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Franchise Model vs. Management Contract

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Franchise Model vs. Management Contract

Franchise Model vs. Management Contract

Parameter Franchise Model Management Contract
Control on the Hotel & Decision Making Remains with the owner Remains with the branded chain
Hotel’s Annual Budget Remains with the owner Remains with the branded chain
Hotel’s Operational Management Remains with the owner Remains with the branded chain
Revenue Management Remains with the owner Remains with the branded chain
Training & Development Remains with the owner Remains with the branded chain
Human Resource Management Remains with the owner Remains with the branded chain
Bank Account, Revenues & Expenses Remains with the owner Shared between the brand and the owner
Property/Product Upgradation Minimal requirements of upgradation As per brand guidelines, brand keeps upgrading
Operating Liabilities & License Renewals Remains with the owner Remains with the branded chain
Fee on total revenue (Average) Domestic Chain- 3.5% International Chain- 4.5% Domestic Chain- 6%
International Chain- 8.5%
Term of Contract 10-15 years 15-30 years
It depends on the owner if we wants to enter into a Franchise model or Management contract with the branded chain. Globally, majority international chains have nearly 60% of their hotels under the franchise model but still to maintain brand’s credibility, they continue to support the hotel owners whenever required.

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