Comparing management and franchise agreements

 

our valuation of the management agreement for the new Hungerford Hotel, we determined that the contract had an NPV of $17,110 per room. This is the value of the brand services and of the management services. In our valuation of the franchise fees for the Hillwood Hotel, we determined the franchise had an NPV of $12,216 per room. This is the value of the brand services.

Based on this information about these agreements, create a post that answers the following questions:

  1. Is the difference in NPV, roughly $5,000 per room, adequate compensation for the responsibility of operating the property?
  2. Is the intellectual property properly valued in each instance?
  3. What conclusions can you make about operating a hotel system under franchise agreements vs. under management agreements?

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