Year Business Began: 1962
Franchising Since: 1965
Headquarters: McLean, Virginia
Estimated Number of Units: 605 (about 7,165 total across all Hilton Worldwide brands)
Franchise Description: Hilton Franchise Holding LLC is the franchisor. The ultimate corporate parent is Hilton Worldwide Holdings, Inc. (formerly, Hilton Hotels Corporation). The company owns, manages or franchises a portfolio of brands, including: Canopy, Conrad Hotels and Resorts, Curio Collection, Doubletree, Embassy Suites, Hampton Inn, Hampton Inn & Suites, Hilton Garden Inn, Hilton Grand Vacations Company, Hilton Hotels & Resorts, Homewood Suites, Home2 Suites, LXR Hotels and Resorts, Motto, Signia Hilton, Tapestry Collection by Hilton, Tempo, Tru, and Waldorf Astoria Hotels and Resorts.
The franchisor licenses the Hilton System (the system). The system consists of the elements, including know-how, designated from time to time to identify hotels operating worldwide under the licensed brand and currently includes the marks; access to the reservation service; advertising, publicity and other marketing programs and materials; training programs and materials; programs for the franchisor’s inspecting of the hotel and consulting with franchisees; standards, specifications and policies for construction, furnishing, operation, appearance and service of the hotel, and other elements it refers to in the Franchise Agreement, in the manual or in other communications to franchisees.
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 over 10 training programs, not including new owner orientation and additional workshops. Both virtual and online training courses are considered equivalent to classroom training. These courses may be provided by the franchisor or its designated third-party vendors. Online and web based programming is self-paced training that trainees can access at any time. The franchisor requires participation by the general manager and director of sales in an annual brand or regional conference. For other training, unless otherwise noted, the franchisor will provide the training on an as needed basis. The franchisor and its affiliates offer many additional optional learning programs and may develop additional learning programs at any time.
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 (restricted area). If the franchisor agrees to give franchisees a restricted area provision for their new development or conversion, it will normally be for an agreed on time period, which is shorter than the term of the Franchise Agreement.
Obligations and Restrictions: Franchisees must provide qualified and experienced management for the operation of the hotel. To fulfill this responsibility, the hotel must be operated either by the franchisee or a third-party management company that the franchisor has approved. No other person or entity may operate the hotel. After a review of the financial information submitted with the application and the proposed ownership of the hotel and real property, the franchisor determines guaranty requirements. Each required guarantor, who may include the spouse of an owner of the hotel or the franchisee, must sign a guaranty, by which the guarantor assumes and agrees to discharge certain of the franchisee’s obligations under the Franchise Agreement. 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. If franchisees are operating an eforea spa, they must comply with the minimum hours of operation for the spa that the franchisor may specify.
Term of Agreement and Renewal: The length of the initial franchise term is generally 23 years after the opening date. The term for conversions is generally from 10 to 20 years from the date the opening date. For the change of ownership, the length of the franchise term is generally the remaining term under the existing Franchise Agreement. Franchisees do not have the right to renew or extend, but if the franchisor agrees, in our its discretion, to re-license, they may be asked to sign a contract with materially different terms and conditions from the original Franchise Agreement, and franchisees must comply with any performance conditions that the franchisor specifies.
Financial Assistance: The franchisor may, in its sole discretion, offer incentives for new hotels. An incentive is a financial contribution that the franchisor makes to assist with the development or conversion of the hotel. The incentive is not a loan, it is a contingent liability. Other than the development incentive program described, the franchisor does not offer direct or indirect financing for franchisees. 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 the franchisee’s note, lease, or other obligations.
