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I am considering becoming a franchisee and rebranding the property. Is this a good idea ?

22 February 2007
I am considering becoming a franchisee and rebranding the property. Is this a good idea ?

Ian Graham, Hotel Solutions Partnership

Rebranding will not, of itself, address a profit decline profit is the result of managing revenues and costs, and branding is unlikely to have a major impact on costs, except the obvious one of increasing them.

Ask yourself if revenues are falling and if the rate of decline can be slowed or reversed by rebranding, or if rebranding can allow you to sell into markets currently not available to you. You can test this by looking at the trend in your RGI (revenue generation index) against your competitive set. You should engage with the Bench or Deloitte to obtain this data, and then use the best consulting revenue manager to interpret the trend. This first phase will tell you objectively whether there is something wrong, and will suggest the value gap that rebranding can help you close.

Franchisors will demand compliance to brand standards, and this will bring a requirement for capital expenditure and will probably increase operating costs, too. So you need to be sure that the marginal income that a franchise will bring provides a good return on investment.

Do not choose a brand on price. You will choose the best brand by making sure you know where you are weak, where your competitors are weak, and looking at the actual delivery by the different brands in these areas. Some brands will be stronger on business demand than leisure. Shop around, or use a consultancy. Understand the cost-benefit equation.

And don't underestimate the change that branding will bring to the culture of your business. Talk the options through with your management and staff and ensure they are on board for the many changes that are implied.

For more, register on our website and read "All Change".

www.hotelsolutionspartnership.com

Richard Holden, Head of Franchising, Lloyds TSB Bank

Franchising is definitely an option you could consider, but you should first clarify whether there are any factors affecting your profits that would not be resolved by rebranding the hotel and becoming a franchisee.

Before deciding which hotel brand to go for, you should do some detailed research. There are a number of hotel brands in the UK, but not all will suit you - and you'll need to make sure you understand the benefits and pitfalls of each one. I would recommend starting your research by visiting the hotel chain websites and by asking for information about the franchise opportunities they offer.

A great place for general franchising guidance is the British Franchise Association (BFA). If you can spare the time, the BFA's franchisee seminars are useful events to attend. You could also buy a copy of their franchisee guide. There is more information on their website, www.thebfa.org.

As a part of the selection process, you will be given the opportunity to put questions to the franchisor. It's at this point that you'll you need to be sure this is the right option for you. It is also worth asking to speak to several existing franchisees of the brand to ensure that they are happy with the support they receive and that they achieved their original sales and profit projections.

Before you make any commitment the franchisee agreement should be checked by a BFA-affiliated lawyer. To receive Lloyds TSB's free guide to franchising, call 0117 943 3089 or e-mail franchising@lloydstsb.co.uk.

www.lloydstsb.co.uk

Ashley DeSafrin, Business Link 4 London

Everyone believes London hotels are booming and, indeed, many are. However, out of the centre, some, especially in the independent sector, are struggling. This can be put down to one or more of the following factors:

  • Poor location (perhaps good at one time, but no longer).

  • Lack of investment and little repeat business.

  • Not enough rooms to interest group operators.

  • Out of touch with changes in the marketplace and client expectations.

  • Poorly trained staff.

  • Increased competition from large budget brands

  • Poor marketing and lack of internet exposure.

Before deciding on the franchise route, it helps to take an outsider's view of your hotel. Either talk to the grading inspectors or to a company like Business Link for London, who will give you a free and frank assessment of your hotel. Is there more you could be doing yourself to improve or market your hotel without the headaches of rebranding?

  • If you do decide on the franchising route, you need to consider a number of points:

  • Is your hotel quality adequate for an international brand?

  • If not, what investment might you have to put in to meet their standards?

  • Do you have enough rooms?

  • How much can you really rely on the franchise to do your marketing or purchasing for you?

  • How many hotels do they already have close to yours (in Harrow there is already a Quality Inn and a Best Western).

  • How much will membership of a big brand cost you? Will it pay?

  • Research is extremely important in this situation, as is talking to others in your sector who might be facing similar challenges.

www.businesslink4london.com

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