InterContinental Hotels & Resorts Franchise Cost & Fees

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Description

Year Business Began: 1946Franchising Since: 1956U.S. Headquarters: Atlanta, GeorgiaCountry of Origin: EnglandEstimated Number of Units: 195 (5,350 across all InterContinental Hotels Group brands)Franchise Description: The franchisor is Holiday Hospitality Franchising, LLC (HHFL). HHFL’s ultimate corporate parent is InterContinental Hotels Group PLC. InterContinental Hotels are typically located in major markets, important secondary cities and resort destinations. InterContinental Resorts are located in resort destinations. InterContinental Hotels and InterContinental Resorts are full service facilities targeted to discriminating business, conference and leisure travelers. Other brands under the InterContinental umbrella include: Klimpton Hotels, HuaLuxe Hotels and Resorts, Crowne Plaza Hotels and Resorts, Hotel Indigo, Even Hotels, Holiday Inn, Holiday Inn Express, Staybridge Suites, and Candelwood Suites. The franchisor offers and grants franchises under the terms of a License Agreement. The License provides for the establishment and operation of an InterContinental Hotel or an InterContinental Resort.Training Overview: The franchisor does not assist in the hiring of employees, but it will train certain Hotel employees either at the franchisee’s Hotel, at its headquarters in Atlanta, Georgia, or at various other major metropolitan locations which it may designate. Franchisees must pay any travel and living expenses of their trainees, and the franchisor may charge franchisees a fee to attend training workshops. Every General Manager must satisfactorily complete the GM initial certification training program within 180 days of assuming the position, and must be acceptable to the franchisor. Guest Service Managers, Sales Directors/Managers, Executive Housekeepers, Director of Engineering, Designated Trainers and Food and Beverage Directors must also satisfactorily complete the appropriate training at the franchisor’s corporate office or another location that it designates, within dates required per the applicable Brand Standards. The franchisor’s employees will provide on-site consulting and/or training visit(s) to the Hotel each year. During the term of the agreement, the franchisor will provide required and optional training programs at various locations, including its headquarters.Territory Granted: HHFL does not typically grant franchises for exclusive areas or territories. The License will be for a specific site only and for the licensing of one Hotel. The License applies to the location specified in the License and to no other location. Franchisees will not receive an exclusive territory. Franchisees may face competition from other franchisees, from hotels that the franchisor or its affiliates own, or from other channels of distribution or competitive brands that the franchisor or its affiliates control.Obligations and Restrictions: Whether franchisees are an individual, corporation, partnership or other entity, the franchisor requires them to retain and exercise direct management control over the Hotel’s business at all times unless otherwise approved by the franchisor. However, the franchisor does not require that franchisees participate personally in the direct operation of the Hotel. The franchisor may include conditions in the License requiring franchisees to hire a duly qualified and experienced (i) management company acceptable to HHFL or (ii) General Manager, Director of Food & Beverage or Director of Sales with at least two years prior experience in such position at a hotel operated under any of HHFL’s brands or at a hotel in a similar brand segment as the Hotel, as defined by Smith Travel Research, Inc. The franchisor requires franchisees with management experience who will supervise the Hotel on the premises or hire a management company it approves. A General Manager who has successfully completed the franchisor’s training program must directly supervise the business on the premises. Franchisees must provide the Hotel services described in the License and must ensure that no part of the Hotel or the System is used to facilitate or promote a competing business. There are no restrictions as to the customers to whom franchisees may sell guest rooms or other goods or services