For a modeled 75-room U.S. Quality Inn conversion hotel run with a paid general manager, this is the independent scenario range for annual pre-tax operating earnings. An owner who personally performs the certified general-manager role may have an estimated owner-operator benefit of about $196,000–$347,000, but the added amount compensates the owner for labor and is not passive business profit.
This estimate is an independent analytical scenario, not a financial performance representation by Choice Hotels International, Inc. It combines identified facts from the 2026 Quality Franchise Disclosure Document with a separately identified hotel-industry margin proxy and explicit scenario assumptions. Actual results can differ materially by location, room count, hotel condition, occupancy, average daily rate, labor, insurance, property taxes, utilities, distribution mix, financing, owner involvement, capital spending, and execution.
- Legal franchisor
- Choice Hotels International, Inc.; see the official Choice Hotels Development website.
- Disclosure reviewed
- 2026 Quality Franchise Disclosure Document, issued April 1, 2026 and amended May 20, 2026.
- Item 19 status
- Official 2025 occupancy, Average Daily Rate, RevPAR, and reservation-contribution data; no hotel profit, net income, EBITDA, owner compensation, or cash-flow result.
- Applicable population
- 1,498 qualifying franchised U.S. Quality hotels from 1,566 open and operating hotels. The FDD reports zero company-owned Quality outlets.
- Model benchmark
- January 2026 Hotel/Gaming pre-tax lease-adjusted operating margin from New York University, plus a ±3 percentage-point sensitivity band.
- Date checked
- July 14, 2026. No matching public FDD copy was verified on an official franchise-controlled domain, so FDD references below are plain-text Item and page citations.
Before interest, debt principal, personal income taxes, and capital expenditures.
Includes $66,880 of manager labor value; it is not pure residual profit.
2025 Performance Sample; gross room revenue per available room.
95.7% of the 1,566 U.S. hotels open and operating at year-end 2025.
5.25% royalty plus 3.5% Marketing and Reservation Fee on Gross Room Revenues.
Broad public-company Hotel/Gaming measure, not a Quality Inn unit margin.
What does Quality Inn’s Item 19 actually measure?
It measures room-revenue performance and operating demand indicators, not owner earnings. For the year ended December 31, 2025, the 2026 FDD reports occupancy, Average Daily Rate, Revenue Per Available Room, and Choice reservation-channel contribution for a Performance Sample of franchised U.S. Quality hotels.
RevPAR is gross room revenue divided by available rooms. It is useful for converting a disclosed hotel-performance metric into an annual room-revenue anchor, but it does not deduct payroll, supplies, utilities, insurance, property taxes, maintenance, franchise fees, commissions, financing, depreciation, or capital expenditures. The FTC Franchise Rule Compliance Guide explains the regulatory framework for financial performance representations; the franchisor’s own limitations still control the interpretation of this Item 19.
| 2025 Item 19 metric | Average | Median | Hotels meeting or exceeding average |
|---|---|---|---|
| Average Occupancy Rate | 50.7% | 51.5% | 778 / 51.9% |
| Average Daily Rate | $87.96 | $85.24 | 653 / 43.6% |
| Revenue Per Available Room | $44.57 | $43.83 | 726 / 48.5% |
| Total Choice Enterprise Contribution | 74.2% | 74.9% | 791 / 52.8% |
| Choice Privileges Contribution | 44.9% | 44.7% | 733 / 48.9% |
Source: 2026 Quality Franchise Disclosure Document, Item 19, Tables 1 and 2, pp. 76–79. Item 19 states that these figures do not reflect costs of sales, operating expenses, or other deductions needed to determine net income or profit.
The 719-hotel subgroup with a Likelihood to Recommend score above the brand average had median RevPAR of $49.27, versus $43.83 for the full Performance Sample—a 12.4% difference. This does not prove that guest-satisfaction improvement alone caused the revenue difference, and the FDD still provides no corresponding expense or profit result.
Which hotels were included or excluded?
The official sample is broad but not identical to every open Quality hotel. It includes hotels open and operating at December 31, 2025 that had been operating on or before January 1, 2025. It excludes hotels repositioned from another Choice brand during 2025, hotels missing at least 30 days of performance data, and hotels interrupted for more than 30 consecutive days because of renovation, natural disaster, or a similar event.
The 1,498-hotel sample represents 95.7% of the 1,566 open and operating U.S. Quality hotels. That high coverage supports the revenue anchor, but it does not solve the missing-expense problem. Item 20 also reports that every Quality outlet was franchised: there were no company-owned hotels from which a same-brand operating margin could be observed.
How does $43.83 of RevPAR become an annual earnings range?
