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Hampton Inn & Suites Franchise Cost & Fees

Date of Incorporation: 2007

Franchising Since:  2007

Headquarters: Delaware

Country: U.S.A.

 

Description:  The Hampton Inn’s indirect corporate parent is Hilton Hotels Corporation. On October 24, 2007, Hilton was acquired by BH Hotels LLC, a Delaware limited liability company and BH Hotels LLC has since been converted to Hilton Hotels Holding Corporation. The franchisor licenses the Hampton Inn hotel system, which consists of the elements, including know-how, that the franchisor designate from time to time to identify hotels operating worldwide under the two Licensed 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: The franchisee will use the Hampton Inn System, under a Franchise License Agreement with Hampton Inns Franchise LLC, to operate a high quality Hampton Inn hotel at moderate prices or a high quality Hampton Inn & Suites hotel, which combines standard guest rooms with a significant block of two-room suites in a single hotel property at moderate prices.

 

Financial Assistance: The franchisor does not offer any direct financing nor do they guarantee any note, lease or obligation. The financial assistance offered by their affiliates or parent company is set out below:

Hilton has made arrangements for BankersBanc Specialty Finance Group, LLC formerly known as GMAC Commercial Mortgage Corporation to offer a lease financing program for fixtures, furnishings and equipment to qualified franchisees. While the transactions are called "leases," they will give the franchisee the opportunity to purchase the leased items at the end of the lease term for $1.00 instead of returning the items.

Hilton HHonors Worldwide has made arrangements with GE Capital Franchise Finance Corporation to award Hilton HHonors Bonus points in connection with a GE Capital Franchise Finance loan to a qualified franchisee for a new development. Under this program, if the franchisee receives a GE Capital Franchise Finance loan for a new development that costs over $10,000,000, Hilton HHonors will award the franchisee two million Hilton HHonors Bonus points, and if the franchisee receives a GE Capital Franchise Finance loan for a new development that costs $10,000,000 or less, Hilton HHonors will award the franchisee one million Hilton HHonors Bonus points. Hilton HHonors Bonus points will be awarded in their entirety after the final loan is paid to the franchisee. Hilton HHonors points will be available only on new development loans and will not be available on refinancing or conversion loans. All loans will be rounded to the nearest $10,000 to determine Hilton HHonors Bonus points. Please consult the UFOC/FDD for more information.

 

Training and Assistance: Hilton offers required training courses to new franchisees. Employees designated to take training must complete the required training to the franchisor’s satisfaction. The franchisee must pay the costs for required and optional courses, along with all travel, lodging and other expenses associated with training. Hilton may also charge for training materials. The general manager must attend the Hampton Lighthouse Leadership General Manager Program before the opening of the hotel.

 

Territory: The franchisor grants franchisees a non-exclusive license during the term of the Franchise License Agreement to operate a licensed hotel at a specified location. The franchisee will not receive an exclusive territory. The franchisee may face competition from other licensees, from hotels that the franchisors affiliates own, or from other channels of distribution or competitive brands that they control.

 

Term of Agreement and Renewal: The term of the franchise agreement is 22 from the date that the application is approved and is none renewable.

 

Obligations and Restrictions: Whether the franchisee is an individual, corporation, limited liability company, partnership or other entity, they are at all times responsible for the management of the hotel’s business. The franchisee 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) a general manager, satisfactory to the franchisor, which they have approved in writing. The franchisee must operate their hotel 24 hours a day every day, except as the franchisor may otherwise permit based on special circumstances. The franchisee must operate, furnish, maintain and equip your hotel in a clean, safe and orderly manner and in first-class condition in accordance with the provisions of the Franchise License Agreement.

 

Total Number of Units: Network of over 2,500 hotel locations.

 

Investment Tables: 

Initial Investment: Hampton Inn Table 1 - 81 Room Hampton Inn

Expenditure Low High
Development Services Fee $50,000 $50,000
Product Improvement Plan $5,000 fee with Application for Change of Ownership, Re-licensing or Conversion $5,000 fee with Application for Change of Ownership, Re-licensing or Conversion
Improvements New Development: $4,000,000 $6,500,000
Architects, Designers, Engineers and Consultants New Development: $150,000 $400,000
Furniture, Fixtures and Equipment $800,000 $1,300,000
Computer Software $34,000 $79,000
Computer Hardware for HSIA $18,500 $31,400
Organizational Expense $15,000 $35,000
Miscellaneous Pre-Opening and Project Management Expenses $80,000 $400,000
Signs $20,000 $75,000
Required Pre-Opening Training $5,000 $15,000
Contingencies $160,000 $275,000
Additional Funds $200,000 $600,000
Phase 1 Environmental Assessment $0 $10,000
Inventory  $60,000 $120,000
Permits, Licenses and Governmental Fees $50,000 $150,000
Total $5,647,500 These figures do not include real estate related costs, any market studies, any construction extension fees, insurance, interest or the cost of improvements under a conversion, re-licensing or change of ownership license. $10,045,400

