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Red Lion Hotel Franchise ProfileLodging & Leisure > Lodging |
What Are the Initial Investment Requirements for a Red Lion Hotel Franchise?
To open a Red Lion Hotel franchise, the initial investment can range significantly from $636,250 to $38,745,000. This includes a franchise fee of $75,000. Prospective franchisees should also be prepared for ongoing costs, including a royalty fee of 5% and a marketing fee of 3%. Additionally, having cash reserves between $1,500,000 and $2,300,000 is essential, along with a net worth requirement ranging from $1,000,000 to $5,000,000.
What Is the Financial Performance of a Red Lion Hotel Franchise?
On average, each Red Lion Hotel franchise generates annual revenues of approximately $856,000, with a median revenue of $48,559. However, revenues can vary widely, with the lowest reported at $28,640 and the highest reaching $12,990,000. Franchisees can expect to break even within about 24 months and achieve a payback on their investment in approximately 36 months, making it a potentially lucrative opportunity for the right investor.
What Are the Ongoing Costs Associated with a Red Lion Hotel Franchise?
Owning a Red Lion Hotel franchise comes with various ongoing expenses that franchisees should anticipate. These include insurance costs ranging from $3,250 to $35,500 annually, marketing and advertising expenses between $50,000 and $100,000, and miscellaneous costs that can add up to $40,000 to $75,000. Additionally, training expenses may vary from $8,000 to $20,000, and operational expenses such as management salaries and utilities are also variable, highlighting the need for careful financial planning.
How Has the Red Lion Hotel Franchise Grown Over Recent Years?
The Red Lion Hotel franchise has shown steady growth in the number of franchised units over the past few years. In 2015, there were 33 franchised units, which increased to 44 in 2016 and further to 51 in 2017. The total number of units, including corporate-owned locations, has also risen, indicating a positive trend in brand expansion and market presence. This growth may present new opportunities for potential franchisees looking to join a developing brand.
Red Lion Hotel Franchise Financial Requirements
Below, you’ll find an overview of the initial investment needed to launch the business, along with the ongoing fees required by the franchisor to maintain operations over time.
The minimum total assets (minus liabilities) you must possess.
Net Worth Required:
The estimated period to recoup your total investment.
Investment Payback:
The initial fee paid to join the franchise system.
Franchise Fee:
Ongoing percentage of revenue paid to the franchisor.
Royalty Fee:
Regular contribution toward the franchise’s advertising fund.
Marketing Fee:
The estimated timeframe to recover your initial costs.
Breakeven Time:
The total amount required to launch the franchise.
Initial Investment:
The minimum liquid capital you must have on hand.
Cash Required:
The typical yearly revenue generated per franchise location.
Average Revenue:
The middle value of yearly revenue among franchise locations.
Median Revenue:
The largest reported annual revenue among franchisees.
Highest Revenue:
The smallest reported annual revenue among franchisees.
Lowest Revenue:
A broad sector defining similar types of franchise businesses.
Industry:
A more specific division within the broader industry.
Category:
The key individuals guiding the franchise’s strategy and growth.
Leadership:
The official business address of the franchisor’s headquarters.
Corporate Address:
Available financing options to help start the franchise.
Funding Year:
The main organization that owns the franchise brand.
Parent Company:
Red Lion Hotel Franchise Unit Growth Summary
A breakdown of corporate, franchised, and total units, with yearly net changes.
Total Units
Franchised Units
Corporate Units
| Units | 2015 | 2016 | 2017 |
|---|---|---|---|
| Total Units | 52 | 57 | 65 |
| Net Change YoY | 5 | 8 | |
| Franchised Units | 33 | 44 | 51 |
| Net Change YoY | 11 | 7 | |
| Corporate Units | 19 | 14 | 14 |
| Net Change YoY | -5 | 0 |
Initial Investment
The Red Lion Hotel franchise requires a significant financial commitment, with initial investments ranging from $636,250 to $38,745,000. This broad spectrum accommodates various property sizes and locations, making it accessible for different levels of investors looking to enter the hospitality sector.
Franchise Fees
To establish a Red Lion Hotel franchise, an initial franchise fee of $75,000 is required. Additionally, franchisees must pay ongoing royalty fees of 5% of gross sales and a marketing fee of 3%, ensuring that franchisees benefit from the brand’s marketing efforts and support.
Financial Requirements
Prospective franchisees need to have a cash reserve of $1,500,000 to $2,300,000 and a net worth between $1,000,000 and $5,000,000. These financial criteria help ensure that franchisees are adequately prepared to manage operational costs and sustain the business during its early stages.
Revenue Potential
The average annual revenue per unit for Red Lion Hotels is approximately $856,000, with a median annual revenue of $48,559. This revenue potential highlights the brand's capability to generate substantial income, although individual performance can vary significantly based on location and management.
Breakeven and Payback Period
Franchisees can expect to reach their breakeven point within approximately 24 months, with an investment payback period of around 36 months. This timeline offers a realistic outlook for new franchise owners, emphasizing the importance of effective operations and marketing strategies to achieve profitability.
Franchise Growth
Red Lion Hotels has shown steady growth in its franchised units, increasing from 33 units in 2015 to 51 units in 2017. This expansion reflects the brand's appeal and the increasing demand for quality lodging options, providing franchisees with opportunities in a growing market.
Frequently Asked Questions
The initial investment for a Red Lion Hotel franchise ranges from $636,250 to $38,745,000, depending on various factors such as location and property size.