Franchised hotels
Hotel buyers for franchised and branded properties
A flagged hotel is sold with a third party at the table: the franchisor. Here is how a direct sale accounts for the brand from the first conversation.
Why a branded hotel sale is different
A franchise agreement is a contract between the brand and the current owner. It does not pass to a buyer automatically. In most systems the buyer applies for a new agreement or for consent to a transfer, and the brand decides whether to approve the applicant and on what conditions. Your agreement sets the rules, so it is one of the first documents we ask to read.
We buy economy, midscale and select-service hotels operating under national and regional flags. We name no brands here because the principles are the same across them. The details live in your contract.
The franchisor's role in a change of ownership
Notice and application
Most agreements require the owner to notify the brand of a proposed sale. The buyer then submits an application and usually pays an application fee. The agreement may also give the brand a right of first refusal or a period in which to approve the buyer.
The inspection and the improvement plan
A change of ownership commonly triggers a brand inspection and a property improvement plan, or PIP, listing what must be upgraded for the hotel to stay in the system. The cost of that plan is central to the price. If a PIP is the reason you are thinking of selling, see selling at franchise renewal or when a PIP arrives.
Leaving the brand
A buyer does not always keep the flag. If the hotel would leave the system at sale, the agreement may call for termination fees, often described as liquidated damages. Who bears them is a negotiated point. Ask a franchise attorney what your agreement provides before you rely on anyone's summary, including ours.
Documents a buyer reviews on a flagged hotel
- The franchise agreement and any amendments
- The most recent quality assurance or brand inspection reports
- Any PIP issued in the last few years and what has been completed
- Trailing-twelve-month profit and loss statement, with franchise fees shown separately
- The STR report, if the hotel subscribes to one
- Reservation system and loyalty program contribution figures, if the brand reports them
- Loan documents, including the maturity date and prepayment terms
An STR report compares your occupancy, rate and RevPAR against a set of nearby competitors. It is among the most useful documents in a branded sale, and our valuation guide explains how a buyer reads it.
How the brand affects price
Fees come out of income
Royalty, marketing and reservation fees are operating expenses. A buyer underwrites them at the rates a new agreement would carry, which may differ from yours.
Remaining term and standing
The years left on the agreement, recent inspection scores and any default notices shape how a buyer and its lender see the hotel.
Capital the brand will require
A buyer subtracts the expected cost of required upgrades, since that money has to be spent soon after closing.
Timing and confidentiality with a franchisor involved
Brand approval takes as long as the brand takes. Add a lender's review, where the buyer is financing or where the existing loan must be paid off by a certain date, and a branded sale has more calendars to line up than an independent one. We give no fixed closing timeline for that reason. The order of events is set out in the stages of a sale to us, and loan timing is covered under hotel loans nearing maturity.
Owners often ask when the brand has to be told. The answer is in your agreement. Until that point a direct sale can be kept among a small group, as described in selling a hotel off-market.
Questions from franchised hotel owners
Will you keep the brand?
It depends on the hotel, the agreement and the cost of the improvement plan. We tell you our intention in the letter of intent, because it affects fees, approvals and price.
Who pays the franchise termination fee if the flag is removed?
That is negotiated between buyer and seller and written into the purchase agreement. Your franchise agreement determines whether a fee applies and how it is calculated.
Do you buy branded extended-stay hotels?
Yes. The franchise steps are the same, and the operating side is covered under extended-stay hotels.
Is a broker better for a branded hotel?
Sometimes. Branded hotels with clean reports attract many buyers, and a broker's marketing can pay for itself. See how hotel brokers and direct buyers differ.
Start with a confidential conversation
Tell us where the property is, how many keys it has and whether it carries a brand. We read every submission ourselves and call you back at the number you give.
Nothing you send is passed to a listing service, and sending it does not commit you to anything.
Tell us about the property
Read by the buyers. Never listed, never advertised.