Managem and a po en bones Check Your knowledge LO: Describe nome prestigious and unusu htel - The Carlton and the Four Seasons chains are way rated as the highest quality chain in the world. The Ritz-Carlton also holds the honor of being the only hotel company to win the Malcolm Baldridge Quality aware - There are several other from staying among the tree in war, i the world underwater from the Great Barrier Reef in Australia, and in depan where guests in 7 tot space to w tor to CASE STUDY Is a Franchise Right for Me? Tom graduated from a prestigious hotel maregement programast year. Anor completing his master's hobe came interested in buying his own franchise hotel Promis otional and traveling experience, he knows that opening and managing his own hotel could be the experience of a fetime. There are several benefits to opening a franchise hotel, including name recognition, marketing support, and access to a centralized reservation system. There are also some potential drawbacion, including high start-up costs, monty franchise fons, and the requirement to meet brand standards To make the decision of whether or not to franchise Tom will need to look at the costs associated with buying a hotel. He is considering franchising a budget hotel, and his initial fees are as follows: The initial license fee to start a franchise is $40,000. This foe covers the first 100 rooms. Beyond that, there is a $100 per room charge. If Tom wanted to open a 150-room hotel, his initial license fee is $40,000+ $100.50 (for the rooms over 100 rooms) - $40,000+ $5,000 - $45.000 In addition to the initial license fee, he would also have to pay monthly fees based on the amount of sales each month. Under this agreement, he would pay five percent of the monthly room revenue as royalty and four percent as a program too. That's a total of nine percent Because he is choosing to open a budgethotelthere we no additional to to pay for food and beverage or amenities. However, the were interested in a service hotel, he could pay 10 percent or more in additionale These foes do not include the costs of building the furnishing the hotel, or any other legal and building related costs. Depending on the location, cous could be as much as $50 million before the tranchise fees Tomhas not yet made the decision to pursue hotel ownership. He is calculating the tesne needs to pay each month. He has paid the initial license toe of SA5,000, so now the monthly fees are simply the percentages of sales, which includes the royalty fee of the percent of revenue and the program fee of four percent of revenue. Based on other like properties, he is assuming an average rate of $55 per right, and an average occupancy of 60 percent each month. Bost, Ball DISCUSSION QUESTION Based on the projected occupancy, average rate, and the fees associated with the franchise, should Tom become a franchisee, or should he pursue other options? Why did make that decision? Introduction to Hospitality Eighth Edition 2 John R. Walker Introduction to Hospitality Eighth Edition ton John R. Wall