Hampton Hotels, aka Hampton Inn & Suites, Is routinely recognized as one of the best, fastest-growing franchises available. The company is a chain of moderately priced hotels. Currently, Hampton Hotels has nearly 2,000 locations, the vast majority of which are in the United States and owned by franchisees, although a handful is international and/or owned by the company. One of the hotel’s signature amenities is a suite, which has two bedrooms joined by a living room and kitchen area. Customers also enjoy the complimentary hot breakfast, fresh coffee, rate discounts, available meeting space for business travelers, free internet accessibility, and exercise rooms. More about the cost of owning a Hampton Hotels franchise is below.
Year Business Began: 1983
Franchising Since: 1984
Headquarters: McLean, Virginia
Estimated Number of Units: 2,865
Franchise Description: Hilton Franchise Holding LLC is the franchisor. The franchisor licenses the Hampton Inn hotel system, which consists of the elements, including know-how, that it periodically designates to identify hotels operating worldwide under two brands: “Hampton Inn” hotels, designed to provide distinctive, high quality hotel service to the public at moderate prices; and “Hampton Inn & Suites” hotels, designed to combine standard guest rooms with a significant block of studio guest suites.
Training Overview: The franchisor offers required training courses to those affiliated with the system for orientation and as part of the certification process. Employees designated to take training must complete the required training to the franchisor’s satisfaction. If a replacement is hired for any of the categories of personnel who must attend a training program, the replacement must successfully complete the appropriate training program. There are currently over 10 training programs, not including owner orientation for all first-time franchisees and the portfolio of virtual learning classes for franchisees that do not have prior hospitality or comparable brand experience. The franchisor and its affiliates offer many additional optional training courses and may develop additional training programs at any time. The franchisor requires participation by the franchisee’s general manager and director of sales in an annual brand or regional conference.
Territory Granted: The franchisor grants franchisees a non-exclusive license to use the system during the term of the Franchise Agreement to operate a franchised hotel at a specified location. There are no provisions in the standard Franchise Agreement granting franchisees a protected area or territory. Franchisees will not receive an exclusive territory. Franchisees may face competition from other franchisees, from hotels the franchisor’s affiliates own, or from other channels of distribution or competitive brands that the franchisor controls. The franchisor may, however, agree to give franchisees certain specific territorial restrictions (restricted area provision) for an area surrounding the franchised hotel and encompassing the immediate competitive market for the hotel as may be agreed on by the parties.
Obligations and Restrictions: Whether franchisees are an individual, corporation, limited liability company, partnership or entity, they are responsible for the management and operation of the hotel at all times. Franchisees must provide qualified and experienced management for the operation of the hotel. To fulfill this responsibility, the hotel must be operated either by franchisees or a third-party management company that the franchisor has approved. No other person or entity may operate the hotel. The franchisor does not impose any restrictions as to the customers to whom franchisees may sell goods or services. In general, franchisees must comply with the franchisor’s requirements as to the types and levels of services, amenities and products that must or may be used, promoted or offered at or in connection with the hotel. Franchisees must operate the hotel 24 hours a day every day, except as the franchisor may otherwise permit based on special circumstances. Franchisees must operate, furnish, maintain and equip the hotel in a clean, safe and orderly manner and in first-class condition under the provisions of the Franchise Agreement and the standards, and in compliance with all applicable local, state, and federal laws, customs and regulations, including maintaining and conducting their business using sound business and financial practices.
Term of Agreement and Renewal: The length of the initial franchise term for new construction hotels is generally 22 years (at midnight on the last day of the month) after the effective date. For a conversion the term is generally the last day of the month 10 to 20 years after the opening date. In a change of ownership, the term is generally, either the remaining term under the existing Franchise Agreement, or such other term as the franchisor may approve. Franchisees do not have the right to renew or extend the Franchise Agreement.
Financial Assistance: The franchisor may occasionally allow payment of the franchise application fee in installments over a limited time period before the start of construction work on the hotel. In addition, the franchisor may, in its sole discretion, offer incentives for new hotels. The incentive is a financial contribution that the franchisor makes to assist with the development or conversion of the franchisee’s hotel. Other than the development incentive program described, the franchisor does not offer direct or indirect financing for franchisees. The franchisor generally does not offer any other financing or guarantee any note, lease, or other obligations. However, in unique or rare circumstances the franchisor may choose to offer other types of financing such as, for example, a mezzanine loan or a guaranty of a franchisee’s note, lease, or other obligations.
