A franchise lends you the brand while you run the hotel. A management contract hands the running to the brand. A manchise starts as the second and becomes the first. Which suits you depends on whether you have, or want, an operating team of your own.
The three models at a glance
| Franchise | Management contract | Manchise | |
|---|---|---|---|
| Who runs the hotel | The owner, or a manager the owner appoints. | The brand. | The brand at first, then the owner. |
| What the brand provides | Name, standards, reservation and loyalty systems. | The same, plus the general manager and daily operation. | Management in the early years, then name and systems. |
| Fees | Franchise and marketing fees on revenue. | A base fee on revenue and an incentive fee on profit. | Management fees first, franchise fees after conversion. |
| Owner's control | Higher. | Lower. | Lower at first, higher after conversion. |
When a franchise suits
A franchise suits an owner who already has, or will appoint, a capable operating team. You keep control of staffing and daily decisions, and pay the brand for its name, its standards, and its reservation and loyalty systems. The quality of the operation is in your hands: the brand does not manage the hotel.
When a management contract suits
A management contract suits an owner who wants the brand to run the hotel. The brand appoints the general manager and operates to its own standards; the owner approves the budgets and receives the profit after fees. You give up day-to-day control, which is where an asset manager comes in: someone on the owner’s side who reviews the budgets and the results.
When a manchise suits
A manchise gives a new hotel the brand’s management while it opens and settles, and lets the owner take over under a franchise after an agreed period. It suits owners who intend to build an operating team but will not have one on opening day.
How to choose
- Do you have an operating team, or want one?
- What does the brand prefer in your location and segment? Brands do not offer every model everywhere.
- How much control do you want over staffing, spending and standards?