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.