Franchise Fee Calculator

Franchise fee stacks vary widely by brand and meaningfully shape NOI.

Rooms revenue

Royalty %

Marketing %

Loyalty %

Reservation %

Total franchise fee

$2,610,000

Effective % of rooms revenue

0.14%

Royalty amount

$990,000

How the math works

Sum each percentage × rooms revenue. Effective % = total ÷ rooms revenue.

$18M × (5.5% + 3% + 4.5% + 1.5%) = 14.5% total = $2.61M annual franchise fee stack.

How to Use

Enter rooms revenue.
Enter royalty %.
Enter marketing %.
Enter loyalty %.
Enter reservation %.
Read total franchise fee.

Frequently Asked Questions

What does the franchise fee stack include?

Royalty (5-7% of rooms revenue) pays for the brand name. Marketing (2-4%) funds national advertising. Loyalty program (4-5%) charges for reward points (Marriott Bonvoy, Hilton Honors). Reservation fee (1-2%) covers the central reservation system. Technology fees (0.5-1%) cover PMS, connectivity. Total typically 12-16% of rooms revenue. Much higher on extended-stay and economy flags due to marketing/loyalty weight, lower on soft brands and independents.

What do you get for the franchise fee?

Brand reservations (25-45% of bookings flow through Marriott.com, Hilton.com, Hyatt.com), loyalty member repeat business (40% of stays for major flags), national advertising, revenue management system access, operating playbooks, PIP (property improvement plan) standards, and corporate travel agreements. Independent hotels get none of this and must spend 8-12% of revenue on direct marketing and distribution to compete.

Is franchise or independent better?

Flag franchising wins in suburban and airport markets where travelers filter by brand. Independent wins in lifestyle markets (resort towns, unique urban districts) where character drives demand. Modeling: an urban Courtyard might do $150 ADR with 75% occupancy under Marriott but only $125 ADR at 60% occupancy as an independent — the 12% franchise fee is easily paid back. A boutique in Aspen might do $450 ADR independent vs $325 under a flag — the fee structure reverses economics.

Can franchise fees be negotiated?

Royalty is usually rigid for existing flags. New build-outs and distressed conversions can negotiate reduced royalty for years 1-3, reduced or waived 'initial fees' ($500-1500 per key), and tiered PIP schedules. Portfolio owners with 10+ properties have leverage to negotiate regional or master agreements that shave 50-100 bps. Individual owner-operators rarely get concessions beyond boilerplate.