round 12 %. That’ s the percentage of rooms revenue a hotel franchisee typically will pay a franchisor for the right to use their name and likeness and all the accouterments that come with it. Is the price worth it? It is one question facing hotel owners, who, jostled by needling and expanding expense lines that have made it much more difficult to operate a property profitably, are giving a rethink to the equitability of the franchise agreement in its current form. Beyond that, a younger crop of hotel owners considers the implications of going at it alone— sans brand— using off-the-shelf technology they believe allows them to operate an independent property as

effectively. It is a calculation and an earnest one at that.

A hotel franchise agreement is the legal contract between a hotel brand( the franchisor) and a hotel owner( the franchisee) that gives the owner the right to operate the property under the brand’ s name and system. The franchisee pays the franchisor fees in exchange for certain services. Reciprocally, the franchisee must adhere to certain brand standards that protect the brands reputation, and maintain the brand through infrequent though necessary renovations, known as property improvement plans, or PIPs.

The total franchise fee is divided into sub fees, the largest of which is the royalty fee, which covers the hotel’ s right to

operate under the franchisor’ s brand and use its proprietary systems and intellectual property. The fee is typically calculated on a percentage of revenue, not profit, an important distinction.

ON THE NUMBER Each year, HVS, a consulting firm that specializes in hotel valuations and appraisals, releases its U. S. Franchise Fee Guide, which, among other things, breaks down what brands charge to use their name and services. As noted in its 2025 release, fee levels vary by chain scale and product type, but the spread is narrower than many owners may expect. Economy brands averaged the lowest total franchise cost, at

9.6 % of rooms revenue, while high-end brands averaged the highest, at 12.9 %. By product type, median costs ranged from 10.9 % for extended-stay hotels to 12.5 % for full-service hotels.

Prospective franchisees looking to keep fees down would do well to consider a collection or soft brand as a

Neil Flavin, COO, HVS Asset Management

6 hotelsmag. com September 2026