Investment Tables:
| Name of Fee | Low | High |
|---|---|---|
| Franchise Application Fee | $100,000 | $100,000 |
| Product Improvement | $0 | $10,000 |
| Market Study | Varies | |
| Environmental Assessment | Varies | |
| Real Property | Varies | |
| Construction/Leasehold Improvements | $9,358,125 | $16,905,000 |
| Design and Engineering Fees | $280,744 | $507,150 |
| Furniture, Fixtures and Equipment | $1,181,250 | $2,716,875 |
| Inventory and Operating Equipment | $88,000 | $220,000 |
| Signage | $20,000 | $75,000 |
| Computer Hardware and Software | $40,195 | $108,205 |
| Guest Internet Access Program | $45,000 | $94,000 |
| Delphi Sales and Events System | $990 | $18,600 |
| Required Pre-Opening Training | $5,000 | $17,500 |
| ADA Consultant Fee | $2,500 | $10,000 |
| Construction/Renovation Extension Fees | $0 | $10,000 |
| Insurance | Varies | |
| Organizational Expense | $50,000 | $127,412 |
| Permits, Licenses and Governmental Fees | $140,372 | $253,575 |
| Miscellaneous Pre-Opening and Project Management Expenses | $280,744 | $507,150 |
| Contingencies | $935,813 | $1,690,500 |
| Additional Funds | $300,000 | $700,000 |
| Other Required Pre-opening Services Fees | $6,000 | $6,000 |
| ESTIMATED TOTAL* | $12,834,933 | $24,076,967 |
* This estimated initial investment ranges from an 80-Room Hampton Inn to a 101-Room Hampton Inn & Suites. These figures do not include real estate costs, market studies, insurance, interest or the cost of improvements under a conversion, re-licensing or change of ownership license. Please see FDD for more details.
| Type of Fee | Amount |
|---|---|
| Monthly Royalty Fee | 6% of gross rooms revenue. |
| Monthly Program Fee | 4% of gross rooms revenue. |
| Room Addition Fee | Currently, $400 per guest room or suite, multiplied by the number of additional guest rooms. |
| OnQ Additional Rooms Software Fee | Currently $120 per guest room/suite. |
| OnQ Connectivity | Currently, $590 to $1,260 per month. |
| OnQ Interface Fees | Currently, $1,000 per additional interface. |
| OnQ Maintenance Support Fees | Currently, $600 to $1,600 per month. |
| OnQ Email Fees | Currently, $7.92 per user per month for e-mail and $12.50 per month for delivery to mobile devices. |
| Delphi Sales and Events System | Currently, $858 per user per year. |
| Guest Assistance Program: Customer Satisfaction Guarantee | Currently, $300 per handled transaction for Hilton Honors Diamond members, $250 per handled transaction for Hilton Honors Gold members, and $200 per handled transaction for all other guests. |
| Guest Assistance Program: Price Match Guarantee | Hotels must honor a 25% discount off the lower rate on all approved claims. |
| Guest Assistance Program: First Contact Resolution | Currently, $15 administrative fee. |
| Guest Assistance Program: Online Complaints | $25 per complaint administrative fee. |
| Quality Assurance Re-evaluation Fee | Currently $460 to $3,000 per re-evaluation visit. |
| Quality Assurance Special Re-evaluation Fee | Currently, $3,000 per re-evaluation visit. |
| Quality Improvement Program for Failure to Meet Minimum Performance Standards | Currently: (1) $495 per month; and (2) a 1-time fee of $3,950 to $4,950. |
| Brand Conference | Currently $2,500 per attendee. |
| General Manager, Commercial and Sales Leader Training | Currently, up to $1,200 per attendee. |
| Hilton Core Sales Skills Training | Currently, $850 per attendee. |
| Other Training Program and Training Materials | Varies from $0 to $5,000 per attendee per program. |
| Travel Clubs | Currently, $0.30 per available room plus 10% commission. Amount may vary by program. |
| Hilton Advance Program | Currently, 1.35% of eligible digital direct revenue, not to exceed $30 per stay. |
| Group Preferred Partnership Program | Currently, $1.50 per transaction, plus the applicable commission. If the franchisor increases this fee this year, it will not exceed $2.50 per transaction, plus commission. |
| Frequent Traveler/Guest Reward Program | Currently, 4.9% of total eligible guest folio. Waived for stays in which the guest is enrolled on-property in Hilton Honors. |
| Hilton Honors Event Planner Bonus Program | Currently, $0.0025 to $0.0050 per Hilton Honors bonus point awarded. |
| Online Group Event Booking Charges | Currently, up to 2% of GRR and up to $25 for included meeting space, plus applicable commissions. |
| Centralized Payment Programs | Third-Party Reservation Charges: Currently, up to $5.59 per stay. FastPay Program: Currently, up to $1.40 per transaction, plus commission. Travel Planner Centralized Payment Program: Currently, $0.18 per transaction processing charge plus up to a 10% commission. Unlimited Rewards Program: Currently, $0.71 for a weekday stay (Monday -Thursday nights), $1.42 for a weekend stay with 1 Fri/Sat/Sun night and $2.13 for a weekend stay with 2 Fri/Sat/Sun nights. Double Dollars amounts increase to $1.42, $2.63 and $3.84 respectively. |
