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Hampton Inn & Suites Franchise Cost & Fees

Date of Incorporation: 1983

Franchising Since: 1984

Headquarters: McLean, Virginia

 

Business 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 designate 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.

 

Franchise Offer: Franchisees will operate either a Hampton Inn hotel or a Hampton Inn & Suites hotel, which combines standard guest rooms with a significant block of 2-room suites in a single hotel property, each offering high quality at moderate prices, under a Franchise Agreement.

 

Financial Assistance: The franchisor may, in its sole discretion, offer incentives for development and conversion hotels. The Incentive is a loan that is not subject to repayment unless the franchise terminates before the end of the Term (generally the first 20 years of operation of the Hotel) or a transfer occurs. Other than the development incentive program described, the franchisor does not offer direct or indirect financing for franchisees.

 

Training and Assistance: 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 12 training programs. The franchisor offer many additional optional training courses and may develop additional training programs at any time.

 

Territory: 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.

 

Term of Agreement and Renewal: The length of the initial franchise term is generally 22 years (at midnight on the last day of the month) after the opening 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.

 

Obligations and Restrictions: Whether franchisees are an individual, corporation, limited liability company, partnership or entity, they are at all times responsible for the management of the hotel's business They may fulfill this responsibility only by providing (i) qualified and experienced management, satisfactory to the franchisor, which may be a third-party management company, and (ii) general manager, satisfactory to the franchisor, which it has approved in writing at least 6 months before the hotel opens. Franchisees must operate the hotel 24 hours a day every day, except as the franchisor may otherwise permit based on special circumstances. 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.

 

Estimated Number of Units: 2,055

 

Investment Tables: 

Initial Investment

51-Room Hampton Inn Prototype

Name of Fee Low High
Franchise Application Fee $75,000 $75,000
Product Improvement $7,500 $7,500
Market Study Varies
Phase 1 Environmental Assessment 0 $10,000
Real Property Varies
Construction/Leasehold Improvements $2,600,000 $4,300,000
Design and Engineering Fees $100,000 $250,000
Furniture, Fixtures and Equipment $450,000 $750,000
Inventory and Operating Equipment $40,000 $120,000
Signs $15,600 $75,000
Computer Hardware and Software $34,000 $79,000
Guest Internet Access Program $19,000 $26,000
Required Pre-Opening Training $5,000 $15,000
ADA Consultant Fee $2,500 $10,000
Construction/Renovation Extension Fees $10,000 $10,000
Insurance Varies
Organizational Expense $15,000 $50,000
Permits, Licenses and Governmental Fees $60,000 $150,000
Miscellaneous Pre-Opening and Project Management Expenses $60,000 $150,000
Contingencies $100,000 $300,000
Additional Funds $200,000 $600,000
Estimated Total $3,793,600 $6,933,500

 

80-Room Hampton Inn

Name of Fee Low High
Franchise Application Fee $75,000 $75,000
Product Improvement $7,500 $7,500
Market Study Varies
Phase 1 Environmental Assessment 0 $10,000
Real Property Varies
Construction/Leasehold Improvements $4,100,000 $6,900,000
Design and Engineering Fees $150,000 $400,000
Furniture, Fixtures and Equipment $725,000 $1,200,000
Inventory and Operating Equipment $80,000 $170,000
Signs $15,600 $75,000
Computer Hardware and Software $34,000 $79,000
Guest Internet Access Program $21,000 $27,000
Required Pre-Opening Training $5,000 $15,000
ADA Consultant Fee $2,500 $10,000
Construction/Renovation Extension Fees $10,000 $10,000
Insurance Varies
Organizational Expense $25,000 $75,000
Permits, Licenses and Governmental Fees $80,000 $120,000
Miscellaneous Pre-Opening and Project Management Expenses $60,000 $300,000
Contingencies $200,000 $500,000
Additional Funds $160,000 $275,000
Estimated Total $5,750,600 $10,248,500

 

101-Room Hampton Inn & Suites

Name of Fee Low High
Franchise Application Fee $75,000 $75,000
Product Improvement $7,500 $7,500
Market Study Varies
Phase 1 Environmental Assessment 0 $10,000
Real Property Varies
Construction/Leasehold Improvements $5,700,000 $9,500,000
Design and Engineering Fees $180,000 $500,000
Furniture, Fixtures and Equipment $1,000,000 $1,700,000
Inventory and Operating Equipment $90,000 $190,000
Signs $16,50 $80,000
Computer Hardware and Software $34,000 $79,000
Guest Internet Access Program $37,000 $50,000
Required Pre-Opening Training $5,000 $15,000
ADA Consultant Fee $2,500 $10,000
Construction/Renovation Extension Fees $10,000 $10,000
Insurance Varies
Organizational Expense $25,000 $85,000
Permits, Licenses and Governmental Fees $80,000 $160,000
Miscellaneous Pre-Opening and Project Management Expenses $80,000 $400,000
Contingencies $200,000 $625,000
Additional Funds $300,000 $650,000
Estimated Total $7,842,500 $14,146,500

