Graduate by Hilton Franchise
Audited FinancialsRisk Score
Pending analysis
Investment Range
$18,746,437 - $91,125,745
Total US Locations
34
Business Summary
Graduate by Hilton offers franchises for hotels operating under the Graduate Brand. These hotels provide guest lodging services, adhering to a system that includes brand standards for design, construction, operation, marketing, and a reservation service. Graduate by Hilton's offerings are part of the larger Hilton Worldwide Brands portfolio, focusing on lodging and related services.
Corporate History
Graduate by Hilton operates under Hilton Franchise Holding LLC, a Delaware company formed in September 2007. The broader Hilton guest lodging business, which is the ultimate parent, has a history extending back to 1946. Hilton Worldwide acquired the Graduate hotel brand on May 24, 2024, leading to the conversion of 36 existing Project Alpha by Hilton hotel franchises into the Graduate brand. Hilton Franchise Holding LLC officially became the franchisor for Graduate hotels in the US on May 28, 2024, with the Project Alpha brand subsequently being retired.
Financial Overview
Investment Range
$18,746,437 - $91,125,745
Franchise Fee (High)
$150,000
Minimum Net Worth
$7,348,000
Royalty %
5%
Marketing %
4%
Equipment Costs (Low)
$15,191,728
Equipment Costs (High)
$76,986,865
Working Capital
$1,200,000
Audited Financials
Yes
Offers Financing
Yes
Audit Opinion
Unqualified opinion
Financial Health Notes
The financial statements for Graduate by Hilton (Hilton Franchise Holding LLC) received an unqualified audit opinion, indicating they present fairly, in all material respects, the company's financial position. The company has strong net income, increasing from $1.2 billion in 2022 to $1.48 billion in 2024. Cash provided by operating activities in 2024 was over $1.5 billion. However, current cash holdings decreased significantly in 2024 to $317,000 from over $5 million in 2023, primarily due to distributions of retained earnings to Hilton affiliates totaling $1.5 billion in 2024 and increased current intercompany payables. The company's assets and franchise contracts are pledged as collateral for certain debt obligations of its parent, Hilton. Management expects that ongoing litigation will not materially adversely affect its financial position.
Financing Details
Graduate by Hilton generally does not offer direct or indirect financing, except for a development incentive program and occasional installment payment options for the Franchise Application Fee. The development incentive is a financial contribution that does not need to be repaid unless the franchise agreement terminates early or a transfer occurs; the repayable amount decreases annually over the term. If the incentive becomes repayable and is not paid, it accrues interest at 1.5% per month. Franchisees may also, on occasion, pay the Franchise Application Fee in interest-free installments before construction begins. In rare, unique circumstances, Graduate by Hilton may offer other types of financing, such as mezzanine loans or loan guarantees, but the terms would vary based on the specific situation.
Performance Metrics
Total US Locations
34
Franchised Units
34
Corporate Units
0
Franchising Since
2024
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
11
Litigation Summary
Graduate by Hilton, through its parent company Hilton Worldwide, has been involved in several litigation cases. Currently, there are five pending class-action lawsuits against Hilton Franchise Holding LLC or Hilton Worldwide, all filed between February 2024 and January 2025. These include one breach of contract case related to a franchise termination and four antitrust lawsuits alleging improper sharing of information and use of revenue management software to set hotel room rates in various markets. Hilton Worldwide intends to vigorously defend these actions. In recent years, Graduate by Hilton (through its affiliates) has concluded six other legal matters. This includes two settled cases with the States of Texas (2023-2025, $2.1 million settlement) and Nebraska (2019-2024, $300,000 settlement) concerning disclosures of mandatory guest fees. Other concluded cases involved contract disputes with former franchisees (settled 2022 and 2020), a class action regarding resort fee disclosure (settled 2015), and a very old antitrust case from the 1970s.
Bankruptcy History
Graduate by Hilton has no bankruptcy history to disclose.
