This case study includes the Word document that contains the background and the case task. The Excel file contains data you will
This case study includes the Word document that contains the background and the case task. The Excel file contains data you will need to complete your analysis.
- Week 11 Franchise Analysis Case Study.docx Week 11 Franchise Analysis Case Study.docx – Alternative Formats
- Franchise Analysis Data.xlsx
When you are complete, upload your Excel file using the name "yourname.xlsx". Enter the name of the brand you are recommending into the text field of the submission.
For information about how you'll be graded, refer to Franchise Analysis Case Study Rubric.docx Franchise Analysis Case Study Rubric.docx – Alternative Formats
HOSP 4040 Asset Management
Assignment: Franchise Analysis
This assignment is due via the Assignment Link by 11: 59 PM Eastern, on the due date.
This assignment is worth 50 points, and will be graded based on the rubic. You may view the rubric by clicking on the assignment link.
Late work will not be accepted.
The Case
You are working as an Asset Manager for a major hotel ownership group. Your company is performing due diligence on a hotel asset in a secondary metropolitan market in the Southeast United States. Your company wants to select from one of 3 brands that are available in this location. Your analyist has entered the relavant information in to an Excel spreadsheet for you to use to complete the analysis and recommend a brand.
Background
Your company has identified an opportunity to purchase a hotel asset in a secondary metropolitan market in the Southeast United States. This city has recently opened a convention center, and there are several hotels near the center, including your target.
The property opon which you are performing due diligence currently has a major brand, however your feasibility team feels that a repositioning strategy moving the hotel up in perceived quality represents a great opportunity for value improvement and has asked you to review the opportunity for 3 major global brands.
When looking at a brand, there are several major considerations.
First and most important, what level of market share is the brand expected to deliver? This is determined by having the brand provide their brand average, and the average of markets and competitive sets similar to yours.
· Occupancy Index
· ADR Index
· RevPar Index.
What will the renovation/FFE requirements of the conversion be? This would include:
· Rooms and public space renovations
· New guest room furniture or entertainment systems that comply with brand standards.
· Technology including Point of Sale, Property Management System, Reservations System, and Guest Room Locking systems.
· Elevator security
· Kitchen and Bar Equipment
· Vans (if the hotel is providing transportation)
· Exterior and Interior Signage
What are the initial costs of changing operating supplies to the new brand standard?
· China, Glassware, Silver, Linen, Terry
· Uniforms
· Guest Amenities
· Guest room supplies
· In Room collateral
· Marketing collateral
What are the franchise fees, and upon what revenue streams are they based?
· Application Fee
· Initial Fee
· Ongoing franchise fees
What are the other fees associated with the brand?
· Reservations and Revenue Managent Fees
· Brand negotiated OTA commissions
· Frequency Program Fees
· Sales and Marketing Fees
· Training
· Guest response/guest satisfaction programs
As your company is the Franchisee with these brands in other hotel projects, you have all of this information at hand. Your analyist has put information about the target hotel, and the brands into an Excel workbook for you to use to complete your analysis.
Required:
1. Calculate the costs and benefits of each brand.
· Using the information in the Excel spreadsheet, calculate the impact of moving the hotel from the existing brands share to the recommended brands market share. Assume that can happen in the first year.
· Apply the fees and other costs to the revised revenue calculated above.
· Apply the FFE and Renovation requirements as a Capital Expenditure – separate from the expenses calculated above.