Investment Tables:
| Name of Fee | Low | High |
|---|---|---|
| Franchise Application Fee | $105,000 | $105,000 |
| Product Improvement Plan | $0 | $10,000 |
| Market Study | Varies | |
| Environmental Assessment | Varies | |
| Real Property | Varies | |
| Construction and Leasehold Improvements | $21,000,000 | $110,000,000 |
| Designer and Engineering Fees | $815,000 | $4,650,000 |
| Furniture, Fixtures and Equipment | $10,000,000 | $20,000,000 |
| Inventory and Operating Equipment | $1,650,000 | $3,500,000 |
| Signage | $40,000 | $120,000 |
| Computer Hardware and Software | $150,695 | $344,905 |
| Guest Internet Access Program | $136,500 | $223,500 |
| Delphi Sales and Events System | $990 | $41,000 |
| Required Pre-Opening Training | $5,000 | $20,000 |
| ADA Consultant Fee | $2,500 | $15,000 |
| Construction/Renovation Extension Fee | $0 | $10,000 |
| Insurance | Varies | |
| Organizational Expense | $75,000 | $268,724 |
| Permits and Licenses | $310,000 | $1,600,000 |
| Miscellaneous Pre-Opening and Project Management Expenses | $1,200,000 | $3,700,000 |
| Contingencies | $2,100,000 | $11,000,000 |
| Additional Funds (working capital for 3 months) | $1,300,000 | $1,900,000 |
| Eforea Spa Initial Fee | $0 | $25,000 |
| Additional Funds for Eforea Spa Implementation | $0 | $4,950,000 |
| Other Required Preopening Services Fees | $23,640 | $28,060 |
| ESTIMATED TOTAL (does not include real estate costs, market studies, insurance, interest, or the cost of improvements under a conversion, re-licensing or change of ownership license) | $38,914,325 | $162,511,189 |
| Type of Fee | Amount |
|---|---|
| Monthly Royalty Fee | 5% of gross rooms revenue. |
| Monthly Food and Beverage Fee | 3% of gross food and beverage revenue. |
| Monthly Spa Royalty Fee | 2% of gross spa 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 Fees Fee Based Pricing Program (FBPP) Fee | Currently, 0.35% to 0.45% of gross rooms revenue for REIT hotels, and 0.45% to 0.75% of gross rooms revenue for non-REIT hotels. |
| OnQ Fees Additional Rooms Fee | Currently $120 per additional guest room/suite. |
| OnQ Connectivity Fees | Currently, there is no separate fee charged for brand hotels. |
| OnQ Interface Fees | Currently, $1,000 per additional interface. |
| OnQ Maintenance Support Fees – REIT Hotels | Currently, $1,500 to $5,600 per month. |
| OnQ Email Fees | Currently, $7.92 per user per month for email 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, $480 to $3,000 per re-evaluation visit. |
| Quality Assurance Special Re-evaluation Fee | Currently, $3,000 per re-evaluation visit. |
| 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, the cost is $850 per attendee. |
| Other Training Programs and Training Materials | Currently, up to $5,000 per program per attendee. |
| 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 | $1.50 per transaction, plus the applicable commission. If the franchisor increases this fee, it will not exceed $2.50 per transaction, plus commission. |
| Frequent Traveler/Guest Reward Program | Currently, 4.3% of total eligible guest folio. This fee is 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 | Varies. |
| Change of Ownership Application Fee | Currently, $150,000. |
| Permitted Transfer Processing Fee | Currently, $5,500. |
| Re-licensing Application Fee | Currently, $85,000. |
| 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 | Actual expenses. |
| Indemnification | Actual amount paid 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 Premature Termination | The system’s average monthly royalty fees multiplied by 60. |
| Liquidated Damages for Post-Opening Termination (Payable if the franchisor terminates the Franchise Agreement on or after the Opening Date but before the 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. |
| Liquidated Damages for Post-Opening Termination (Payable if the franchisor terminates after the 2nd anniversary of the Opening Date but before the final 60 calendar months of the Term.) | The hotel’s average monthly royalty fees multiplied by 60. |
| Liquidated Damages for Post-Opening Termination (Payable if the franchisor terminates the Franchise Agreement within the last 60 months of the 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. |
| Consultation and Service Fees | Set by the franchisor 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 plus up to 10% commission or fee, where applicable, for each consumed night booked by a TMC travel agency. If the franchisor increases this fee, it will not exceed $1.15, plus commission. |
| 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 $3,939 to $14,799. Category 3 – Monthly Reports Only Models, currently $1,129 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. |
The above information has been compiled from the FDD of Hilton Hotels. Year of FDD: 2023.
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