that are related to the Hotel business.Term of Agreement and Renewal: The length of the initial franchise term is 20 years from the date the Hotel opens in the System for a new development; 10 years from date Hotel opens in the System for a conversion; and 10 years from Term Commencement Date for a change of ownership or re-licensing. The License does not provide for renewal or term extensions. If the franchisor agrees to re-license, franchisees may be asked to sign a contract with materially different terms and conditions than the original contract.Financial Assistance: The franchisor does not offer any formal program for direct or indirect financing. HHFL, SCH or its affiliate, General Innkeeping Acceptance Corporation (GIAC), may furnish loans or guaranties. HHFL, SCH and GIAC consider making loans or guaranties under terms and conditions that would be negotiated on a case by case basis with the prospective franchisee and any decision to make a loan or provide a guaranty would be made in the judgment of HHFL, SCH or GIAC alone, and conditioned upon approval of the Executive Committee and Board of Directors. It is the franchisee’s responsibility alone to obtain adequate financing for all expenses related to the development, opening and operation of the hotel. Investment Tables: Estimated Initial Investment for a 300 room InterContinental Hotel or InterContinental Resort Name of Fee Low High Application Fee Fee $150,000 $150,000 Property Improvement Plan (PIP) Fee $8,500 $8,500 Land Varies Building Construction $56,846,050 $76,909,300 Furniture, Fixtures & Equipment $10,031,645 $16,719,410 Opening Inventory $1,050,000 $2,100,000 Primary Identification Sign (including installation, freight, foundation and wiring) $210,000 $420,000 PMS Equipment; Software; Installation & Training; HOLIDEX Plus Equipment & Training; SPS Equipment; Software; Installation & Training $124,000 $187,000 Guest Internet Access – Hardware $22,500 $49,000 Market Feasibility Study $15,000 $50,000 Hotel Openings Services & Transitions (HOST) training (materials & shipping, plus trainer’s travel and lodging) $8,000 plus trainer expenses New Hotel Opening Training Materials $0 $5,000 Initial Certification Training Program (plus trainer expenses) $5,370 $15,000 Pre-Opening Training $1,200 $1,200 Pre-Opening Re-visit (plus trainer expenses) $0 $5,000 Back of House Program $550 $10,000 Licenses and Permits Varies Professional Fees $750,000 $3,000,000 Security Deposits $10,000 $50,000 Insurance $200,000 $625,000 Financing and Closing Varies Additional Funds and Prepaid Expenses during the initial Phase (first 3 months after opening) $1,000,000 $2,625,000 Hotel Photography $3,500 $6,200 ESTIMATED TOTAL (These estimates do not include real estate related costs or other items that HHFL cannot estimate.) $70,436,315 $102,938,610 Other Fees Type of Fee Amount Royalty 5% of Gross Rooms Revenue. Capital Revenue Up to 5% of Gross Revenue. Standard Fee for Room Additions $500 for each new approved guest room or suite. Fees for Extensions of Commencement Deadlines:a. New Development (6 month extensions)b. New Development (extensions of less than 6 months)c. Room Additions (6 month extension) a. 1/2 of then-current standard minimum Application Fee. b. Then current Application Fee prorated according to time period requested. c. 1/2 of original room addition Application Fee. Public Offering or Private Placement Processing Fee $25,000 plus additional costs incurred by HHFL. Audit/Interest Amount of discrepancy, interest and $3,000 (audit fee may be increased on Systemwide basis). Re-Licensing Fee $500 per guest room but not less than $75,000 Changes of Ownership Fee $500 per guest room but not less than $75,000 Realignment/Name Change; Brand Conversion Processing Fee $5,000 for franchisee name change, ownership realignment or brand conversion. PIP Inspection/Preparation Fee $8,000 for a PIP (and $5,000 for a re-inspection). Plan and/or FF&E Default $2,500 to cover costs of SCH travel and expenses related to plan and/or FF&E defaults. PIP Default Travel $2,500 to cover costs of SCH travel and expenses related to PIP defaults. Quality Visits for Guest Satisfaction or Quality Evaluation Failure, Default or Termination Status/ Failed PIP Inspection $2,000 to $7,500 per visit Monthly Quality Self-Assessment (MQSA), Management Action Plan (MAP), or Hotels that