Hotel Franchise Agreement Vs Management Agreement

The branding of a hotel property is often a long and expensive offer for the hotel owner, the compromise being access to a well-established clientele and an extensive booking and marketing system. Hotel owners often face the difficult choice of reconciling the potential benefits of a hotel brand with the costs of obtaining and maintaining prescribed branding standards. In our current economic climate, this decision can be decisive, as the ability to obtain financing and/or stabilize profits and reach yield thresholds can relate to economic conditions with the hotel brand owner. The reputation, name and standard level of a brand holder and cost restrictions imposed by the hotel owner are key elements in defining and negotiating a franchise agreement or management agreement. Many brands offer both options based on location, size, equipment, duration of engagement, brand level and other related factors. So why choose a franchise contract over a management contract? Often it is simply because the hotel owner receives the benefits of brand strength and presence with cost-cutting potential. The premise of a franchise agreement denies any significant change or change in the form of the original franchise agreement provided by the trademark holder. As a result, the negotiation process is limited, not as long and much more concentrated in its scope. How does an owner choose between a franchise agreement or a management contract? The decision can be made on the basis of many factors, but in general, a franchise agreement is the best for an owner who wishes to have a “hands on” stake in the day-to-day running of his hotel. This person may already be an experienced hotelier.

While the process of negotiating a franchise agreement may be less intense, some conditions for discussion and modification are available. Frequent changes to the form franchise agreement may include. B furniture and furnishing reserve amounts and periods, property and cost improvement requirements, allocation and financing rules, and termination rules. Other changes based on the ownership of the franchise agreement may include territorial restrictions, management company authorizations, guarantees, and terms and extensions provisions. Liquidized claims provisions, the budget approval process and centralized services and related royalties are areas that are generally standardized and not negotiated in depth. Negotiating the leverage of the hotel owner often relies on the strength and breadth of the brand`s power, which contrasts with the need for the brand`s presence in a given territory, the structure of the building and its character, as well as the age and marketing strategy of the brand itself. D. load, post, send or e-mail content that you cannot transfer under any law or contractual or fiduciary relationships, such as inside information, proprietary and confidential information learned or disclosed in the context of labour relations or as part of confidentiality agreements; According to the 2015 HVS study, the franchise agreement represented a juicy part of the portfolio of major hotel chains more than in Europe, as shown in the table of the cake below.