Buying a hotel franchise

A hotel franchise is usually referred to as an investment franchise. It will require a large investment, possibly in excess of the resources of an individual. They are therefore generally bought by companies, some of which could have several hotels, each managed by the company but under separate franchise agreements.

As with any company, there may be a number of investors and directors. When reviewing the application, the franchisor will carefully research the directors, all of whom will be required to be party to the franchise agreement as well as signing a deed of guarantee which effectively removes the limited liability from those directors to the franchisor. When recruiting other investors, you will need to make them aware of this and ensure that compliance with this is specified in the Shareholders Agreement. I would strongly recommend that you ask a lawyer to draw up this agreement to avoid future problems.

Hotel franchises are generally for terms of 20 years or sometimes longer. The hotel must be built to the exact specifications of the franchisor and run in a prescribed manner ensuring that the guest experience is similar with other establishments of the same brand.

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