fall below the At Risk guest satisfaction threshold $2,500 to $7,500 for failure to complete the mandatory MQSA or MAP as required. Hotels that fall into the guest satisfaction category below the At Risk brand threshold must pay up to $7,500 for each required visit and assigned training classes. Indemnification All expenses, including attorneys’ fees and court costs, incurred by HHFL, its parents, subsidiaries, affiliates, and their successors and assigns to remedy any defaults of, or enforce any rights under the License; to effect termination of the License; or collect any amounts due under the License. Liquidated Damages Payment on premature termination before HHFL authorizes you to use the system at the Hotel (includes termination resulting from failure to perform the construction, upgrading and renovation work described in the License A lump sum equal to the monthly average of all amounts that would have been payable to HHFL under paragraphs 3.B(1), (3) and (4) of the License assuming the Hotel had collected Gross Rooms Revenue based on the average daily revenue per available room for all hotels in the System for the previous 12 months, as determined by HHFL, multiplied by the greater of (a) 6 or (b) the number of full and partial months from the Term Commencement Date to the termination date of the License. Liquidated Damages Payment on premature termination after HHFL authorizes you to use the System at the Hotel (applicable only if License terminates before expiration, in accordance with License Agreement An amount equal to the total amounts required under License paragraphs 3.B(1), (3) and (4) during the 60 calendar months of operation preceding the termination or during the preceding number of months equal to the unexpired License Term at the time of termination (if less than 60 months); or if the Hotel has not been in operation in the system for 60 months, an amount equal to the greater of (i) 60 times the monthly average of these amounts for the period during which the Hotel has been in operation in the System, or (ii) 60 times these amounts as are due for the one month preceding the termination. Royalty in case of Casualty 2% of GRR based on average GRR for preceding 12 months. Promotions; required and optional advertising materials Expenses incurred. Services Contribution 3% of GRR in aggregate. Initial Marketing Contribution for the Frequency Program $10.00 per approved guest room. Special Marketing Contribution for Frequency Program $4.75 per enrolling stay with a flat 1000 points issued. 4.75% of Qualifying Full Folio revenue from Frequency Program members. 1.425% of Qualifying Room and Meeting Revenue from Frequency Program members. IHG Commission Services (“ICS”) (Travel Agent Commissions)] 10% (minimum) commission on total room rate. Third Party Distribution Connection Fees Varies. IHG Voice Reservation Service $7.65 per net booking, which may be changed once annually. All hotels must sign up for the service. A commission of 10% may be applied to hotels who transfer hotel-direct calls to pubic IHG CRO toll-free numbers. Revenue Management for Hire Program $425 – $3,350 per month depending on total Hotel room count and annual occupancy. (These fees apply until December 31, 2017, after which they may change.) Plus, out of pocket travel expenses for SCH personnel. (These fees are modifiable with 90 days written notice.) Completion of the appropriate level of IHG Revenue Management certification (if hotel is not participating in the Revenue Management for Hire Program) $1,195-$1,500 Performance Marketing Fees 10% – 15% commission on consumed revenue booked. GDS Biasing Programs 5% of incremental revenues through the programs. BTA Revenue Program 2.25% override fee (in addition to standard travel agency commission) per consumed room nights, to a maximum $20,000 per year. Mid-Market Account Program Booking Fees 4% of consumed transient revenue booked through the Mid-Market Account Program Activation Training for PERFORM Prior to activating PERFORM, Hotel must attend PERFORM The Fundamentals Training. Cost for Training ranges from $375 to $400. Activation Training for PERFORM with Price Optimization Prior to activating PERFORM with Price Optimization, Hotel must attend either a virtual or classroom training session. Cost for training ranges from $375 to $400. This charge is waived if the hotel