This is a famous quote from John F. Kennedy in his inaugural address in 1961.  This quote really does resonate with me and is something that comes to mind when dealing with first time buyers who are buying franchise hotel properties.  In my experience, many first time buyers do not know or are initially timid/fearful to negotiate terms with the franchise.  Many first time buyers are either unaware that negotiating terms is a possibility or they are simply fearful that negotiating may undermine their chances of obtaining franchise approval in a timely fashion.  

When purchasing a franchise hotel property, the buyer must first send into the franchise a franchise application that must be approved by the franchisor’s committee.  The franchise approval process alone can induce anxiety for all buyers ranging from experienced hoteliers to first time buyers.  Although, in my experience, first time buyers are particularly anxious mainly because they are new to the process.  However, the fact is that it’s not very difficult for a first time buyer to obtain the franchisor’s approval.  In fact, most franchisors are more concerned with keeping the hotel in their inventory and making sure that the property condition is up to current franchise standards than they are with whom will actually be the new property owner.  Buyers are sometimes unaware or fearful to negotiate the initial franchise fee and subsequent annual royalty fee percentages. The initial franchise fee alone for most Wyndham and Choice properties that are under 100 units are commonly $35,000 to $50,000 depending upon the property tier class.  That is a lot of money that buyers are wasting by not negotiating aggressively.  Other terms that can be negotiated is the term of the agreement.  SBA is actually a strong proponent of agreements with limited terms because it allows the client to change franchises to preserve the business if the existing franchise starts to lose market share for whatever reason.  At HBC, we encourage our clients to not be fearful and to negotiate aggressively with the franchisors as most of the time the franchisor wants to keep the property in their inventory just as bad as the client wants to be an approved operator by the franchisor.

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