A manager-run, 65-room Red Roof Inn may produce roughly $70,000 to $165,000 in estimated annual pre-tax business earnings under the model below. An owner who personally replaces the required full-time lodging manager may receive an estimated $149,000 to $243,000 owner-operator benefit, but that higher figure includes compensation for the owner's labor and is not passive business profit.
Data basis. The legal franchisor is Red Roof Franchising, LLC. The Franchise Disclosure Document was issued April 9, 2026. Item 19, pages 59–64, reports 2025 Average Daily Room Rate, Occupancy Rate, Revenue per Available Room, Brand Contribution, and competitive-set indices; it does not report Gross Room Revenues, Operating Profit, EBITDA, Net Income, cash flow, or owner compensation. The primary same-brand population used here is 508 franchised Red Roof Inns open at least one year, with temporary closures under 90 days.
Benchmarks used: 2022 IRS Corporation Income Tax Returns, Publication 16, Table 5.1 for the Accommodation minor industry; May 2025 BLS Occupational Employment and Wage Statistics for lodging managers. Checked July 20, 2026. The official U.S. Red Roof franchising website is linked for current brand and operating-format context.
How much may a Red Roof Inn owner earn per year?
The defensible estimated range is $70,000 to $165,000 per year for manager-run pre-tax business earnings on the modeled 65-room property. This is a scenario result, not an official franchisor earnings figure, and it applies to a mature Red Roof Inn using the 2025 median RevPAR reported for franchised Red Roof Inns.
The central scenario is approximately $112,000. It starts with median RevPAR of $34.89, converts that per-available-room measure into modeled room revenue for 65 rooms, and applies a 13.6% IRS accommodation-industry net-income ratio. The conservative and upside scenarios use an explicit 80%/100%/120% revenue spread and a margin sensitivity of three percentage points below and above the benchmark.
Estimated pre-tax business earnings before financing principal and personal income taxes.
Interpretation: The $112,000 base result is a model midpoint, not a forecast or the most likely outcome. Sources: 2026 Red Roof Inn FDD, Item 19, pages 59–64; IRS Publication 16 corporation statistics, 2022 Table 5.1. Revenue and margin spreads are editorial assumptions.
What does the 2026 FDD actually measure?
The official disclosure measures room-rate and demand performance, not owner earnings. For the January 1 through December 31, 2025 period, Item 19 reports Average Daily Room Rate, Occupancy Rate, RevPAR, Brand Contribution, and a competitive-set RevPAR index for defined franchised and affiliate-owned populations.
For the 508 franchised Red Roof Inn properties, the median RevPAR was $34.89 and the average was $35.79. Only 239 properties, or 47.0%, met or exceeded the average RevPAR. Item 19 separately reports Red Roof PLUS+ results, so the estimate does not merge the 59-property PLUS+ cohort into the core Red Roof Inn anchor.
| Official 2025 metric | Average | Median | What it means |
|---|---|---|---|
| Daily Room Rate | $67.08 | $66.04 | Room revenue divided by occupied rooms. |
| Occupancy Rate | 53.4% | 52.6% | Occupied rooms divided by available rooms. |
| RevPAR | $35.79 | $34.89 | Room revenue generated per available room per day. |
| Brand Contribution | 36.6% | 30.3% | Share of room revenue generated through defined brand, distribution, and loyalty channels. |
Brand Contribution is not a profit margin. It measures the portion of room revenue generated through specified reservation channels. RevPAR is also revenue, not cash available to the owner. Neither metric deducts payroll, housekeeping, utilities, rent or mortgage costs, insurance, repairs, franchise fees, distribution charges, property taxes, replacement reserves, or debt service.
The Item 19 population included inns open and operating for at least one year, with temporary closures of less than 90 days. Across the combined Red Roof Inn and Red Roof PLUS+ franchised population, 567 properties qualified; 29 franchised inns opened during 2025 were excluded. The data were compiled from company records and franchisee information and were not audited. The FDD says written substantiation is available upon reasonable request and cautions that individual results may differ.
How is the owner-earnings range calculated?
The calculation is a derived scenario for a 65-room Red Roof Inn conversion format, not a franchisor-reported P&L. It converts 2025 median RevPAR into annual room revenue and then applies an official, but broad, accommodation-industry net-income benchmark.
Base earnings: $827,765 × 13.5847% IRS benchmark margin = $112,450, rounded to $112,000.
- Revenue anchor: The conservative, base, and upside room-revenue scenarios are $662,212, $827,765, and $993,318. The low and high figures equal 80% and 120% of the base. This spread is analytical and does not represent Item 19 quartiles or probabilities.
- Margin anchor: IRS Publication 16 reports $20.897 billion of net income less deficit on $153.824 billion of total receipts for active corporations in the 2022 Accommodation minor industry, a 13.5847% ratio. The scenario band uses 10.5847%, 13.5847%, and 16.5847%.
- Fee treatment: The IRS ratio is treated as an all-in accounting benchmark, so the 5% royalty and 4% Marketing and Reservation Fee are not subtracted a second time. This avoids obvious double counting, but the IRS data do not isolate franchised hotels or Red Roof's particular channel-fee structure.
- Included conceptually: Normal unit-level expenses and manager payroll are assumed to be reflected in the broad industry ratio. Interest and depreciation are reflected at the aggregate IRS-industry level, but comparability to an individual property can be weak.
- Excluded from the published earnings definition: Personal income taxes, financing principal payments, owner-specific distributions, and a separately modeled capital-expenditure or property-improvement reserve. These items can materially reduce cash available for distribution.