currently subscribe to IHG’s Revenue Management for Hire service.Additionally, for Hotels that do not participate in Revenue Management for Hire, additional costs of between $30 and $60 may apply for competitive rate insight shopping. For hotels currently subscribing to MarketVision or Rate360, these costs may be waived. IHG Rewards Club Measured Standards $500 per standard failed. Fee escalates by an incremental $1,000 each consecutive quarter Hotel in “Failure” status. PMS Software Maintenance Maintenance and/or hosting fees may be increased up to 5% per year. Costs will vary according to the franchisee’s technology needs. Opera– Premise Based $17.60 per room, per year for Opera V5 Software Support; $2.86 per room, per year for Oracle TechnologyFoundation Support; $9.24 per interface, per year, within bundle for IFC8 Interfaces Annual Support; $440.00 per interface, per year, out of bundle for IFC8 Interfaces Annual Support; $0.09 per interface, per year for OXI 2-Way – HOLIDEX® Support; $0.00 per room, per year for Opera Commission Handling Support; $0.03 each, for Opera Back Office Interface Support; $0.02 each, for Opera Export Files Support $1.65 per room, per year for Opera Web Services Support (OWS); $110.00 per interface, per year for eSocketPOS Interface Support (SPS) Opera Xpress – Hosted $2.87 per room, per month for Opera V5 Software Services & Support; $0.36 per room, per month for IFC8 Interface Services & Support; $0.50 per room, per month for Opera Commission Handling Services & Support; $0.50 per room, per month for Opera Back Office Interface Services & Support; $0.50 per room, per month for Opera Export Files Services & Support; $0.60 per room, per month for OXI 2-Way – HOLIDEX® Services & Support; $0.50 per room, per month for Credit Card Interface Services & Support FastConnect Plus And Access Control Manager $167.32 Secure Payment Solution Maintenance Support $156.25 Guest Internet Access – Bandwidth Service Subscription $1,000 to $2,800. Pricing is estimated and varies based on regional service providers. Guest Internet Access – Hardware Maintenance & Guest Support $1.50 per guest room $25.00 per meeting/conference room, plus $20.00 per 2000 sq. ft. of total meeting space, maximum of $500.00 (meeting room support fees only apply if total meeting space exceeds 2000 sq. ft.) PMS Hardware Maintenance (Costs vary according to technology needs. These are estimates) $150.00 (1-150 rooms) $175.00 (151-250 rooms) $200.00 (251 + rooms) Costs are noted above on a per month basis. Gift Card EquipmentEstimated terminal cost of $295-$400 (one time charge) if a terminal is required. Technology Fee $14.80 per room, per month. Tax on Sales/Gross Receipts HHFL’s actual cost. Guest Relations Fees Quality and Service contacts from Hotels will be handled by Guest Relations in the ‘One Contact Resolution’ process. Hotels will be charged a case management fee of $150, plus the compensation amount of no greater than one night room and tax. Non Service and Quality cases (such as billing or reservations issues) that are not resolved within 48 hours by the Hotel will be handled by Guest Relations with a case management fee of $150. Pre-Opening Training and Consultation: (a) New Investor Orientation and Certification Program (b) General Manager (GM) Program (c) Pre-Opening Training Plan-Executive Briefing (Consulting & Support) (d) On-Site Pre-Opening Training-Manager Orientation and Department Training Planning (e) On-Site Pre-Opening Training Part II- Hotel Orientation On-Site Center of Excellence Opening Support Team (f) Leading the Brand Training (a) $8,000 plus expenses and covers two attendees for the HOST and ramp-up program. Up to $250 for additional attendees plus $250 for the Ramp-up program.(b) $2,195 for initial onboarding certification.(c) $500 per day.(d) $1,500 a day per trainer.(e) $640-1500 per day per trainer/task force member.(f) $1,200 per hotel Ongoing Management Training Fees Pricing for workshops range from $375-$5,000 per workshop per participant depending on length, subject, content and delivery. Employee Engagement Survey $7 to $12 per employee each year. Owner or GM Conference – Lifestyle Brands $1,500 – $2,500 per attendee, not inclusive of travel. The above information has been taken from the FDD of InterContinental Hotels & Resorts. Year of FDD: 2018Franchise Direct’s Disclaimer

