Profit from a Powerhouse Brand

Profit from a Powerhouse Brand

Holiday Inn offers a chance to profit from the recognition of a well-known brand in an immigrant-friendly company.

You’d be hard-pressed to find anyone in the United States—or many other countries—who isn’t familiar with the Holiday Inn name or its offshoot brand, Holiday Inn Express. With 1,863 hotels in the U.S., Holiday Inn Express provides a no-frills option to guests, but with the same level of attention to detail you’d expect from any quality hospitality franchise. Owned by Atlanta-based InterContinental Hotels Group, it is a major player in the $92.4 billion U.S. hotel market—for good reason.

“Guests expect—and receive—a significant consistency of service,” says Bob Ekman, Vice President of Western Region Franchise Sales and Development.

The Company

Service

Holiday Inn Express provides clean, comfortable, affordable lodging without such extras as a bar, restaurant, or space for functions. The average room rate is $92 a night. Guests can earn loyalty reward points and use them at any InterContinental Hotel, including Crowne Plaza, Hotel Indigo, Staybridge Suites, and Candlewood Suites.

While there are no official policies, the company is extremely immigrant-friendly. An estimated 40% or more of franchisees are immigrants, many from India and Taiwan.

Training

For owners, there’s a mandatory session of four to five days, usually held at InterContinental’s headquarters in Atlanta. The curriculum covers a wide range of topics, from development costs to operations and guest services. The company also offers training for general managers and salespeople. And there’s an extensive library of training information available on the web and on DVDs.

Immigrant-friendly Policies

While there are no official policies, the company is extremely immigrant-friendly. An estimated 40% or more of franchisees are immigrants, many from India and Taiwan. “I’ve heard so many stories—someone comes to this country with $10, works at a relative’s hotel, then buys his own small property and keeps moving up the ladder,” says Ekman.

What you’ll need

If you’re building a hotel from scratch, you’ll need to find a site, of course. But the company will help you look for suitable markets. And it may be able to provide prototype architectural plans. Whether or not you’re building a new hotel, you’ll need property-management systems for running and staffing the operation. The company has contracts with a number of suppliers, which provide installation and training.

Startup cost

For total construction costs of a hotel, expect to pay $55,000 to $75,000 per room, depending on the community. (The average hotel is 80 rooms.) That includes everything from fixtures to furniture, but not land or site-improvement costs. As for the cost of land, it’s highly variable from one market to another. There also are ongoing fees, including $500 per room, with a minimum of $50,000; a royalty fee of 6% of Gross Rooms Revenue (GRR) per year; and advertising or marketing fee of 3% of Gross Rooms Revenue (GRR) per year. According to Ekman, it’s common for franchisees to put together groups of investors, who are often friends and family, to help finance the venture. “We go through a pretty rigorous testing of financial capability,” says Ekman.

Fran­chisees in the limited-service seg­ment … can expect to see a 5% to 20% return on equity per year.

Financing

The company doesn’t help with financing. Ekman cautions prospective franchisees to expect banks to ask for as much as 50% down these days, depending on the applicant’s experience level.

Return on Investment

Ekman couldn’t disclose specifics, but did say that franchisees in the limited-service segment of the hospitality industry can expect to see a 5% to 20% return on equity per year.

“You have to work with your franchise partner to understand their brands, their offering, and their market,” says Ekman.

Requirements for Prospective Franchisees

Previous industry experience isn’t necessary if the franchisee plans to hire a management company. But a significant previous business background of some kind is important. And franchisees need to have an acceptable level of personal net worth and, in today’s market, liquidity.

“From a management standpoint, focus on hiring high-quality people and providing excellent customer service,” he says.

Tips for the Immigrant Buyer

Ekman suggests that potential franchisees learn everything there is to know about the company. “You have to work with your franchise partner to understand their brands, their offering, and their market,” says Ekman. “If the company can’t share certain information because of disclosure rules, look for answers on your own. You have to do your homework, looking at the market you’re considering and its potential,” says Ekman. In the hospitality industry, finding the best employees also is critical, which is where your previous business experience will help you. “From a management standpoint, focus on hiring high-quality people and providing excellent customer service,” he says.

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