hotels Get Funding?
Hotels are known to leverage traditional commercial real estate loans from banks, hard money loans, or commercial real estate crowdfunding for alternative hotel construction financing. Many hotel lenders will also call construction loans CapEx loans—or capital expenditure loans—so keep an eye out for those, too.
Is Buying A Hotel A Good Investment?
Yes, high yield is one of the biggest reasons to invest in hotels for experienced real estate investors. The statistics are clear that hotels trade at higher cap rates than other real estate class across the board. However, they are associated with more risk to manage.
How Long Can You Live In A Hotel?
You can live in some hotels indefinitely and for long periods of time which is essentially a permanent residence in some cases. As long as the hotel does not have restrictions on the duration of your stay, you should be able to remain there as long as you wish as a paying guest.
How Do You Open Your Own Hotel?
- Make a plan
- Create your Unique Value Proposition
- Develop your marketing plan
- Enquire about permits and zoning
- Raise start-up capital
- Find hotel premises, build and furnish
- Recruit staff
- Put systems in place
How Much Money Do You Make Owning A Hotel?
Hotel owners are known to make money based on the profits of the hotel, meaning they’ll need to work out how much they want to make a year before setting their room rates to account for their salary.
A hotel has enormous profit-making potential. Some hotels make six figures per year. Others generate millions per year. Unfortunately, some hotels fail to make a profit.
Where Can You Buy A Turkish Hotel?
Hotels for sale in Turkey in areas such as Istanbul, Antalya City, Kemer and Bodrum will always be popular – indeed, hotels in these areas often cannot meet the demand for accommodation as more and more tourists travel to resort towns each year, particularly during the peak summer months.
How Much Does A Marriott Hotel Owner Make?
Approximately $25,000 to $75,000 per year.
Do Boutique Hotels Make Money?
Yes and no. Note that this depends a lot on the locale surrounding the hotel, the amenities offered and the area as a whole. If you have a clean, well-maintained property in a beautiful area, you’ll probably make money.
Can Someone Treat A Hotel As An Apartment And Can Someone Live In A Hotel If They Want To?
Yes you can live in a hotel. But with some limitations, therefore you cannot treat a hotel as an apartment. For instance, you cannot setup your own custom workstation at the hotel room, you cannot install a big fridge or do your own cooking (unless the ensuite room includes a stove), and you cannot do many other things that you could otherwise do in your own apartment. Since it depends on a case-by-case basis, you should definitely weigh out the pros and cons before deciding to live in a hotel.
How Much Money Do You Need To Buy A Motel?
Typically you’d expect to make an initial investment starting from about $300,000, but this amount can vary according to location and size of the business too.
How Can You Start A Small Hotel Business?
- Make a plan
- Create your Unique Value Proposition
- Develop your marketing plan
- Enquire about permits and zoning
- Raise start-up capital
- Find hotel premises, build and furnish
- Recruit staff
- Put systems in place.
How Do You Get A Hotel Room That Is Sold Out?
- Check with a travel agency
- Call the hotel directly
- Leverage your membership in organizations, such as AAA and AARP, which could give you the upper hand.
How Much Profit Does A Hotel Make Per Room?
According to reports, the gross operating profit per available room was up 3.1 percent year-over-year, allowing hotels to reach profit levels of $135.34 per available room, above the previous high of $127.54 recorded October 2018.
If You Want To Buy A Room At A Hotel To Live In Permanently Would They Let You?
Yes, it is possible to buy a room at a hotel to live permanently. However, living in hotel used to only be for the rich and eccentric on the luxury end of the spectrum and the poor and eccentric on the budget end.
What Is A Good Occupancy Rate For A Hotel?
A good occupancy rate for a hotel is the one that brings in the most revenue. There are no hard and fast rules when it comes determining the best occupancy rates for your hotel. What is good for your hotel may be not good for another hotel. And vice versa! Finding out what is good in your case will inevitably require some experimentation.
How Much Does It Cost To Build A Marriott Hotel?
The total investment to open and operate a Courtyard by Marriott hotel as a franchisee is between $7 million and $10 million.
What Is The Financial Reasoning Behind Wealthy Folks Choosing To Live In A Hotel?
There are a couple of financial reasons why someone would choose to live in a hotel despite the cost. One reason is that if you sign a lease for a year or more, the price becomes much cheaper than the daily rate. The second reason is that many people who live in hotels have their rent covered by their employer. The rent is either paid directly, or given as a housing allowance which can be used to cover rental expenses.
It’s also convenient to have housekeeping clean your bathrooms, provide fresh towels, wash your dishes, mop the floors and make your bed each day – it’s heavenly to slip into freshly ironed sheets each night. It’s very awesome to have 24 hour on-site maintenance services when the alternative is finding your own fix for plumbing, electrical, appliance, and internet problems at midnight in a foreign land. Also, the rent includes high speed WIFI, utilities, fitness rooms, pools, in-hotel discounts on food and spa activities, lots of hotel loyalty points.
Is Owning A Hotel Profitable?
Yes, if it’s in the right location, has the proper management, is well capitalized and the economy is doing well. Not profitable if it is in the wrong location, poorly run, run down, undercapitalized, and the economy is in a downturn.
Can You Refuse To Pay For A Hotel Room?
