Prompt Title: Hotel Franchise Agreement

summary: Franchise agreements are legal and binding contracts between a franchisee and a franchisor. The franchisee is often an entrepreneur who wants to operate his own business without taking the risk of developing his own concept of brand. Thus he or she decides to pay various fees, such as royalty fees to a franchisor. The franchisor, the firm owning the trademark, and operating procedures and manuals. Hotel franchises essentially provide operating procedures, trademark, and access to reservation systems, and other technologies to the franchisees. The value of a franchise is thus related to the ability of the franchisor to give up it's brand name as well as providing reservations at the lowest possible cost. A proper definition of a franchise agreement is the following. It is a legal contract in which a well established business consents to provide it's brand, operational model and required support to another party for them to set up and run a similar business In exchange for a fee and some share of the income generated. The franchise agreement lays out the details of what duties each of the party needs to perform in what compensation they can expect. A typical franchise system offers value to its franchisees by offering the following services. Marketing and advertising. Brand recognition. Reservation systems. Cross-selling within the network. Proven mode of operations, technology, soft and hardware, training, design plans and specifications, financing, site selection and market analysis, PR and promotions, quality assurance programs, and purchasing benefits. The costs and fees of franchising include initial fees, simply to enter the network, which is typically a mix of the flat fee plus a certain amount per room. For instance, a franchisee could pay while submitting its application a flat fee of 40,000 Euros plus 300 Euros per room. Other costs may be incurred such as PIP, or Property Improvement Plan costs, and others such as signage. In addition to the initial fees, the franchisee needs to paying continuing fees, generally on a monthly basis. Which includes royalty fees between 3 and 7% of room revenue, marketing fees from 1 to 5% of room revenue, and reservations fees ranging from 1 to 10% of room revenue or fixed amount per available room. Other fees may exist too including loyalty program fees. Management agreements, or contracts, can be either extension of franchise agreements when they involve a branded operator or simply, legal contracts between a property owner and a management company. The contract lays out the services that is rendered by the management company and the fees the owner will have to pay in exchange. The generic definition of a management agreement is the following. It is the written agreement between owner and operator of the lodging facility, in which the owner contracts with the operator to manage the facility in a professional manner. The owner provides the lodging facility and working capital while the operating company provides the professional expertise to manage the hotel and receives management fees for services rendered. The roles and responsibility of the management company and of the property owner may vary but generally include the following. The management company is responsible for managing all operating activities, including hiring, trading, purchasing, repair maintenance, and most importantly pricing, distribution marketing and sales and driving demand. The property owner is then responsible for providing the facility and necessary working capital to operate it. He or she is also responsible for paying any pre-opening expenses and provide exclusive right to manage the property as well as paying all fees and real estate taxes. The fees associated with the management agreement vary but often include base fees as a percentage of total revenue, and incentive fees frequently based on gross operating profits.