| Change of Ownership Application Fee | Currently, $200,000. |
| Permitted Transfer Processing Fee | Currently, $5,500. |
| Re-licensing Application Fee | Currently, $100,000. |
| Lender Comfort Letter Processing Fee | Currently, $3,500 for lender comfort letters and $1,500 for lender comfort letter assignments. |
| Public Offering or Private Placement Processing Fee | Currently, $5,000. |
| Management Fees | Fees will be established by mutual agreement. |
| Actual Damages Under Special Circumstances | Varies. |
| Audit | Actual amount of deficiency plus interest. |
| Default Remedies | Reimbursement of all of the franchisor’s expenses. |
| Indemnification | Reimbursement tor all payments by the franchisor or its affiliates due to any claim, demand, tax, penalty, or judicial or administrative investigation or proceeding arising from any claimed occurrence at the franchisee’s hotel. |
| Insurance | Actual amount |
| Liquidated Damages for Unauthorized Opening | $5,000 per day that the hotel is open without authorization. |
| Liquidated Damages for Pre-Opening Termination | The system’s average monthly royalty fees multiplied by 60. |
| Liquidated Damages for Post-Opening Premature Termination | Before 2nd Anniversary of the Opening Date: The greater of: (a) the hotel’s average monthly royalty fees multiplied by 60; or (b) the system’s average monthly royalty fees multiplied by 60. After 2nd Anniversary of the Opening Date, but Before the Final 60 Calendar Months of Term: The hotel’s average monthly royalty fees multiplied by 60. Within the Last 60 Months of Term: The hotel’s average monthly royalty fees multiplied by the number of months remaining in the term. |
| Service Charges for Overdue Payments | 1.5% per month or highest percentage permissible by law, whichever is less. |
| Taxes | Actual amount. |
| Identity, Sales, and Distribution Non-Compliance Fee | Currently, $500 per instance. |
| Franchise Agreement Non-Compliance Fee | 1% of gross rooms revenue. |
| FastPay Non-Compliance Fee | Varies and escalates based on the number of violations. Currently, up to the greater of $3,000 or 10% of gross group room revenue (not to exceed $7,500) per violation. |
| Consultation and Service Fees | Set by us on a project-by-project basis. |
| Consortia Program | Currently, $2.70 for each consumed night booked under the consortia “parity” rate, plus applicable commission. |
| TMC Pay-On-AII-Pay-For Performance Program | Currently, $1.03 for each consumed night booked by a TMC travel agency, plus up to 10% commission or fee where applicable. If the franchisor increases this fee this year, it will not exceed $1.15, plus applicable commission or fee. |
| US Government Travel Agency Programs | Currently, up to $2.30 per consumed room night or 1.5% of consumed room revenue, depending on program. |
| ResMax Program | Currently, 5.4% to 5.9% of consumed revenue from ResMax booking with a 3-night maximum. |
| Revenue Management Consolidated Center (RMCC) | Category 1 – One Time Service Models, currently $1,699. Category 2 – Monthly Full Support Models, currently $1,265 to $14,799. Category 3 – Monthly Reports Only Models, currently $569 to $1,749. Category 4 – Monthly Lead Management Service Models, currently $1,139 to $1,599. Category 5 – Monthly Group Rooms Coordinator Models, currently $775 to $5,195. |
| Procurement and Service Fees | Currently, 4% to 10% of product cost. |
Navigating the Journey: Armed with a thorough understanding of franchise costs, fees, and the FDD, aspiring franchisees can embark on their journey toward Hampton Inn & Suites ownership with confidence and clarity. However, it’s crucial to approach this process with diligence and attention to detail. Consulting with experienced franchise advisors, such as Star Brands Consulting Ltd, can provide invaluable guidance and support, ensuring a smooth and successful transition into franchise ownership.
Closing: In conclusion, the path to Hampton Inn & Suites franchise ownership is paved with opportunity and potential. By comprehensively understanding the financial aspects and legal obligations associated with franchise ownership, aspiring entrepreneurs can position themselves for success in the dynamic world of hospitality. With the support of reputable franchise consultants like Star Brands Consulting Ltd, the dream of owning a Hampton Inn & Suites franchise can become a reality, enriching lives and communities for years to come.