The model annualizes Item 19 median RevPAR for a 75-room conversion hotel and applies a clearly separated margin proxy. The 75-room count is the conversion-hotel assumption used on the 2026 FDD cover and in Item 7; it is not the disclosed average size of the Performance Sample.
At the official median RevPAR of $43.83, the resulting base room-revenue anchor is $1,199,846. Because Item 19 supplies no quartiles for RevPAR, the conservative and upside revenue anchors use 80% and 120% of the median as explicit analytical assumptions. They are not FDD-reported probabilities or forecasts.
For the expense side, the central proxy is the January 2026 New York University Hotel/Gaming pre-tax lease-adjusted operating margin of 16.44%, based on 63 publicly traded firms. The conservative and upside margins are 3 percentage points below and above that benchmark. This proxy is materially imperfect: its companies may include gaming businesses, franchisors, large portfolios, and operating structures unlike one 75-room Quality Inn.
| Scenario | Modeled RevPAR | Annual room revenue | Operating-margin assumption | Manager-run earnings |
|---|---|---|---|---|
| Conservative | $35.06 | $959,877 | 13.44% | $129,000 |
| Base | $43.83 | $1,199,846 | 16.44% | $197,000 |
| Upside | $52.60 | $1,439,816 | 19.44% | $280,000 |
Manager-run 75-room conversion hotel; values rounded to the nearest $1,000.
Interpretation: Revenue and margin move together in this sensitivity model, so the chart shows a range of possible operating outcomes—not a probability distribution or promised result.
Source and method: 2026 Quality FDD, Item 19, pp. 76–79; 75-room conversion assumption from the FDD cover and Item 7; January 2026 NYU Hotel/Gaming margin dataset. Formula: modeled room revenue × scenario margin.
What is included and excluded from “manager-run earnings”?
The result is an operating-income proxy, not after-tax take-home pay. The model assumes normal unit-level operating expenses and paid management labor are reflected in the all-in margin proxy. It does not subtract FDD fees again, because doing so would risk double-counting expenses embedded in the benchmark.
- Included by assumption: ordinary hotel operating expenses, normal manager compensation, and recurring franchise-related costs within the broad margin proxy.
- Interest: excluded from operating earnings and must be evaluated separately for the buyer’s actual loan or lease structure.
- Depreciation and lease normalization: follow the NYU pre-tax lease-adjusted accounting definition, which is not identical to cash flow.
- Capital expenditures and replacement reserve: excluded; an older conversion property may require substantial recurring renovation and furniture, fixtures, and equipment spending.
- Debt principal and personal income taxes: excluded. The article does not estimate after-tax owner take-home pay.
How does active owner involvement change the result?
An active owner may capture both residual operating earnings and the value of work that otherwise would be performed by a paid lodging manager. Item 15 does not require the owner to participate directly, but every hotel must have a certified General Manager. The General Manager does not need an ownership interest.
The owner-operator scenario adds $66,880—the May 2024 median annual wage for lodging managers in traveler accommodation reported by the U.S. Bureau of Labor Statistics—to the manager-run operating result. It is a labor-value benchmark, not a Quality Inn salary disclosure. It also excludes employer payroll taxes, benefits, relief coverage, and any incremental compensation required in a particular market.
Each row adds the same $66,880 manager labor value to the manager-run result.
Interpretation: The $66,880 gap is compensation for work performed. An owner who hires a General Manager should focus on the square markers; an owner who personally fills the certified role may consider the circles, subject to workload and local wage reality.
Source and method: Manager-run scenarios above; 2026 Quality FDD, Item 15, p. 71; BLS May 2024 traveler-accommodation lodging-manager median wage. Formula: manager-run earnings + $66,880.
Manager-run ownership
The scenario range is $129,000–$280,000 in pre-tax operating earnings. It assumes a normal paid-manager cost is already embedded in the operating-margin proxy. Residual earnings still require owner oversight, capital decisions, lender compliance, and franchise governance; “manager-run” does not mean risk-free or passive.
Owner-operated management
The scenario range is $196,000–$347,000 in estimated owner-operator benefit. Approximately $66,880 of each figure represents the benchmark value of the owner’s management labor. The residual business profit remains the same as in the manager-run model unless active operation also changes revenue or expenses.
Which FDD fees can materially change Quality Inn owner earnings?