 

Other Fees

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 Maintenance Fees Currently, $600 to $1,200 per month.
OnQ Connectivity Currently, $590 to $1,260 per month.
OnQ Fees Email Currently, $9.20 per user per month for e-mail and $22 per month for delivery to mobile devices.
OnQ Additional Rooms Software Fee Currently $120 per guest room/suite.
Guest Internet Access Service Currently, per month: $150 to $330 for 51-rooms; $240 to $520 for 80-rooms; or $300 to $660 for 101-rooms.
Guest Internet Access Circuit Cost Currently, per month: $1,300 to $3,000 for 51-rooms; $1,600 to $3,000 for 81-rooms; or $1,600 to $3,000 for 101-rooms.
Guest Assistance Program: Customer Satisfaction Guarantee Currently, $150 per handled transaction for HHonors Gold members, $200 per handled transaction for HHonors Diamond members and $100 per handled transaction for all other guests.
Guest Assistance Program: Our Best Rates. Guaranteed. Currently, the $100 handling fee includes the cost of the Cheque and other fees.
Guest Assistance Program: First Contact Resolution Currently, $15 administrative fee.
Quality Assurance Re-evaluation Fee Currently, $2,500 per re-evaluation visit.
Quality Improvement Program for Failure to Meet Minimum Performance Standards Currently: (1) a 1-time initial fee of $750, plus $1,025 to $1,999 per month; (2) $495 per month; and (3) a 1-time fee of $3,950 to $4,950
Brand Conference Currently $1,000 per attendee.
   
AAA/CAA Rewards and Discounts Currently, $0.30 per available room.
Edge Program Currently, 4.25% for each commissionable reservation received through EDGE.
FastPay (Centralized Group Meeting Payment Program) Currently, $0.18 per transaction, which includes commissionable reservations plus cancellations, no-shows and non-commissionable reservations.
Frequent Traveler/Guest Reward Program Currently, 4.9% of eligible room revenue with a maximum charge per stay of $110
Hilton Plus Program $0.18 transaction fee applies to all bookings through Hilton Plus. This fee applies to no-show, canceled, commissionable and non-commissionable reservations. Hotel is billed 10% commission on the consumed hotel revenue.
Third-Parties Reservation Charges Currently, $4.65 per stay.
Travel Planner Centralized Payment Program (TPCP) Currently, up to 10% commission on the total room rate and other commissionable charges, and $0.18 per transaction processing charge.
Unlimited Budget Travel Planner Incentive and Loyalty Program Weekday stay (Monday -Thursday nights) = $0.71; Weekend stay (1 Fri/Sat/Sun night) = $1.42; Weekend stay (2 Fri/Sat/ Sun nights) = $2.13. For Double Points, amounts increase to $1.42, $2.63, and $3.63 respectively.
Change of Ownership Application Fee Currently, $150,000
Processing Fee for Permitted Transfers Currently, $5,000
Re-licensing Application Fee Currently, $75,000
Lender Comfort Letter Processing Fee Currently, $3,000
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 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./span>
Liquidated Damages for Post-Opening Premature Termination $3,600 for each authorized guest room; The sum of the Monthly Royalty Fees due to the franchisor for the previous 24 months, divided by 24, multiplied by 60. The sum of the Monthly Royalty Fees due to the franchisor for the previous 24 months, divided by 24, multiplied by the number of months remaining in the Term.
Liquidated Damages for Unauthorized Opening $5,000 per day that the hotel is open without authorization.
Liquidated Damages for Pre-Opening Premature Termination $3,600 for each authorized guest room.
Service Charges for Overdue Payments 1.5% per month or highest percentage permissible by law, whichever is less.
Taxes Actual amount.
Consultation Fees Set by us on a project-by-project basis.
TMC/Consortia Program Currently, $2.70 for each consumed night booked under the TMC/ consortia “parity” rate.
TMC Pay-On-AII-Pay-For Performance Program Currently, $1.03 for each consumed night booked by a TMC travel planner.
FedRooms Participation Fee Currently, 2.75% of room revenue for each consumed stay booked under the FedRooms rate/SRP.
CWT Sato Travel Pay for Performance Fee Currently, $2.50 for each consumed night booked under the Sato Travel SRP.
ResMax Program Currently, 1.25% to 5% of consumed revenue from ResMax booking, subject to a $25 monthly minimum fee. Rate varies due to ADR, hotel type and other factors.
Revenue Management Consolidated Center (RMCC) Foundation Program - $1,399 (1-time fee); Core Program - $1,025 per month; GRO Support Program - $545 to $555 per month; Complex/Custom Support Program - $1,999 to $2,575 per month; Forecast Model - $3,300 to $4,350 per month.
Procurement and Service Fees Currently, up to 10% of product cost.

The above information has been taken from the FDD of Hampton Inn. Year of FDD: 2015

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