Do you want to open a hotel business by buying Hampton Inn franchise? If YES, here is how much it cost to open a Hampton Inn franchise successfully. One of the many challenges people face when considering starting their own business is the fact that their business might fail. Even though there are many factors that can cause a business to fail, some of the major concerns are simply that the demand isn’t there or the business model isn’t sustainable.
Hence, one way to ensure business success is to invest in a proven business model, which is exactly how franchising works. Hotel franchises are a popular option, as long as vacations, honeymoons, and business trips exist, you’ll have a market for your services. Even though the success of a hotel franchise is certainly not assured, but an entrepreneur is more likely to find business success entering into a franchise agreement with a tried – and – true hotel brand than starting a new one.
If you are in this league and looking to start a hotel business, then Hampton Inn is one of the best options for you. Part of the Hilton Brands of Hotel franchises, Hampton Inn/Hampton Inn & Suites has built itself into a formidable business and into the list of award – winning mid-priced hotels in the world.
Boasting of over 20 years of warm and competitive experience, the company has been the favour in the mid-market segment. In addition, starting a Hampton franchise is actually very cheap compared to building and owning a high-end five-star hotel.
To buy into this franchise, you are expected to have all the necessary requirements completed before you sign a contract with them. These include background check, credit approval, and financial capability. The company will also check on your hospitality experience in order to know if you are qualified to run a franchise.
Note that with over 129,000 guest rooms in the chain of Hampton hotels, the company has established itself as one of the largest hotel service providers in the country with more than 1,280 branches in 49 States of the US.
When it comes to advertising and publicity, Hampton has been a household name and has been the first choice for many American families for several years now and also serves as destinations for tourist and local residents in their respective areas.
According to reports, franchises of Hampton have a profit margin of $200,000 – $2 million depending on the location of the hotel. This is the more reason why finding the right location for your Hampton hotel will be taken care of by the company.
The company also gives you and your management staff and crew on-site consultative and efficiency training to help you find the right place in the market.
Financial Requirements of Opening a Hampton Inn Franchise in the United States
First and foremost, note that the estimated initial investment outlined below ranges from an 80 – Room Hampton Inn to a 101 – Room Hampton Inn & Suites. However, these figures do not include real estate costs, market studies, insurance, interest or the cost of improvements under a conversion, re – licensing or change of ownership license.
- Franchise Application Fee: $75,000 – $75,000
- Product Improvement : $0 – $7,500
- Market Study: Varies
- Environmental Assessment: Varies
- Real Property: Varies
- Construction/Leasehold Improvements: $5,500,000 – $14,000,000
- Design and Engineering Fees: $150,000 – $550,000
- Furniture, Fixtures and Equipment: $725,000 – $2,250,000
- Inventory and Operating Equipment: $80,000 – $200,000
- Signs: $15,600 – $80,000
- Computer Hardware and Software: $40,195 – $117,995
- Guest Internet Access Program: $45,000 – $94,000
- Delphi Sales and Events System: $2,500 – $15,000
- Required Pre – Opening Training: $5,000 – $17,500
- ADA Consultant Fee: $2,500 – $10,000
- Construction/Renovation Extension Fees: $0 – $10,000
- Insurance: Varies
- Organizational Expense: $50,000 – $116,600
- Permits, Licenses and Governmental Fees: $75,000 – $200,000
- Miscellaneous Pre – Opening and Project Management Expenses: $150,000 – $575,000
- Contingencies: $550,000 – $1,400,000
- Additional Funds: $200,000 – $600,000
ESTIMATED Total: $7,671,795 – $20,324,595
According to Hampton Inn FDD, other Costs may include
- Monthly Royalty Fee: 6% of gross rooms’ revenue.
- Monthly Program Fee: 4% of gross rooms’ revenue.
- Room Addition Fee: Presently, $400 per guest room or suite, multiplied by the number of additional guest rooms.
- OnQ Additional Rooms Software Fee: Presently $120 per guest room/suite.
- OnQ Connectivity: Presently, $590 to $1,260 per month.
- OnQ Interface Fees: Presently, $1,000 per additional interface.
- OnQ Maintenance Support Fees: Presently, $600 to $1,600 per month.
- OnQ Email Fees: Presently, $7.92 per user per month for e – mail and $12.50 per month for delivery to mobile devices.
- Delphi Sales and Events System: Presently, $798 per user per year.
- Guest Assistance Program: Customer Satisfaction Guarantee: Presently, $300 per handled transaction for Hilton Honours Diamond members, $250 per handled transaction for Hilton Honours Gold members, and $200 per handled transaction for all other guests.
