A Franchise is the right to use the brand and the business model of a specific parent company for a prescribed period of time. It is a method for expanding a business and distributing products and services through a licensing relationship.
A Franchisor is a company that ‘gives’ the license to a third party for the conducting of a business under their trademark. They specify the products and services that should be offered.
In other words it means that the parent Hotel Franchise Company provides permission for the local owner to use the parent company’s name (brand) and products. A franchise can be owned as a corporation, sole proprietorship, limited liability company or other business structure.
In hospitality industry, a Hotel Franchise can be vaguely compared to a chain, since it is a management agreement, that provides certain services (brand, reservation system, support, etc.) in return to follow specific regulations and procedures. In other words the hotel brand is shared by other proprietors.
Beneficial is that the Franchisees can brand their hotel with a well-known and popular brand, while the franchise contract provides them with a powerful set of tools to drive new business. Franchisees operate business for themselves but not by themselves.
The advantages of a Hotel Franchise (for the Franchisees) are:
- strong brand portfolio
- specific set of tools
- strong approach to standards
- good reputation
- training programmes
- consultation and advice service
- marketing programmes
The benefits for the franchisor, on the other hand, is an alternative to building “”chain stores/ hotels”” to distribute their products. It avoids the investments and liability of a chain.
The franchisor’s success however depends on the success of the franchisees.
Not only hotels but also many chain restaurants (i.e. McDonalds) and retail stores (i.e. 7-Eleven) are owned as franchises.