No. If you stay in your rooms past your reservation dates, you are already trespassing, which is against the law. The hotel therefore has the legal right to kick you out of the hotel room.
What Are Some Tips For Buying Your First Hotel?
- Consider the location
- Know your customers
- Talk to an experts
- Consider revenue streams
- Competitor analysis
Can You Get A Hotel Room During The Day?
You can make bookings at any time, even on the day. You don’t need a credit card to reserve most hotels as you pay at the hotel in many cases.
How Much Does It Cost To Stay In A Hotel For A Night?
According to reports, the average cost of a hotel room, determined by surveying 100 hotels in U.S. cities, is $255.36 per night as of 2019.
How Much Do Hotels For Sale In Turkey Cost?
There are a wide variety of hotels for sale in Turkey. At the lower end of the scale you can find small hotels for sale in cheap and cheerful areas on the market for less than 500,000 Euros. Note that these have communal pools and good facilities for children and adults. These hotels are ideal for those who are looking to move to Turkey but want to continue working or operate their own business.
At the high end of the scale, there are huge seaside hotels with hundreds of rooms offering incredible facilitie. These Turkish hotels for sale can run well into the millions of Euros when talking about price.
If You Break Something In A Hotel Room, Are You Expected To Pay For It?
Generally hotels don’t ask you to pay if it’s broken by mistake. But if it was your negligence that caused it, you will be expected to pay. If the damage is so severe that it puts the room out of commission for days or weeks in order to make repairs, you could be charged for each night the room could otherwise be occupied. And in the event that your damages also disturbed neighbours down the hall, you could be fined for disrupting their stay.
How Do You Value A Small Motel?
- Capitalisation of Net Income: The Capitalisation of Net Income is the primary method of valuation and is performed by assessing a net achievable income (based on the motel’s performance) and capitalising that into perpetuity at an appropriate capitalisation rate (yield).
- Direct Comparison (Rate per room basis): The Direct Comparison valuation method on a Rate per Room basis is generally performed as a check method to ensure the value derived from the Capitalisation of Net Income approach reflects a rate per room that is within the range of the sales evidence.
Is Marriott Owned By Chinese?
No, of all 7,642 properties, 2,149 are operated by Marriott, and 5,493 are operated by others pursuant to franchise agreements. The company also operates 20 hotel reservation centres.
How Can You Get A Hotel With No Money?
The hotel business is capital intensive and requires quite a substantial amount of money to invest in. Therefore, buying one with no money may be fun for the interested party, but it isn’t to the seller. More so, it is almost impossible.
Is Owning A Small Hotel Profitable?
Opening a small hotel is a dream for many who enjoy interacting with people and want to run their own business. However, you can’t just open your doors and expect your hotel to be successful automatically. It takes careful research, management, and financial planning to make a hotel profitable.
Are The Owners Of Marriott Mormon?
Marriott is an active member of The Church of Jesus Christ of Latter-day Saints. Since 1978, the Marriott’s have been supporters of the annual Festival of Lights on the grounds of the Washington D.C. Temple.
What Is The Most Profitable Hotel Chain?
Hilton Hotels & Resorts was the most valuable hotel brand in 2020, with a global brand value of approximately 10.83 billion U.S. dollars.
How Much Does It Cost To Build A Small Motel?
The average cost of starting a hotel in the US ranges from $750,000-$1,000,000 for a small motel, to the national average being around $22,000,000 for a hotel with around 115 rooms, and much higher for luxury and high-rise hotels.
What Does It Take For A Hotel To Have 5 Stars?
- Standalone concierge staff available at least 16 hours a day
- A high staff-to-room ratio—ideally above 2.5
- Multilingual staff
- 24-hour reception, room service, valet parking, butler, doorman
- Nightly turndown
- Daily housekeeping that is also available upon request at any time
How Much Does A 5 Star Hotel Cost?
Compared to other regions, North America has the most expensive luxury hotels, with an average cost of $884 per night.
How Much Does It Cost To Live In A Hotel For 1 Month?
Depends on hotel location, hotel standard, and choice of room! You can rent a room at small Motel for $50 a night, you can find a Hilton at $259 a night, or you can rent a Penthouse Suite at Caesar’s Palace in Las Vegas for $40,000 a night. Multiply those by 30 and you’ll get $1,500, $7,770.00 or $1,200,000 for a month. However, these hotels would probably give you a bit of a discount.
What Is The Average Size Of A 5 Star Hotel Room?
52.5 square feet.
How Much Does It Cost To Build A 100 Room Hotel?
According to Fixr.com, the average cost of a 100-room 5-star hotel is over $60,000,000.
How Much Of A Discount Should Hotel Give If You Stay For 3 Weeks?
It depends upon the quality of the hotel, what time of year, are you a regular, how you created the reservation. The hotel Revenue Manager will need to evaluate the displacement caused by your stay vs. the benefit of incremental room nights. This will give her/him the breakeven point and then can calculate a room rate based on that.
Who Is The Richest Hotel Owner?
David and Simon Reuben
What Are The Best Hotel Stocks To Buy Right Now?
Extended Stay America Inc. Extended Stay America owns and operates hotels and motels. Its accommodations offer guest rooms, dining services, on-site laundry, pools, fitness centres, and more.
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