102 Room Hampton Inn & Suites Table 2

Expenditure Low High
Development Services Fee $50,900 $50,900
Product Improvement Plan $5,000 fee with Application for Change of Ownership, Re-licensing or Conversion $5,000 fee with Application for Change of Ownership, Re-licensing or Conversion
Improvements New Development: $5,600,000 $9,000,000
Architects, Designers, Engineers and Consultants New Development: $180,000 $500,000
Furniture, Fixtures and Equipment $1,000,000 $1,600,000
Computer Software $34,000 $79,000
Computer Hardware for HSIA $24,000 $38,900
Organizational Expense $15,000 $35,000
Miscellaneous Pre-Opening and Project Management Expenses $80,000 $400,000
Signs $25,000 $80,000
Required Pre-Opening Training $5,000 $15,000
Contingencies $210,000 $365,000
Additional Funds $200,000 $600,000
Phase 1 Environmental Assessment $0 $10,000
Inventory $60,000 $120,000
Permits, Licenses and Governmental Fees $50,000 $250,000
Total $7,538,900 These figures do not include real estate related costs, any market studies, any construction extension fees, insurance, interest or the cost of improvements under a conversion, re-licensing or change of ownership license. $13,148,800

 

Ongoing Fees:

Name of Fee Amount
Monthly Royalty Fee 5% of Gross Rooms Revenue
Monthly Program Fee 4% of Gross Rooms Revenue
Frequent Traveler/Guest Reward Program From the date the hotel begins to participate in HHonors, the franchisee’s hotel will be charged on the same basis as other System hotels. Currently, the cost of this program is 4.9% of eligible room revenue with a maximum charge per stay of $110. In addition, the franchisee’s hotel will be responsible for other charges as specified.
Consultation Fees Set by the franchisor on a project-by-project basis
Procurement and Services If the franchisee buys from Hilton Supply Management (as the franchisor specifies), the franchisee pays product cost plus procurement fee of up to 10% of product cost plus freight and sales tax
Travel Planner Centralized Payment Program (TPCP) Standard travel planner commission on the total room rate and other commissionable charges is currently up to 10%, but is subject to change. Processing charge is currently $0.18 per transaction, which includes commissionable reservations plus cancellations, no-shows and non-commissionable transactions. The processing charge is subject to change.
Third-Party Reservation Charges Cost and fees incurred in connection with Third-Party Reservation Systems (such as GDS, airlines and other service reservation providers).
Customer Satisfaction Guarantee Reimbursement Actual costs to compensate a dissatisfied guest to ensure the guest’s “100% Satisfaction Guarantee”.
Best Rates Guaranteed Fees charged under rate parity and guaranty program
Quality Assurance Re-evaluation Fee $1,500 per re-evaluation visit, subject to change
Special Programs Varies by program
FastCASH/HCI (Merchant/ Opaque Payment Automation Program) The fee for this program is currently $0.18 per transaction which includes commissionable reservations plus cancellations, no-shows and non-commissionable transactions. Fee is subject to change.
Fast Pay (Centralized Group Meeting Payment Program) The fee for this program is currently $0.18 per transaction, which includes commissionable reservations plus cancellations, no-shows and non-commissionable transactions. Fee is subject to change.
Unlimited Budget travel planner incentive and loyalty program Weekday stay (Monday -Thursday nights) cost = $0.71; Weekend stay (with one Fri/Sat/Sun night) cost = $1.42; Weekend stay (with two Fri/Sat/Sun nights) cost = $2.13. These funds are remitted to Budget (a portion is paid to the travel planner; Budget retains the remaining amount as a processing charge).
Optional TMC/Consortia Program (list of participating travel planner accounts can and will vary depending on negotiations with accounts). Current room night fee is $2.50 for each consumed night booked under the TMC/consortia “parity” rate (the franchisor pays a portion of the $2.50 directly to the travel planner account; the remainder is used to fund marketing efforts with travel planner accounts and as a processing charge).
Hilton Plus Program $0.18 Transaction Fee applies to all bookings through Hilton Plus. Hotel is billed 10% commission on the consumed hotel revenue. Hotel receives 25% credit on the positive gross margin generated from the non-hotel components of the Hilton Plus Package.
Optional TMC Pay-On-All-Pay-For Performance (list of participating travel planner accounts can and will vary depending on negotiations with accounts) Current room night fee is $0.90 for each consumed night booked by a TMC travel planner (the franchisor pays a portion of the $0.90 directly to the TMC; the remainder is used to fund marketing efforts with the TMC and as a processing charge).
