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Six Things To Consider When Choosing a Franchise

Six Things To Consider When Choosing a Franchise

Choosing a franchise is no simple task. Hotel owners must consider everything from their targeted market segment to the status of the hospitality company with which they will be entering a long-term agreement. LODGING spoke with Michael Tall, president and chief operating officer of Charlestowne Hotels, to understand the factors that owners should take into consideration when determining the best franchise fit for their hotel.

1. Location, Location, Location
A hotel’s location is the most critical factor in considering the right franchise flag. Whether a hotel is near a major transportation hub, a busy conference center, or an up-and-coming eclectic neighborhood will help determine which franchises are best suited to appeal to that property’s market segments. “Ensuring that the franchise is going to agree with the location is first and foremost the biggest question,” Tall says.

2. Oversaturation
Owners should anticipate market oversaturation by understanding all of the available hotel sites within a hotel’s competitive overlay. “What is the potential for more hotels to be built in any given area, or are their heavy barriers to entry for any hotels coming in? That’s something that needs to be considered with any analysis,” Tall explains.

3. Steady Demand Generators
Choosing a neighborhood that is on the way up or at least stabilized will help ensure that owners avoid committing to a franchise in an area that will fall into an economic depression in five to seven years. “Airports, entertainment venues, sports stadiums—you want to understand those demand generators, their visibility, and the transportation to and from your hotel,” Tall says.

5. To Dual-Brand or Not to Dual-Brand
Does it make sense to dual-brand a location? Tall says that owners should determine whether dual-branding would provide a higher market share.

4. Franchise Cost and Performance Outlook
Owners should compare costs of affiliations and franchises, particularly in a market where there is a limited rate ceiling, and determine the cost versus the expected projections analysis, Tall says. Also, request a performance analysis from a potential franchise in a similar market or the anticipated performance in the suggested market. “The brand can provide a lot of support in helping to cement the projections that any owner, asset manager, consultant, or management company is putting together for a potential franchise,” Tall explains, adding that owners may also consider soliciting an independent consultant to do a feasibility study of the franchise.

5. Brand Support
Franchises often provide an operation turnkey that is intended to support owners when opening the brand. Hoteliers should consider the systems set in place to support franchisees in terms of policies, procedures, revenue streams, and loyalty programs. “They can provide a wealth of support in marketing, backed by national advertising and promotions, sales accounts, robust booking engine, database, and CRS,” Tall explains.

6. Length of Commitments
Franchise agreements can span more than a decade. Tall says that an owner needs to understand their commitment by asking whether they feel that a brand will represent their asset and still give their hotel a competitive advantage throughout the entire length of the agreement. “The most important decision an owner has to make in choosing a brand once they’ve narrowed down the list is the length of time in the agreement and whether they’re comfortable partnering up with a brand for that long,” Tall explains. For example, does the brand have a shelf life that appeals to the goal of the asset? Will it remain stable to deliver on projections? “Making sure that the brand is in the right place of the business cycle is going to be important because that’s the factor that’s going to drive—or not drive—the asset.”

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