|
Residence Inn Franchise ProfileHealthcare & Senior Care > Senior Living Facilities |
Initial Investment and Financial Requirements for Residence Inn Franchise
To open a Residence Inn franchise, you will need to prepare for an initial investment that ranges from $3,000,000 to $45,415,710. The initial franchise fee is set at $90,000, with ongoing royalty fees of 6% and a marketing fee of 2.5%. It's essential to have liquid cash available between $200,000 and $500,000, along with a net worth that meets the same criteria. These financial requirements are crucial for ensuring that you can sustain the business and navigate initial operational costs effectively.
Revenue Potential and Breakeven Timeline
The average annual revenue for a Residence Inn unit is approximately $1,216,000, with a median revenue of $113,220. Revenue can vary significantly, with the lowest annual revenue recorded at $36,450 and the highest at $1,386,000. Franchisees can expect to reach breakeven within 24 months, which aligns with the investment payback period. Understanding these financial metrics can help you assess the profitability of the franchise and set realistic financial goals.
Franchised and Corporate Unit Growth
As of 2023, Residence Inn operates a total of 846 units, with 772 being franchised and 74 corporate-owned. The franchise has shown steady growth over the years, with a slight increase in franchised units from 745 in 2021 to 772 in 2023. This growth trend indicates a healthy demand for the brand and a stable business model, making it an attractive option for prospective franchisees looking to enter the hospitality industry.
Operational Insights and Profitability Metrics
The average profit margins for a Residence Inn franchise can be quite promising, with an EBITDA of $30,157, representing 31.9% of revenue. The cost of goods sold (COGS) is approximately $50,771, accounting for 53.7% of revenue, while operating expenses are around $64,260, making up 68.1% of revenue. These metrics provide valuable insights into the operational efficiency of the franchise and highlight areas where franchisees can focus on optimizing costs to enhance profitability.
Residence Inn 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:
Residence Inn Franchise Unit Growth Summary
A breakdown of corporate, franchised, and total units, with yearly net changes.
Total Units
Franchised Units
Corporate Units
| Units | 2021 | 2022 | 2023 |
|---|---|---|---|
| Total Units | 854 | 846 | 846 |
| Net Change YoY | -8 | 0 | |
| Franchised Units | 745 | 769 | 772 |
| Net Change YoY | 24 | 3 | |
| Corporate Units | 109 | 77 | 74 |
| Net Change YoY | -32 | -3 |
Initial Investment
The Residence Inn franchise requires a significant initial investment, ranging from $3,000,000 to $45,415,710. This investment encompasses various costs, including real estate, construction, equipment, and other startup expenses. A franchise fee of $90,000 is also required, along with a cash reserve between $200,000 and $500,000 to ensure adequate financial backing for operations.
Revenue Potential
Franchisees can expect an average annual revenue of approximately $1,216,000 per unit, with a median revenue of $113,220. The revenue range is quite broad, with the lowest annual revenue reported at $36,450 and the highest at $1,386,000. This potential for high revenue makes the Residence Inn an attractive option for investors looking to capitalize on the hospitality market.
Ongoing Fees
Residence Inn franchisees are subject to a royalty fee of 6% of gross sales, alongside a marketing fee of 2.5%. These ongoing fees contribute to the brand's marketing efforts and support services, ensuring that franchisees benefit from a strong national presence and promotional initiatives that drive customer traffic to their locations.
Financial Performance
The average financial performance metrics for Residence Inn units indicate a gross profit margin of 46.3%. Operating expenses average around $64,260, which translates to 68.1% of revenue. This results in an EBITDA of $30,157, representing 31.9% of total revenue. These figures provide insight into the profitability and operational efficiency of franchise units.
Breakeven and Payback
Franchisees can anticipate a breakeven timeframe of approximately 24 months, which is critical for financial planning. The investment payback period is also set at 24 months, making it essential for potential franchisees to prepare for initial cash flow challenges while working towards profitability.
Franchise Growth
The Residence Inn franchise has shown consistent growth in its franchised units, increasing from 745 in 2021 to 772 in 2023. In contrast, corporate-owned units have decreased from 109 to 74 during the same period. This shift indicates a strategic focus on expanding the franchise model, providing opportunities for aspiring entrepreneurs to join a growing brand in the hospitality sector.
Frequently Asked Questions
The initial investment for a Residence Inn franchise ranges from $3,000,000 to $45,415,710. This includes the franchise fee, construction costs, and other startup expenses.