Part I. Problem Solving Questions 1. Tom Jones is considering two franchise opportunities for his 100-room economy property. He believes each firm offers about the same services and will sign with the firm that has the lowest franchise costs over the initial three-year period. (15 points) The franchise costs are as follows: Colonial Inn Potomac Hotel Initial fee $35,000 $300/room Royalty fee 4% of gross room sales 3.5% of gross room sales Advertising fee 3% of gross room sales 3% of gross room sales Reservation fee $4/room/month plus $4 per reservation 2.5% of gross room sales Note: Reservation fee by Colonial Inn is $4 per room per month plus another $4 for each room booked through central reservation system. Jones projects both hotels' ADR and paid occupancy percentages for the three-year period to be as follows: Year ADR $45 $48 $52 Paid Occupancy Percentage 60% 65% 3 70% Further, he expects the Colonial Inn's reservation system will provide his hotel with 20% of its rooms sold each year. Required: Determine the total franchise cost year by year for each franchise system and the total fees for the three years