Module 3: Owners, Operators, and Investors—A Behind-the-Scenes Look at Investing in the World of Hospitality

3.1: The Structure of the Operation > Watch: How Do Owners Evaluate a Potential Investment?
3.1: The Structure of the Operation > Watch: Choosing the Level of Branding
3.2: Evaluating Proposed Projects > Watch: Introduction to Project Evaluation
3.2: Evaluating Proposed Projects
3.3: Negotiating Management Contracts > Watch: Ask the Experts about the Negotiation Process
3.4: Negotiating Franchise Agreements > Watch: Ask the Experts about Franchises in the Future

With the assessment of hospitality opportunities, the investor is faced with three major decisions regardless of the concept or the strategy.
- Own or lease the building?
- Owner operate or third-party management?
- Branding

Branding decisions for lodging property are largely driven by investors’ notion of how much demand can be driven to the site by the brand’s distribution andmarketing
Branding decisions for restaurants, on the other hand, are generally driven by investors’ notions ofmarket share and mind share.
The brand createsmarket awareness and advertises to create demand at individual locations.
In addition to creating mind share, the brands provide very valuable services to their franchisees.

In this section of the course, we focus on investment
Investors use a variety of methodologies to analyze potential investments, but in the end, it all boils down to one thing: do the benefits of investment dominate the cost of the investment?
Investors proceed when the returns frominvesting in this project exceed the returns they could get in an alternative equivalent investment.

This starts from the owner’s commitment to adhere and to actually agree with the vision, with the values, of the brand.
Objectives, particularly if they are financial objectives or quality objectives, are shared and fixed very early on as well and, preferably, even agreed before any commitment from either party.
It is important that if there is a commitment or minimum guarantee from the operator, that allotment is discussed and agreed in the best possible way far in advance in order to actually achieve the results.
Extremely complicated as well when there are disagreements as to how the work is actually happening and the responsibility of the operator in terms insurance, for example, in terms legal issues.

Expert Bill Minnock on franchising and franchises.
How rapidly can owner-operators or third-party management companies be developed in order to enable the franchising model to succeed?
From an owner’s point of view on a franchise hotel, one of the big issues for them is control.