Independent Vs Franchise Hotels

My parents owned a 10 unit motel with an attached home. If the lobby buzzer rang during Thanksgiving dinner, no one was suprised. My parents made the business look so easy and profitable that I decided I wanted to follow in their foot steps. My dad worked for General Motors so I got a job at Ford's. I got married and my wife and I saved money to buy a nine unit motel with a home and garage. Our bedroom was next to the utility room and you could hear the hot water boiler sucking air and popping like a fire cracker. We did well, but rather than fix the heating system we sold the place for a substantial profit. The next place we bought had 20 units. We added a party store and gift shop and again did very well. Divorce has a way dividing success into two weak parts. I survived but it was outside investments that allowed me to retire at 40. When the Nasdaq bubble burst I was forced to go back into the hotel business. My bank and the SBA convinced me to purchase a flag for the 134 unit motel I was about to purchase. I had my reservations but they seemed so sure it would add value to the property. I've been a Days Inn franchisee now for over nine years and i'm still waiting for profits and property values to increase.

In the nine years that I've been a Days Inn I've paid about $1.2 million in royalties and fees. I blame Days Inn for destroying my profit margin. A good independent hotel is always more profitable than a good franchised property. In 2011 I paid over $150,000.00 in royalties and fees. Nobdy shows up and says, "Hey your a Days Inn, here's $150K". You have to earn that $150K. When I study the ratio of increased profits to increased revenue, I come up with for every additional $1.00 in revenue you get about $0.33 in additional profit. Therefore one could easily come to the conclusion that I have to over $400K in business to earn enough to pay the $150K in royalties and fees. $450K is about one third of our total revenue in 2011. You could say Days Inn owns one third of our revenue! If that doesn't bother you, you should stop reading now! I guess the theory is we would lose more than a third of our revenus if we dropped Days Inn. I've been contacting many hoteliers who have dropped their flag or become a Magnuson Hotel. Some say they lost 10% of their business and some say they didn't lose any! Franchise hotels became popular because they offered property management systems with a seemless GDS connection. Today an independent can not only duplicate these services but also for a much lower cost. National chains are like big government. They love to tax and spend. National chains overhead has gotten so big they need more and more revenue to pay their bills. Wyndham came up with Wyndham Rewards. A couple years ago at a national convention, I asked the president of Days Inn what percentage of than called "Trip Rewards" was actually redeemed. He claimed he didn't know! They're charging us 5% on a rental and they act like it's no big deal. Your supposed to like it regardless of the results. He finally got one of his assistance to answer. He said he thought it was about 20%. I'm thinking he was rounding up. When I asked what happened to the 80% not redeemed, he said he thinks with time redemptiions will increase. When a person has a Wyndham Rewards account, i pay 13.9% of the rental to Days Inn. The points drop off so fast they'll probably never use them, but at the end of the month I will definatley be paying Days Inn.

I could rant for hours about the problems of being a hotel franchisee but your probably getting tired of hearing me complain. I'm actually a very positve person who appreciates positive solutions. In future blogs I'll address the solution to be a franchisee.

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