The IRS benchmark covers the broad Accommodation minor industry, different corporation sizes, affiliated and independent businesses, and both profitable and loss-making returns. It is older than the 2025 FDD performance period and includes non-room receipts. It is useful for a disciplined sensitivity model, but it cannot reproduce a Red Roof Inn franchisee income statement.
How does owner involvement change the result?
Owner involvement can add roughly $78,740 of labor value in this model when the owner personally performs the full-time lodging-manager role. This is an estimated owner-operator benefit for the modeled 2025 operating scenarios, not pure business profit or passive income.
Item 15 of the 2026 FDD, page 54, does not require the owner to supervise personally. It does require direct on-premises supervision by a full-time manager who has completed RED Advantage Training and meets brand specifications. A third-party manager requires prior approval. The owner-operator case therefore assumes the owner is approved, qualified, and actually replaces a paid manager rather than merely overseeing one.
The distance between markers is the BLS lodging-manager labor value added to each business-earnings scenario.
Interpretation: The added amount pays for full-time work and should not be treated as passive return on capital. Sources: Red Roof Inn FDD Item 15, page 54; May 2025 BLS occupational wage data. BLS reports a $78,740 mean annual wage for lodging managers and excludes self-employed workers; employer benefits are not included.
A manager-run owner may still spend substantial time on asset management, lender reporting, budgeting, property improvement plans, insurance, taxes, vendor oversight, and franchise compliance. Conversely, an owner-operator may need additional supervisory coverage, benefits, or relief management, so the full BLS wage amount may not translate into distributable cash.
Which obligations can move owner cash flow the most?
Revenue performance, manager payroll, debt and occupancy costs are likely to move annual cash flow more than any single fixed system fee, but the FDD's percentage and channel charges can materially affect the result. This assessment is partly official and partly uncertain because Item 19 does not provide a franchisee expense statement.
- Royalty
- 5% of Gross Room Revenues. The FDD also describes a discretionary performance incentive of up to 0.5% for a qualifying 12-month period.
- Marketing and Reservation Fee
- 4% of Gross Room Revenues, subject to a stated maximum of 5%.
- RediRewards fee
- 4% of Gross Room Revenues from RediRewards Preferred Members, subject to a maximum of 5%.
- Distribution and booking costs
- Distribution listing fees, commissions, rebates, per-booking charges, and digital-performance marketing vary by channel and reservation source.
- Reservation Platform / PMS
- Currently $490 per month plus $3.85 per room per month. For a 65-room property, that equals $8,886 annually before permitted increases.
- Capital and financing
- Debt service, required property improvements, replacements, and major repairs are property-specific. They are not estimated as annual deductions in the published range.
The $70,000–$165,000 range is operating-level pre-tax business earnings, not cash after loan amortization. Financing principal is excluded. The FDD states that Red Roof Franchising, LLC does not offer financing for the initial investment. A buyer should model the actual acquisition or construction loan, interest rate, amortization, required reserves, and lender covenants separately.
Hotel size also matters. At the same $34.89 median RevPAR, an 82-room property would model approximately $1.044 million of annual room revenue and about $142,000 of manager-run earnings at the 13.6% benchmark margin. That is a room-count sensitivity, not a prediction for the FDD's 82-room new-build prototype. The official Red Roof new-build information describes a current prototype that can flex between 79 and 82 rooms.
What should a buyer verify before relying on this range?
A buyer should verify the property's actual trailing performance and expense structure rather than treating the scenario as a valuation input. The following checks apply to the current U.S. Red Roof Inn format and should be completed with Item 19 substantiation, property records, and franchisee interviews.
- Request written Item 19 substantiation. Confirm the 2025 cohort, temporary-closure rule, treatment of the eight affiliate-owned properties sold to franchisees, and exclusion of 29 newly opened franchised inns.
- Obtain property-level records. Review at least three years of monthly room revenue, ADR, occupancy, RevPAR, refunds, complimentary rooms, channel mix, and non-room revenue for any existing hotel under consideration.
- Reconcile every system charge. Separate royalty, Marketing and Reservation Fee, RediRewards, online-travel-agency commissions, booking charges, digital marketing, PMS, revenue management, required training, and insurance-related fees.
- Validate payroll and owner role. Determine whether an approved full-time general manager is already included in the P&L, what benefits and relief coverage cost, and whether the owner can realistically replace that role.
- Model property-specific fixed costs. Use actual rent or mortgage terms, property taxes, insurance, utilities, maintenance, security, required renovations, replacement reserves, and capital expenditures.
- Interview current and former franchisees. Ask owners with similar room counts, format, market type, property age, financing, and operating model about normalized cash flow—not only revenue.
The Federal Trade Commission's guidance on franchise financial performance representations explains that sales or earnings claims must have a reasonable basis and, with narrow exceptions, must appear in Item 19. The official Red Roof operational-support page is useful for understanding support functions, but it does not replace property-level financial verification.
What is the strongest defensible takeaway?
The strongest defensible annual range is $70,000 to $165,000 of estimated manager-run pre-tax business earnings for the modeled 65-room Red Roof Inn, with a central scenario near $112,000. It is scenario-based, not official Item 19 owner earnings. If an approved owner replaces the full-time manager, the estimated owner-operator benefit rises to roughly $149,000–$243,000, but the increment is compensation for labor.
The most important operating driver is the combination of RevPAR and room count; the largest unresolved uncertainty is the absence of a same-brand franchisee expense or profit disclosure. Before using the range in a purchase decision, a buyer should reconcile Item 19 substantiation to the target property's actual P&L, verify all recurring system and distribution fees, test manager-run and owner-operated staffing, and model debt service and capital needs separately.