Other Fees
Type of Fee Amount
Royalty 5% of Gross Rooms Revenue.
Capital Revenue Up to 5% of Gross Revenue.
Standard Fee for Room Additions $500 for each new approved guest room or suite.

Fees for Extensions of Commencement Deadlines:

a. New Development (6 month extensions)

b. New Development (extensions of less than 6 months)

c. Room Additions (6 month extension)

a. 1/2 of then-current standard minimum Application Fee.

b. Then current Application Fee prorated according to time period requested.

c. 1/2 of original room addition Application Fee.

Public Offering or Private Placement Processing Fee $25,000 plus additional costs incurred by HHFL.
Audit/Interest Amount of discrepancy, interest and $3,000 (audit fee may be increased on Systemwide basis).
Re-Licensing Fee $500 per guest room but not less than $75,000
Changes of Ownership Fee $500 per guest room but not less than $75,000
Realignment/Name Change; Brand Conversion Processing Fee $5,000 for franchisee name change, ownership realignment or brand conversion.
PIP Inspection/Preparation Fee $8,000 for a PIP (and $5,000 for a re-inspection).
Plan and/or FF&E Default $2,500 to cover costs of SCH travel and expenses related to plan and/or FF&E defaults.
PIP Default Travel $2,500 to cover costs of SCH travel and expenses related to PIP defaults.
Quality Visits for Guest Satisfaction or Quality Evaluation Failure, Default or Termination Status/ Failed PIP Inspection $2,000 to $7,500 per visit
Monthly Quality Self-Assessment (MQSA), Management Action Plan (MAP), or Hotels that fall below the At Risk guest satisfaction threshold $2,500 to $7,500 for failure to complete the mandatory MQSA or MAP as required. Hotels that fall into the guest satisfaction category below the At Risk brand threshold must pay up to $7,500 for each required visit and assigned training classes.
Indemnification All expenses, including attorneys’ fees and court costs, incurred by HHFL, its parents, subsidiaries, affiliates, and their successors and assigns to remedy any defaults of, or enforce any rights under the License; to effect termination of the License; or collect any amounts due under the License.
Liquidated Damages Payment on premature termination before HHFL authorizes you to use the system at the Hotel (includes termination resulting from failure to perform the construction, upgrading and renovation work described in the License A lump sum equal to the monthly average of all amounts that would have been payable to HHFL under paragraphs 3.B(1), (3) and (4) of the License assuming the Hotel had collected Gross Rooms Revenue based on the average daily revenue per available room for all hotels in the System for the previous 12 months, as determined by HHFL, multiplied by the greater of (a) 6 or (b) the number of full and partial months from the Term Commencement Date to the termination date of the License.
Liquidated Damages Payment on premature termination after HHFL authorizes you to use the System at the Hotel (applicable only if License terminates before expiration, in accordance with License Agreement An amount equal to the total amounts required under License paragraphs 3.B(1), (3) and (4) during the 60 calendar months of operation preceding the termination or during the preceding number of months equal to the unexpired License Term at the time of termination (if less than 60 months); or if the Hotel has not been in operation in the system for 60 months, an amount equal to the greater of (i) 60 times the monthly average of these amounts for the period during which the Hotel has been in operation in the System, or (ii) 60 times these amounts as are due for the one month preceding the termination.
Royalty in case of Casualty 2% of GRR based on average GRR for preceding 12 months.
Promotions; required and optional advertising materials Expenses incurred.
Services Contribution 3% of GRR in aggregate.
Initial Marketing Contribution for the Frequency Program $10.00 per approved guest room.
Special Marketing Contribution for Frequency Program $4.75 per enrolling stay with a flat 1000 points issued. 4.75% of Qualifying Full Folio revenue from Frequency Program members. 1.425% of Qualifying Room and Meeting Revenue from Frequency Program members.
IHG Commission Services (“ICS”) (Travel Agent Commissions)] 10% (minimum) commission on total room rate.
Third Party Distribution Connection Fees Varies.
IHG Voice Reservation Service $7.65 per net booking, which may be changed once annually. All hotels must sign up for the service. A commission of 10% may be applied to hotels who transfer hotel-direct calls to pubic IHG CRO toll-free numbers.
Revenue Management for Hire Program $425 – $3,350 per month depending on total Hotel room count and annual occupancy. (These fees apply until December 31, 2017, after which they may change.) Plus, out of pocket travel expenses for SCH personnel. (These fees are modifiable with 90 days written notice.)
Completion of the appropriate level of IHG Revenue Management certification (if hotel is not participating in the Revenue Management for Hire Program) $1,195-$1,500
Performance Marketing Fees 10% – 15% commission on consumed revenue booked.
GDS Biasing Programs 5% of incremental revenues through the programs.
BTA Revenue Program 2.25% override fee (in addition to standard travel agency commission) per consumed room nights, to a maximum $20,000 per year.
Mid-Market Account Program Booking Fees 4% of consumed transient revenue booked through the Mid-Market Account Program
Activation Training for PERFORM Prior to activating PERFORM, Hotel must attend PERFORM The Fundamentals Training. Cost for Training ranges from $375 to $400.
Activation Training for PERFORM with Price Optimization

Prior to activating PERFORM with Price Optimization, Hotel must attend either a virtual or classroom training session. Cost for training ranges from $375 to $400. This charge is waived if the hotel currently subscribe to IHG’s Revenue Management for Hire service.