- Guest Assistance Program (Price Match Guarantee): Hotels must honour a 25% discount off the lower rate on all approved claims.
- Guest Assistance Program (First Contact Resolution): Presently, $15 administrative fee.
- Guest Assistance Program (Online Complaints): $25 per complaint administrative fee.
- Guest Assistance Program (Brand Operations Tech Fee): $323 per year.
- Quality Assurance Re – evaluation Fee: Presently $460 to $3,000 per re – evaluation visit.
- Quality Assurance Special Re – evaluation Fee: Presently, $3,000 per re – evaluation visit.
- Quality Improvement Program for Failure to Meet Minimum Performance Standards: Presently: (1) $495 per month; and (2) a 1 – time fee of $3,950 to $4,950.
- Brand Conference: Presently $1,750 per attendee.
- General Manager Training: Presently, $1,550 per attendee.
- Sales Skills Training: Presently, $1,000 per attendee.
- Training Program and Training Materials: Varies from $0 to $5,000 per attendee per program.
- Pre – Opening Kit: Presently, up to $150 per hotel.
- AAA/CAA Discounts and Rewards Program: Presently, $0.30 per available room.
- AAA/CAA Discounts & Rewards Program (Member Direct): Presently, 10% commission.
- AARP Program: Presently, $0.30 per available room.
- AARP Program Commission: Presently, 10% commission.
- Hilton Advance Program: Presently, 1.35% of eligible Digital Direct Revenue, not to exceed $30 per stay.
- FastPay (Centralized Group Meeting Payment Program): Presently, up to $1.40 per transaction, plus commission.
- Group Preferred Partnership Program: Presently, $1.50 per transaction, plus the applicable commission. If the franchisor increases this fee this year, it will not exceed $2.50 per transaction, plus commission.
- Frequent Traveller/Guest Reward Program: Presently, 4.9% of total eligible guest folio. Waived for stays in which the guest is enrolled on – property in Hilton Honours.
- Hilton Honours Event Planner Bonus Program: Presently, $0.0025 to $0.0050 per Hilton Honours bonus point awarded.
- Third – Party Reservation Charges: Presently, up to $5.45 per stay.
- Travel Planner Centralized Payment Program (TPCP): Presently, up to 10% commission on the total room rate and other commissionable charges, and $0.18 per transaction processing charge.
- Unlimited Rewards Travel Counsellor Incentive and Loyalty Program: Weekday stay (Monday – Thursday nights) = $0.71; Weekend stay (1 Fri/Sat/Sun night) = $1.42; Weekend stay (2 Fri/Sat/ Sun nights) = $2.13. For Double Points, amounts increase to $1.42, $2.63, and $3.84 respectively.
- Change of Ownership Application Fee: Presently, $175,000.
- Permitted Transfer Processing Fee: Presently, $5,500. A discount of $500 will apply if all parties use the preferred method of electronic signature.
- Re – licensing Application Fee: Presently, $75,000.
- Lender Comfort Letter Processing Fee: Presently, $3,500 for Lender Comfort Letters and $1,500 for Lender Comfort Letter Assignments. A discount of $500 will apply if all parties use the preferred method of electronic signature.
- Public Offering or Private Placement Processing Fee: Presently, $5,000.
- Actual Damages Under Special Circumstances: Tend to Vary
- Audit: Actual amount of deficiency plus interest
- Default Remedies: Reimbursement of all of the franchisor’s expenses.
- Indemnification: Reimbursement of all payments by the franchisor or its affiliates due to any claim, demand, tax, penalty, or judicial or administrative investigation or proceeding arising from any claimed occurrence at the franchisee’s hotel.
- Insurance: Actual amount
- Liquidated Damages for Unauthorized Opening: $5,000 per day that the hotel is open without authorization.
- Liquidated Damages for Pre – opening (Termination): The system’s average monthly royalty fees multiplied by 60.
- Liquidated Damages for Post – Opening Premature Termination: Before 2nd Anniversary of the Opening Date: The greater of: (a) the hotel’s average monthly royalty fees multiplied by 60; or (b) the system’s average monthly royalty fees multiplied by 60 (After 2nd Anniversary of the Opening Date, but Before the Final 60 Calendar Months of Term: The hotel’s average monthly royalty fees multiplied by 60).
- Service Charges for Overdue Payments: 1.5% per month or highest percentage permissible by law, whichever is less.
- Taxes: Actual amount.
- Identity, Sales, and Distribution Non – Compliance Fee: Presently, $500 per instance.