,
Franchise Analysis
| Strategic Capital Partners | ||||||||||
| Franchise Comparison | ||||||||||
| Existing | Westin | Hilton | Marriott | Calculation Requirmement | ||||||
| Market Share Index | ||||||||||
| Occupancy | 82.30 | 109.0 | 107.0 | 108.0 | ||||||
| ADR | 96.80 | 115.0 | 106.0 | 110.0 | ||||||
| Revpar | 82.30 | 125.4 | 113.4 | 119 | ||||||
| Hotel Financial Report – Prior Year | ||||||||||
| Available Rooms | 146,000 | |||||||||
| Occupancy | 70% | Calculate new occupancy at the brand benchmark | ||||||||
| Occupied Rooms | 102,200 | Calculate new occupied rooms | ||||||||
| ADR | $ 165.00 | Calculate new ADR at the brand benchmark | ||||||||
| RevPar | $ 115.50 | Calculate new RevPar (Occupancy % X ADR) | ||||||||
| Revenue | ||||||||||
| Room Revenue | $ 16,863,000 | 65.0% | Calculate room revenue (RevPar X Available Room Nights) | |||||||
| F&B | $ 7,782,923 | 30.0% | Calculate on a per room occupied basis for existing, apply to new occupied room nights | |||||||
| Other | $ 1,297,154 | 5.0% | Calculate on a per room occupied basis for existing, apply to new occupied room nights | |||||||
| Total | $ 25,943,077 | 100.0% | ||||||||
| Departmental Profit | ||||||||||
| Rooms | $ 12,647,250 | 75% | Use Existing Profit % for revised revenue | |||||||
| F&B | $ 2,334,877 | 30% | Use Existing Profit % for revised revenue | |||||||
| Other | $ 1,102,581 | 85% | Use Existing Profit % for revised revenue | |||||||
| Total | $ 16,084,708 | 62% | Calculate (Total Departmental Profit divided by Total Revenue) | |||||||
| Undistributed Expenses | ||||||||||
| Adminstrative | $ 1,556,585 | 6.0% | Use Existing cost %, apply against total revenue | |||||||
| Sales and Marketing | $ 1,297,154 | 5.0% | Use Existing cost %, apply against total revenue | |||||||
| Repairs and Maintenance | $ 908,008 | 3.5% | Use Existing cost %, apply against total revenue | |||||||
| Energy Expense | $ 518,862 | 2.0% | Use Existing cost %, apply against total revenue | |||||||
| Total Undistributed Expenses | $ 4,280,608 | 16.5% | Calculate (Total Undistributed Expense divided by Total Revenue) | |||||||
| Franchise Related Fees | ||||||||||
| Franchise Royalty Fee | $ 843,150 | 3.3% | 6% Rooms | 5.5% Rooms | 6% Rooms | Apply % to revised room revenue | ||||
| Sales and Marketing Fee | $ 252,945 | 1.0% | 2% Rooms | 2.5% Rooms | 2% Rooms | Apply % to revised room revenue | ||||
| Reservations Expense | $ 337,260 | 1.3% | $5.65 POR | $4.95 POR | 0.8% Rooms | Apply $ POR or % of room revenue | ||||
| Frequency Program Fee | $ 389,146 | 1.5% | 1.5% Total | 1.7% Total | 1.8% Total | Apply % to Total Revenue | ||||
| Total Franchise Related Fees | $ 1,822,501 | 7.0% | ||||||||
| Gross Operating Profit | $ 9,981,599 | 38.5% | Calculate based on revised costs. | |||||||
| FFE Reserve | $ 1,297,154 | 5.0% | 5% | 6% | 5% | |||||
| Initial Supplies | $ 55,000 | |||||||||
| Other Fees | ||||||||||
| Training | $ 10,500 | |||||||||
| Guest Response | $ 25,000 | |||||||||
| Product Improvement Plan | $ 3,500,000 | $ 3,200,000 | $ 3,000,000 | |||||||
| Net Benefit Year 1 | Variance to Existing Franchise | |||||||||
| Variance in FFE Reserve | Variance to Existing Franchise | |||||||||
| Intial Supplies | Above | |||||||||
| Fees | Above | |||||||||
| PIP | Above | |||||||||
| Net Benefit | Subtract incremental cash cost from incremental profit | |||||||||
,
Franchise Analysis Rubric
|
Criteria (Weight) |
Proficient(100%) |
Competent (67%) |
Unacceptable (33%) |
Unacceptable 2 (0.00%) |
|
Calculations are correct (100%) |
All 3 franchise recommendations are mathematically correct |
2 franchise recommendations are mathematically correct |
1 franchise recommendation are mathematically correct |
JWU1001
College of Online Education
Johnson & Wales University
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