Optional FedRooms government and military travel program Current fee is 2.75% of room revenue – for each consumed stay booked under the FedRooms rate/SRP (the franchisor pays the entire fee to FedRooms).
Optional Sato Travel government and military travel program. Current room night fee is $2.50 for each consumed night booked under the Sato Travel SRP (the franchisor pays a portion of the $2.50 directly to Sato Travel; the remainder is used to fund marketing efforts with Sato Travel and as a processing charge).
AAA Show Your Card & Save Program Current fee is $1.80 for each consumed stay booked by an AAA travel planner or through the dedicated AAA “member-direct” line at HRCC. These funds are remitted to AAA headquarters.
Maintenance Fees for OnQ®, OnQ® Connectivity, and E-mail $500 to $1,200 per month for maintenance support, $350 per month for OnQ® connectivity ($525 for international hotels), and approximately $7.50 for e-mail per user, per month, for all users. The franchisor currently pays for the cost of three email accounts per month per hotel. The franchisee pays for all additional email accounts which are billed to the hotel.
Additional OnQ® Fees If the franchisee add or construct additional guest rooms at the hotel at any time after they sign the Franchise License Agreement, the franchisee must pay or HSS or Hilton an additional fee, based upon the then prevailing per guest room/suite fee charged to System hotels multiplied by the number of additional guest rooms (currently, $100 per additional room)
Electronic Distribution Systems Development and Operation Fees (Brand.com) The franchisor may charge the franchisee the costs and fees incurred in connection with development and operation of electronic distribution systems, currently up to $2.50 per transaction, subject to change.
Internet Distribution Program (IDP) Standard internet commission on the total room rate and other commissionable charges is currently up to 12%, but is subject to change. Processing charge is currently $1.50 per transaction, but subject to change, and includes commissionable reservations plus cancellations, no-shows and non-commissionable transactions.
Marketing Materials Reasonable cost of Materials.
Required Training Programs and Training Materials Charges ranging from $50.00 to $4,400
Service Charges for Overdue Payments Lesser of 1½% per month or the maximum rate permitted by applicable law.
Room Addition Fee Prevailing per guest room/suite Development Services Fee charged to System hotels multiplied by the number of additional guest rooms (currently, $450 per additional guest room/suite). Prevailing PIP Fee if we require you to renovate the hotel (currently $5,000) payable at the time of inspection.
Renovation Work Completion Extension Fee $10,000
Management Fees If Hampton Inns Management LLC enters into a management agreement with the franchisee, the terms, including fees, will be established by mutual agreement.
Indemnification Reimbursement for all payments by the franchisor or their affiliates due to any claim, demand, tax, penalty, or judicial or administrative investigation or proceeding arising from any claimed occurrence at the hotel.
Processing Fee for “Permitted Transfers” $3,000
Fees for Change of Ownership Proposed owner must pay then-prevailing application fee. If approved, proposed owner pays any other then applicable fees and charges for new franchise licenses.
Public Offering Processing Fee $5,000 and any additional costs the franchisor may incur in reviewing your documents, including reasonable attorneys’ fees.
Default Remedies Reimbursement of all of the franchisor’s expenses
Termination Fee (Liquidated Damages) (a) All outstanding fees and charges amounts owed us, Hilton and the Entities  for periods before up to termination date, including amounts accrued but not yet billed, plus (b) “Termination Fee”
Special Termination Fee (a) All amounts owed before termination date, plus (b) amount equal to two times Termination Fee
Liquidated Damages for Unauthorized Opening $5,000 per day that the hotel is open without authorization and their costs, including attorney’s fees.
Pre-Opening Termination Fee Lump sum equal to $1,200 for each Guest Room on Rider, multiplied by 3.
Annual Brand Conference $1,500 per attendee.
Information Technology Recapture Charge A dollar amount or a percentage increase to any of the fees based on a percentage of Gross Rooms Revenue.
Lender Comfort Letter Processing Fee Currently $1,500 but may increase in the future.
Optional ResMax Program Optional – not yet determined
Re-licensing Fee (not involving a Change of Ownership) $25 per guest room/suite multiplied by the number of years in the Re-licensing term.

Date of FDD: 2009

The above information has been taken from the UFOC/FDD and online sources of Hampton Inn & Suites.

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