The most visible fixed percentage burden is 8.75% of Gross Room Revenues before loyalty, distribution, and technology charges. Item 6 requires a 5.25% Royalty Fee and a 3.5% Marketing and Reservation Fee. Gross Room Revenues are broader than ordinary occupied-room revenue because the definition also includes certain meeting-room, banquet-room, no-show, cancellation, attrition, day-use, and business-interruption proceeds.
| Recurring Item 6 obligation | FDD amount | Illustration for the base 75-room model | Interpretation |
|---|---|---|---|
| Royalty Fee | 5.25% of GRR | $62,992 | Calculated on $1,199,846 of modeled room revenue. |
| Marketing and Reservation Fee | 3.5% of GRR | $41,995 | Royalty plus this fee equals approximately $104,987. |
| Rewards Program Fee | 4.5%–5.5% of rewards-member room revenue | $24,135–$29,498 | Derived using the Item 19 median Choice Privileges Contribution of 44.7%. |
| Property Technology & Service Fee | $9.65 per room monthly; $625 minimum and $925 maximum | $8,685 | 75 rooms produce $723.75 per month, within the stated limits. |
| CrowdStrike | $60 monthly | $720 | Required cybersecurity software and services. |
| ChoiceMAX | $235–$360 monthly | $2,820–$4,320 | Mandatory revenue-management platform for Quality hotels. |
Source: 2026 Quality Franchise Disclosure Document, Item 6, pp. 27–41. Illustrations are rounded only after full-precision calculations.
At the base revenue anchor, the listed royalty, marketing, estimated rewards fee, Property Technology & Service Fee, CrowdStrike charge, and ChoiceMAX fee total about $141,000–$148,000, or roughly 11.8%–12.4% of modeled room revenue. That subtotal still excludes travel-agent commissions, third-party distribution fees, Choice Accelerate charges, optional ChoiceROCS service, and property-level operating costs. It is shown to explain fee sensitivity—not subtracted again from the all-in margin model.
Why is the evidence confidence limited?
The revenue evidence is strong, but the profit conversion is not same-brand evidence. Item 19 covers 95.7% of open and operating U.S. Quality hotels in its Performance Sample, yet it discloses no cost structure. The central margin comes from a broad public-company Hotel/Gaming dataset, not from Quality Inn franchisee income statements.
- Wide unit dispersion: Item 19 reports RevPAR from $8.32 to $133.99. Those endpoints show variation, but they are not quartiles and should not be treated as likely outcomes.
- Unknown room-count distribution: the 75-room model is a disclosed conversion assumption, not the Performance Sample’s average or median room count.
- No same-brand profit proxy: Item 20 reports zero company-owned Quality hotels, so company-operated unit economics cannot validate the margin.
- Property-specific fixed costs: real estate taxes, insurance, utilities, maintenance, breakfast, housekeeping productivity, wages, and renovation needs can vary sharply by market and building condition.
- Channel mix: rewards, online travel agency, travel-agent, paid-media, and other reservation costs depend on where bookings originate.
- Capital and financing: debt service, lease economics, furniture-fixtures-and-equipment replacement, and property improvement plans can materially reduce owner cash available.
Does the 2025 outlet decline prove weak earnings?
No. Item 20 shows franchised Quality outlets declined from 1,621 at the start of 2025 to 1,566 at year-end, a net change of 55 hotels, and records 74 transfers during 2025. Those are system-structure facts, not income statements. The figures do not establish whether a particular closure, termination, non-renewal, conversion, or transfer resulted from poor economics, owner strategy, property condition, or another cause.
What should a buyer verify before relying on this range?
A buyer should replace every broad assumption with property-level evidence before underwriting the acquisition or conversion. The most useful next step is not a more precise internet estimate; it is reconciled operating history for comparable Quality hotels and the specific property.
- Request Item 19 written substantiation and confirm exactly how occupancy, ADR, RevPAR, Enterprise Contribution, and Choice Privileges Contribution were calculated.
- Ask current and former franchisees for trailing 12-month room revenue, payroll, housekeeping cost per occupied room, utilities, insurance, property taxes, repairs, franchise invoices, channel commissions, and capital reserves.
- Separate mature, uninterrupted conversion hotels from recently repositioned, renovated, seasonal, or distressed properties.
- Verify whether the owner will be the certified General Manager, what relief coverage is required, and the actual local market compensation for a qualified manager.
- Model debt interest and principal separately using the buyer’s actual financed amount, rate, amortization, covenants, and required renovation funding.
- Review the property improvement plan, inspection reports, deferred maintenance, and expected furniture, fixtures, equipment, roof, mechanical, and life-safety spending.
The strongest defensible annual range for the modeled 75-room Quality Inn is $129,000–$280,000 of manager-run pre-tax operating earnings. It is a scenario estimate anchored to the 2025 Item 19 median RevPAR, not an official owner-income disclosure. If the owner personally replaces a paid certified General Manager, the estimated owner-operator benefit becomes $196,000–$347,000, with $66,880 representing labor value. RevPAR and the property-level operating margin are the main earnings drivers; the largest unresolved uncertainty is the absence of same-brand expense and profit data. A buyer should verify Item 19 substantiation, actual franchise invoices, comparable franchisee income statements, local manager cost, capital needs, and debt service before relying on the range.