Agreement Terms
Initial Term
23 years
Renewal Conditions
Graduate by Hilton franchisees do not have a right to renew or extend their franchise agreement. However, if Graduate by Hilton agrees, in its sole discretion, to re-license the hotel, the franchisee may be required to sign a new contract with potentially different terms and conditions and must comply with any specified Property Improvement Plan (PIP) performance conditions.
Training & Support Program
Franchisor Assistance
Graduate by Hilton provides extensive support to its franchisees both before and after hotel opening. For pre-opening, Graduate by Hilton loans the franchisee a comprehensive Manual detailing operational standards and specifications. It reviews and approves key personnel such as architects, interior designers, general contractors, and management companies. The franchisor also approves all construction plans and designs to ensure compliance with brand standards. Franchisees are provided with the HITS Agreement for access to critical information technology systems like OnQ (for reservations, property management, and revenue management), Guest Internet Access, GRO, Delphi, Connected Room, Digital Floor Plan, and Digital Key systems, including maintenance and support. For initial setup, Graduate by Hilton makes various purchasing arrangements available for essential items like signs, equipment, supplies, and furnishings. Franchisees and their key personnel must complete mandatory training programs for which fees apply. Ongoing support includes marketing efforts through published directories, national and regional advertising campaigns funded by monthly program fees, and continuous maintenance and upgrades for the required computer systems. Graduate by Hilton administers a quality assurance program through regular inspections and guest surveys, and performance assessments like Stay Scores. A Service Quality Improvement Program is also available for hotels that consistently fall below service quality standards. Optional consultation services are available for operations, facilities, and marketing. Additionally, the franchisor requires the use of an approved third-party food and beverage consultant or offers its own StiR Creative Collective program for these services and may require participation in various third-party promotional programs.
Initial Training Hours
133
Training Location
Online/virtual and on-site at the hotel, with conferences at various locations.
Ongoing Support
Graduate by Hilton provides ongoing operational support through various programs. It continuously publishes directories and includes franchised hotels in its national and regional advertising and marketing initiatives. Franchisees also maintain access to the central Reservation Service. A comprehensive quality assurance program is administered, which includes periodic inspections, guest satisfaction surveys, and performance assessments like Stay Scores. Hotels are required to comply with various standards and renovation schedules, and a Service Quality Improvement Program is available for hotels that consistently fall below service quality standards. For technology, Graduate by Hilton manages maintenance upgrades for proprietary software and requires franchisees to maintain hardware, including regular refresh cycles for the OnQ system (every 3 years) and the Guest Internet Access system (every 4 years). Additional optional consultation services and learning programs are available, though some may incur fees. Franchisees are also required to meet annual compliance training requirements, and key personnel must attend annual brand conferences.
Franchise Requirements
Ideal Candidate Profile
Graduate by Hilton seeks franchisees or management companies with qualified and experienced management capabilities to operate their hotels. Ideal candidates should possess strong managerial skills and operating capacity, and be able to adhere fully to the obligations and requirements of the Franchise Agreement. Candidates are expected to have independently investigated the risks and competitive factors of operating a hotel under the brand. Prior hotel ownership or management experience is implicitly valued as part of the application process.
Industry Experience Required
No
Management Experience Required
Yes
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
retail
Owner Participation
Supervisory
Territory Type
Protected
Territory Size Requirements
For Graduate by Hilton, if a franchisee is granted a Restricted Area, its boundaries are determined by the immediate competitive market and circumstances at the time the franchise agreement is signed. These boundaries vary in size and shape for each hotel and are not based on a standard formula. They can be defined using various methods, such as references to cities, metropolitan areas, counties, other political subdivisions, specific streets or highways, or by a specified radius distance from the hotel's front door.
Staffing Notes
Graduate by Hilton requires that the franchised hotel be operated by qualified and experienced management, either directly by the franchisee (with prior written approval and training) or by an approved third-party Management Company. Key personnel, including the general manager and director of sales, must complete mandatory training programs to meet brand standards. If replacement personnel are hired for these roles, they must also successfully complete the appropriate training. The franchisor reserves the right to communicate directly with the hotel's managers and Management Company regarding operations and compliance.