Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Hyatt Regency Franchise Costs (2016 FDD)

by Franchise Chatter on September 10, 2016

in Franchise Costs, Hotel Franchise

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Detailed Estimates of Hyatt Regency Franchise Costs Based on Item 7 (Estimated Initial Investment) of Hyatt Regency’s 2016 Franchise Disclosure Document

1.  Application Fee:  $100,000 to $150,000

  • The Application Fee listed above is for a Hyatt Regency Hotel with 250 to 500 guest rooms.

2.  Market Study:  $15,000 to $25,000

3.  Architecture and Design:  $1.2 million to $4.4 million

4.  Pre-opening Marketing and Sales Expenses:  $100,000 to $550,000

  • This item includes costs for marketing and sales programs that you undertake before the Hotel opens, including payments of the applicable Centralized Services Charges during the Pre-Opening Period and the costs to establish and operate a sales office during the Pre-Opening Period.

5.  Construction, Improvements, Remodeling, Decorating Costs, and Other Sitework:  $24 million to $115 million

6.  Signage:  $50,000 to $220,000

7.  Furniture, Fixtures, Other Fixed Assets, Equipment, and Inventory:  $6 million to $19.1 million

  • Costs for fixtures; equipment; furnishings; furniture; telephone systems; communications systems; facsimile machines; copiers; signs; the Technology System and other property management, revenue management, in-room entertainment, and other computer and technology systems; and other similar items the franchisor periodically specifies for the Hotel (collectively, “FF&E”) depend mostly on the Hotel’s size and configuration.

8.  Telephone and Telecom Equipment:  $500,000 to $1.1 million

9.  Security and Technology System Equipment and Fees:  $350,000 to $1.72 million

  • The franchisor or its affiliate will inspect the Hotel and/or its plans and specifications to develop a specific proposal relating to the telephone and telecom equipment and the Technology System equipment for your Hotel.
  • The franchisor includes in the estimate for the Technology System the projected costs of acquisition/installation and the annual support and service contracts for the first year that the Hyatt Group provides as part of Mandatory Services.

10.  General and Administrative:  $400,000 to $660,000

  • This item includes costs for permit fees, security deposits, utility deposits and startup requirements, impact fees (one-time charges that the government levies to offset service costs relating to the new development), tap fees (charges for connecting to existing water or sewer lines), and various business licenses.
  • Landlords sometimes pay some of the tap or impact fees, and the amount depends on municipal requirements and the final Hotel configuration.
  • This item also includes costs for insurance, legal, and accounting expenses.

11.  Liquor License:  $7,500 to $440,000

  • Liquor license costs vary widely depending on the jurisdiction. In most jurisdictions, the cost will be on the low end of the range, but could be on the high end (or even exceed the high end) in those jurisdictions that consider a liquor license to be an asset. You may be able to re-sell your liquor license in those jurisdictions.
  • The liquor license must include beer, wine, and full spirits.

12.  Training Expenses:  $10,000 to $25,000

13.  Miscellaneous Opening Costs:  $150,000 to $550,000

  • This item includes costs for office and other supplies, wages for Hotel management and employees, the franchisor’s training team’s expenses, the comfort letter fee, the Extension Fee (if applicable), and other miscellaneous pre-paid opening expenses.

14.  Additional Funds – 3 Months:  $500,000 to $1.65 million

  • This item estimates your initial start-up expenses (other than the items identified separately in the table). These expenses include payroll costs for the Hotel’s personnel but not any management fees or similar draw.

15.  Total Estimated Initial Investment:  $33,382,500 to $145,590,000

  • The estimated amounts presented in the table above are for a Hyatt Regency Hotel with 250 to 500 guest rooms. The franchisor relied on its affiliates’ experience in developing and operating hotels since 1957 to compile the estimate for additional funds and other figures.
  • Hyatt Regency Hotels typically are in primary markets at suburban, airport, highway, and city center sites. They will typically have from 250 to 500 guest rooms and occupy property of 2 to 10 acres, but the amount of land the Hotel requires will vary greatly depending upon local building codes, setback requirements, parking requirements, and similar factors.
  • Leasing or purchase costs vary widely and depend on geographic location, size, visibility, local rental rates, other businesses in the area, other local economic conditions, the site’s market potential, the type of ownership or leasehold interest, and other factors.
  • Because of these factors, this table does not estimate the costs for the Hotel’s rent or security deposit or the purchase price for the building or land on which the Hotel is located (if you decide to buy, rather than lease, the land and/or premises).

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