New Franchise for East Texas Hotel Loan

Our East Texas clients were ready for a new franchise. After operating a Wyndham Baymont property for several years, they were ready to switch to an IHG Garner flagged hotel. The change would bring down their franchise fees. In addition, the new franchise affiliation would also decrease their third party booking fees. Finally, their new loan refinanced previous debt and also covered a lot of the cost of the reflagging.

GRP Capital worked hard to find a lender willing to make a hospitality loan outside of the largest Texas metropolises. Helping the lender understand the benefits of the new franchise was crucial to the underwriting process.

Krishan Patel, Managing Director of GRP Capital stated, “The hotel owners had demonstrated very strong prior management. Their hotel was already healthy and cash flowing. They had done their due diligence and believed that affiliating with a new franchise would have an immediate impact on both their revenues and their expenses. Ultimately, it was our job to tell their story to lenders and find a good match for them. I was very pleased that this loan closed quickly. Hospitality loans outside the major cities often are harder to place and close, but this project was strong from the beginning.”

In the end, having a large lender network allowed GRP Capital to find an appropriate lender and close the loan as quickly as possible.

Are You Considering a New Franchise Affiliation?

• Compare franchise fees: A basic part of a franchise agreement is the percentage of revenues (franchise fee) that come directly to the franchise. So it’s important to compare these numbers. However, be aware that there is variety in the industry. Franchise fees differ not only by flag, but also by type of property (economy, mid-scale, luxury).

• Determine how your franchise affiliation benefits you: Different franchises and different brands within the franchise offer various benefits. Does your franchise have a popular loyalty program? That can really improve your market penetration. Does your brand have general strong marketing and advertising that benefits the franchisees?

• Calculate the costs for reflagging: What will your immediate costs be? You will have to engage in a PIP (Property Improvement Plan). The PIP typically includes refreshing and renovations from the parking lot to the lobby to the guest rooms. And sometimes these are quite extensive. Calculate these costs from furniture to labor, to a big new outdoor sign.

• Consider hiring an attorney to negotiate with the franchise: Your franchise agreement is a long, complex document, that obligates you for many years. An attorney with experience in dealing with franchises can negotiate fees as well as the PIP components to your advantage. This can save time and also position you best in your marketplace.

• Choose the best timing for a transition. A new franchise requires multiple steps. Consider your labor pool and your high season. How can you fit in a transition that is the least disruptive and costly to your business? Do you need to build in some interest only time in your loan if your revenues will be sharply curtailed?

• Learn about all types of loans: There are many types of hospitality loans, including conventional loans, SBA loans, bridge loans and non-recourse loans. Small Business Administration (SBA) loans are often the best matches for hospitality loans. Crucially, the SBA is willing to guarantee a larger variety of hospitality loans, including economy and mid-scale properties.

Why Choose GRP Capital?

Our GRP Capital team specializes in crafting financing solutions tailored to each client’s unique goals.

Whether you’re purchasing, refinancing, or building from the ground up, our extensive network of lenders ensures you’ll find funding that aligns with your goals and cash flow needs.

Here’s what sets us apart:

• We save you time by researching and identifying the best funding options for your project.
• Our expertise spans various loan products—including non-recourse loans, SBA loans, bridge loans, and conventional financing—so you can navigate even the most complex transactions confidently.
• Beyond lending, we provide strategic guidance on operational decisions that drive long-term business success.