Question

A franchised hotel generates $2,000,000 per year in gross rooms revenue. What amount of franchise fees is this hotel likely to be required to pay its franchisor on this level of rooms revenue?

A) Less than $60,000
B) $60,000 to $300,000
C) $300,001 to $500,000
D) Over $500,000

Answer 1

The franchised hotel generating $2,000,000 in gross rooms revenue would likely pay franchise fees between B)$60,000 to $300,000, depending on the franchisor's fee percentage.

Step-by-step explanation:

To determine the amount of franchise fees a franchised hotel generating $2,000,000 per year in gross rooms revenue would be required to pay its franchisor, it's important to know the typical percentage rates for franchise fees. Franchise fees often vary by company and can range from around 3% to 10% of the gross revenue, depending on the terms of the franchise agreement and the services provided by the franchisor. Therefore, at a conservative estimate of 3%, the franchise fee would be $60,000, and at a higher rate of 10%, the fee would be $200,000. Consequently, the likely amount of franchise fees for this hotel would fall into option B) $60,000 to $300,000.