Additionally, for Hotels that do not participate in Revenue Management for Hire, additional costs of between $30 and $60 may apply for competitive rate insight shopping. For hotels currently subscribing to MarketVision or Rate360, these costs may be waived.

IHG Rewards Club Measured Standards $500 per standard failed. Fee escalates by an incremental $1,000 each consecutive quarter Hotel in “Failure” status.
PMS Software Maintenance Maintenance and/or hosting fees may be increased up to 5% per year. Costs will vary according to the franchisee’s technology needs.
Opera– Premise Based $17.60 per room, per year for Opera V5 Software Support; $2.86 per room, per year for Oracle Technology
Foundation Support; $9.24 per interface, per year, within bundle for IFC8 Interfaces Annual Support; $440.00 per interface, per year, out of bundle for IFC8 Interfaces Annual Support; $0.09 per interface, per year for OXI 2-Way – HOLIDEX® Support; $0.00 per room, per year for Opera Commission Handling Support; $0.03 each, for Opera Back Office Interface Support; $0.02 each, for Opera Export Files Support $1.65 per room, per year for Opera Web Services Support (OWS); $110.00 per interface, per year for eSocketPOS Interface Support (SPS)
Opera Xpress – Hosted $2.87 per room, per month for Opera V5 Software Services & Support; $0.36 per room, per month for IFC8 Interface Services & Support; $0.50 per room, per month for Opera Commission Handling Services & Support; $0.50 per room, per month for Opera Back Office Interface Services & Support; $0.50 per room, per month for Opera Export Files Services & Support; $0.60 per room, per month for OXI 2-Way – HOLIDEX® Services & Support; $0.50 per room, per month for Credit Card Interface Services & Support
FastConnect Plus And Access Control Manager $167.32
Secure Payment Solution Maintenance Support $156.25
Guest Internet Access – Bandwidth Service Subscription $1,000 to $2,800. Pricing is estimated and varies based on regional service providers.
Guest Internet Access – Hardware Maintenance & Guest Support $1.50 per guest room
$25.00 per meeting/conference room, plus $20.00 per 2000 sq. ft. of total meeting space, maximum of $500.00 (meeting room support fees only apply if total meeting space exceeds 2000 sq. ft.)
PMS Hardware Maintenance (Costs vary according to technology needs. These are estimates) $150.00 (1-150 rooms)
$175.00 (151-250 rooms)
$200.00 (251 + rooms)
Costs are noted above on a per month basis.
Gift Card Equipment Estimated terminal cost of $295-$400 (one time charge) if a terminal is required.
Technology Fee $14.80 per room, per month.
Tax on Sales/Gross Receipts HHFL’s actual cost.
Guest Relations Fees Quality and Service contacts from Hotels will be handled by Guest Relations in the ‘One Contact Resolution’ process. Hotels will be charged a case management fee of $150, plus the compensation amount of no greater than one night room and tax. Non Service and Quality cases (such as billing or reservations issues) that are not resolved within 48 hours by the Hotel will be handled by Guest Relations with a case management fee of $150.

Pre-Opening Training and Consultation:

(a) New Investor Orientation and Certification Program

(b) General Manager (GM) Program

(c) Pre-Opening Training Plan-Executive Briefing (Consulting & Support)

(d) On-Site Pre-Opening Training-Manager Orientation and Department Training Planning

(e) On-Site Pre-Opening Training Part II- Hotel Orientation On-Site Center of Excellence Opening Support Team

(f) Leading the Brand Training

(a) $8,000 plus expenses and covers two attendees for the HOST and ramp-up program. Up to $250 for additional attendees plus $250 for the Ramp-up program.

(b) $2,195 for initial onboarding certification.

(c) $500 per day.

(d) $1,500 a day per trainer.

(e) $640-1500 per day per trainer/task force member.

(f) $1,200 per hotel

Ongoing Management Training Fees Pricing for workshops range from $375-$5,000 per workshop per participant depending on length, subject, content and delivery.
Employee Engagement Survey $7 to $12 per employee each year.
Owner or GM Conference – Lifestyle Brands $1,500 – $2,500 per attendee, not inclusive of travel.