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Hilton Hotels & Resorts Franchise Cost & Fees

Date of Incorporation: 1962
Franchising Since: 1965
Headquarters: McLean, Virginia

Business Description: Hilton Franchise LLC is the franchisor. The ultimate corporate parent is Hilton Worldwide Holdings, Inc. (formerly, Hilton Hotels Corporation), a global hospitality company owned by the Blackstone Group, a private equity firm. The company owns, manages or franchises a portfolio of brands, including Hilton Hotels & Resorts, Conrad Hotels, Doubletree, Embassy Suites Hotels, Hampton Inn, Hampton Inn & Suites, Hilton Garden Inn, Hilton Grand Vacations Company, Homewood Suites by Hilton, Home2 Suites by Hilton and The Waldorf-Astoria Collection.

Franchise Offer: The franchisor licenses the Hilton System (the System). The System consists of the elements, including knowhow, designated from time to time to identify hotels operating worldwide under the Licensed Brand and currently includes the Marks; access to a reservation service; advertising, publicity and other marketing programs and materials; training programs and materials; standards, specifications and policies for construction, furnishing, operation, appearance and service of the hotel, and other elements.

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: Hilton Worldwide 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 8 training programs. The general manager must attend brand conferences. Online and web based programming is self-paced training that trainees can access at any time. For other training, unless otherwise noted, the franchisor will provide the training on an as needed basis.

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 23 years after effective date, at month end for new construction. The term for conversions varies, but is generally from 10 to 20 years from the date the franchisor authorizes the hotel to open. For the change of ownership, generally, the remaining term under the existing franchise agreement. There are no renewal rights.

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. If franchisees are operating an etorea spa, they must comply with the minimum hours of operation for the spa that the franchisor may specify. 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: 575 (4,6000 system wide across all Hilton Worldwide brands)

Investment Tables:
Initial Investment for a New Hilton Hotel – 300 rooms (for other properties, see their respective FDDs)
Name of Fee Low High
Franchise Application Fee $95,000 $95,000
Product Improvement Plan $7,500 $7,500
Market Study Varies
Phase 1 Environmental Assessment $0 $10,000
Real Property Varies
Construction/Leasehold Improvement $40,000,000 $65,000,000
Designer and Engineering Fees $500,000 $2,000,000
Furniture, Fixtures and Equipment $8,000,000 $12,000,000
Inventory and Operating Equipment $1,500,000 $3,000,000
Signs $50,000 $150,000
Computer Hardware and Software $100,000 $250,000
Guest Internet Access Program $94,500 $154,500
Required Pre-Opening Training $15,000 $30,000
ADA Consulting Fee $2,500 $10,000
Construction/Renovation Extension Fee $10,000 $10,000
Insurance Varies
Organizational Expense $50,000 $200,000
Permits and Licenses $100,000 $500,000
Contingencies $4,000,000 $6,500,000
Miscellaneous Pre-Opening and Project Management Expenses $1,000,000 $3,000,000
Additional Funds (working capital for 3 months) $400,000 $1,000,000
etorea Spa Initial Fee $75,000 $75,000
Additional Funds for Spa Implementation $0 $3,125,875
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) $59,999,500 $97,117,875
Other Fees
Type of Fee Amount
Monthly Royalty Fee 5% of Gross Rooms Revenue and 3% of Gross Food and Beverage Revenue.
Monthly Spa Royalty Fee 5% 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 (FBPP Fees) 0.75% of Gross Rooms Revenue.
OnQ Fees Additional Rooms Currently $120 per additional guest room/suite.
OnQ Fees Email Currently, a $120 one-time set-up fee per user after opening, $9.20 per user per month for e-mail and $22 per month for delivery to mobile devices.
Guest Internet Access Service Currently, $900 to $2,000 per month.
Guest Internet Access Circuit Cost Currently, $1,950 to $5,500 per month.
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.
Brand Conference Currently $1,000 per attendee.
Director of Sales Symposium Currently, $2,300 per attendee.
General Manager Brand Training Currently, $2,300 per attendee.
Training Program and Training Materials Currently, $0 to $5,000 per program 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, in addition to any other applicable reservation fees.
FastPay (Centralized Group Meeting Payment Program) Currently, $0.18 per transaction, which includes commissionable reservations plus cancellations, no-shows and non-commissionable reservations. Fee is subject to change.
Frequent Traveler/Guest Reward Program Currently, 4.3% of total eligible guest folio.
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. Hotel receives 25% credit on the positive gross margin generated from the non-hotel components of the Hilton Plus Package.
Third-Party Reservation Charges Currently, $4.65 per stay.
Travel Planner Centralized Payment Program (TPCP) Currently, up to 10% commission 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 Transfer Fee Currently, $125,000
Permitted Transfer Processing Fee Currently, $5,000
Re-licensing Application Fee Currently, $85,000
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 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 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 Government and Military Program Currently, 2.75% of room revenue for each consumed stay booked under the FedRooms rate/SRP.
CWTSato Travel Government and Military Travel Program Currently, $2.50 for each consumed night booked under the Sato Travel SRP.
Omega World Travel Government Pay for Performance Fee Currently, $2.70 for each consumed night booked under the Program SRP, and standard travel agency commission ranging from 8% to 10%.
ResMax Program Currently, 1.25% to 5% of consumed revenue. Rate varies due to hotel type, location, ADR and other factors.
Revenue Management Consolidated Center (RMCC) Currently, $3,318 to $7,985 per month.
Procurement and Service Fees Currently, up to 10% of product cost.

The above information has been taken from the FDD of Hilton Hotels. Year of FDD: 2016

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