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Problem: Amanda and Jason Smith are contemplating turning their inn into a franchise. The 75-room Cozy Inn is located in a picturesque New England town, clearly accessible from the turnpike. The inn has just been refurbished, and the fresh paint and attractive landscaping add to its presentation. The Cozy Inn's year-round occupancy is 58 percent, which is about 10 percentage points below the nation average. The average daily rate is $78. The Cozy Inn's guests are a nearby business park, a few retirees traveling for pleasure, an occasional bus tour, and some sports teams. The Smiths have asked several franchise corporations to submit their best offers. The best one indicates that the cost of a franchise application fee is $20,000, there is a 2 percent revenue-marketing fee, and a reservation fee of $4 per room booked by the CRS.
Required:
1. What would you do in the Smiths' situation? Make assumptions if needed.
2. What terms and conditions of a franchise agreement would be acceptable to you?
3. What additional information would you need to know if you were in the Smiths' situation?
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