After deciding to develop a hotel and operate it as a franchise, perhaps the most important decision you'll make is choosing a franchising organization.

How do you decide? What questions should you ask? Where is there room to negotiate? What should you expect from a franchise company? In short: How do you make sure you will get value for that hefty fee you'll pay the franchisor every month?

Before selecting a franchise, owners need to do diligent homework," says Paul White, executive vice president of Hawthorn Suites. Most of it falls under the heading of research - primarily asking the right people the right questions.

Remember that franchise sales personnel are likely to say what you want to hear. It's your responsibility, then, to checkout the promises they make to be as sure as possible that once the ink is dry on your contract you'll receive the support and service that you have a right to expect.

A quick list of questions to answer:

• What are the total costs of the affiliation over a fixed time?
• What conditions and terms does the license agreement involve?
• Who is the licensor? What are its reputation and future expectations?
• What is the company's track record with its existing franchises?
• How much experience do the company officers have?
• Is the company's reservations systems producing for franchisees?
• What sort of brand marketing and sales support is provided?
• Are adequate and effective training programs offered?
• Does the company effectively and uniformly enforce its quality control standards?
• Is the company committed to the lodging business, or is it just interested in accumulating more licensees? 
• Has the company tried to establish a working partnership with owners?

Once you have made that decision, you can contact chains catering to the specified segment and begin a comparative analysis. When meeting with representatives of the selected chains, be prepared with a list of questions so you can obtain information that is so critical to your ultimate decision.

It's wise to determine the main sources of revenue for any chain you're considering. If it comes primarily from renewals, annual fees and other recurring income, it probably indicates a focus on quality, service and stability. But if most of the company's revenue comes from new franchise fees, the franchisor may be more interested in numbers than in quality, and may not offer the service that will provide a sound foundation for your investment.

Ask about the chain's financial picture. Has it been through reorganizations? Why? What have the results been?

Determine the extent to which the chain investigates your business qualifications. A quality-driven company will be thorough, wanting to affiliate with quality franchisees. A quality-conscious company will insist that its good name is protected in the marketplace. That, in turn, will protect yours and will be to your long-run benefit.

Ask for projected total affiliation costs over a fixed period, perhaps five years. Use the same assumptions for each chain, based on number of rooms, revenue, growth and reservation contributions. Ask about minor or hidden costs; they can be significant.

Obtain reservations statistics for the property's market area to help you project potential sales and growth. What sort of queries does a chain receive about your area, even though it may not have a property there? That's an extremely valuable indicator.

Is the reservations system based on updated technology? What are plans for improvement? How is it used as a marketing tool?

Are reservationists well-trained? Do they have a good understanding of all the properties they are trying to sell? Is the information in the database up-to-date?

It's essential to know the terms of the agreement and what penalties you might face for early termination, for example. Other cost considerations:

• What are signage and logo requirements?
• What will it cost to convert?
• What capital improvements will be required? Each chain is different.
• Learn all that you can about the services provided by each chain. Which ones are free, and which cost extra?

It is important to understand clearly the role of franchisees in overall chain operations, something you can learn best by talking with other licensees. Is there just a token representation, or does the franchisor actually respond to its franchisee and their concerns?

It's critical to know whether the company is involved with multiple brands, and how It handles competition among them. What type of protection is offered? Franchise companies have already begun to address licensees' concerns by providing territory protection in their contracts. 

Armed with this data, you can evaluate the relative capabilities and benefits of the competing chains in your property's market niche and then apply that information to your specific property.

Use independent information. Don't just rely on a sales executive's representations without checking them out. You can compare the chain's reservations projections, for example, against numbers produced by independent reporting firms for specific market areas and properties within those areas. Make revenue projections using estimated roomnights and the average rate that you can expect from the chain's affiliation. Be sure to include your expected costs, including those related to the franchise relationship.

Despite fees and royalties, many chains can generate significant cost savings compared to an independent operation. Many offer reduced insurance premiums and credit card commission discounts. Training education and assistance, design assistance, advertising discounts, and technical services are usually available as well.

There is more to consider than just the numbers, however.

Skip Stearns, vice president of franchise sales and marketing at Omni Hotels, advises potential franchisees to focus on "what life will be after you cut your deal." 

What is the relationship with the franchisor? Will you have access to the top people? How will you be supported - really?

Stearns advises potential franchisees to consult existing owners of similar properties, or those located in your point - of - origin markets. What are their properties like? What kind of image do they project? What has their experience been like with the franchisor? Or, of course, you can work with a management company to help develop all of this information. 

Nancy Landino, vice president of Choice Hotels International, advises prospective licensees to look carefully at the company's track record and its premise for being in business. Does it have a significant commitment to the industry? Does it own and operate its own properties where it tests practices before offering them to franchisees? Or are they simply selling signs, towels and an 800 number?

Also keep in mind that it is a buyers market today, with a limited number of properties available to ever larger companies as a result of industry consolidation. 

Stephen P. Taylor, CHA, is president of TaylorGroup. His 25 years of hospitality experience provide an invaluable background for clients and readers alike.