- Franchise Agreement Non – Compliance Fee: 1% of gross rooms’ revenue.
- Group Distribution Administrative Fee: Presently, $500 per instance.
- Consultation and Service Fees: Set by the company on a project – by – project basis.
- Consortia Program: Presently, $2.70 for each consumed night booked under the consortia “parity” rate, plus applicable commission.
- TMC Pay – On – AII – Pay – For Performance Program: Presently, $1.03 for each consumed night booked by a TMC travel agency.
- FedRooms Program: Presently, 1.75% of room revenue – for each consumed stay booked under the program SRP.
- CWTSato Travel Program: Presently, $2.30 for each consumed night booked under the Program SRP, and standard travel agency commission ranging from 8% to 10%.
- DOD Preferred Program: Presently, 1.75% of room revenue for each consumed stay booked under the program SRP.
- Omega World Travel Government/Consortia Programs: Presently, $2.30 for each consumed night booked under the programs’ SRPs, and standard travel agency commissions ranging from 8% to 10%.
- ADTRAV Government Pay for Performance Fee: Presently $2.30 for each consumed night booked under the program SRP, and standard travel agency commissions ranging from 8% to 10%.
- ResMax Program: Presently, 5.15% to 5.65% of consumed revenue from ResMax booking. Rate varies due to type of booking, length of stay, and other factors.
- Procurement and Service Fees: Presently, 4% to 10% of product cost.
- Renovation Roadmap: Presently, $250.
How to Open a Hampton Inn Franchise in the United States
These steps and tips below will help you acquire a Hampton Inn franchise.
- Assess Your Finances
The very first step you need to take when considering buying a Hampton Inn franchise is the cost. Investing in any hotel franchise is no small matter. In exchange for a proven business model and recognizable brand name to operate under, you are expected to shell out a hefty upfront investment—like the ones mentioned above. That is why it’s important you assess your own finances to decide the amount of capital you have to invest, as well as what franchise financing options you have. Take time to consider your finances, your financial resources, and fully understand that entire investment prior to jumping in to an application.
- Consider a Loan
If you realize that you don’t have enough money in the bank to out rightly pay for a Hampton Inn Franchise, then you should consider other financing options. While you won’t need to obtain a loan before you officially enter into a franchise agreement, you should make sure you have strong enough financials to qualify for one when the time comes. Also ensure you have a strong credit score, solid personal financials, and more before moving forward.
- Request the Franchise Questionnaire
The first step in a Hampton Inn franchise application is the franchise questionnaire. This questionnaire will include questions about your basic information, the proposed location for the hotel, and how you would operate the hotel. The company will also want to know information about your background, your experience in operating a business or hotel, why you are interested in owning a Hampton Inn franchise and any management experience you have.
- Obtain Hampton Inn Franchise Disclosure Documents
Once Hampton Inn is interested in moving forward with you, the next step will be to review and accept the franchise agreement. Note that to be compliant with the law, Hampton Inn will send you this document at least 14 days prior to when you are supposed to sign it so you have adequate time to examine the document and to have it reviewed by a lawyer if you choose to. Remember that while the FDD is regulated by federal law, there are also state laws that regulate franchises. Each state has slightly different franchise rules and some, such as California, Minnesota, and Illinois are quite strict.
Although it is not a must to hire a lawyer when joining a franchise, it’s highly advisable. Note that when dealing with a legally binding document that will affect your business for the foreseeable future, you are expected to take extra care to make sure there are no hidden clauses or red flags that could cost you down the road. A lawyer with experience in franchise law, or dealing with hotel franchises specifically, can be well worth the expense so that you don’t enter into an agreement that you don’t fully understand.
- Review the Franchise Agreement
Even though the franchise disclosure document or FDD will make a large portion of the franchise agreement, it’s not the only document that you will need to consider. The franchise agreement itself includes everything from the concept, the geographic location for the hotel, the marketing budget, the operating documents that will be provided by Hampton Inn, and the amount of supervision and control the franchisor has over you and your franchise. However, you should still have a lawyer review the franchise agreement to make sure that you are entering into a legal and fair franchise relationship.
- Finalize the Details
After you must have gotten your finances in order, done your research, and gotten all the legal paperwork in hand, then all you have to do is add your signature and finalize the details. You are now on your way to being a Hampton Inn franchise business owner!
When you are looking for just the right balance between budget and quality, look no further than Hampton by Hilton. Both Hampton Inn and Hampton Inn & Suites represent wise hotel franchise choices for business owners looking to start in the hotel industry. This brand is loved by hotel franchise owners and travellers alike.
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