Knights Inn Franchise
Audited FinancialsRisk Score
Pending analysis
Investment Range
$151,696 - $9,623,807
Franchise Fee
$12,500
Min Cash Required
$30,000
Total US Locations
136
Business Summary
Knights Inn operates limited-service hotels under its brand name, offering accommodations at specific locations. Each Knights Inn Hotel must have at least 40 guest rooms and meet a minimum 1-diamond rating standard. Amenities typically include swimming pools, complimentary continental breakfast, flat-screen commercial-grade televisions with premium programming, high-speed internet access in guest rooms and the lobby, and complimentary lobby coffee service, along with specific bedding, terry, and in-room amenity requirements.
Corporate History
Sonesta RL Hotels Franchising Inc. was founded on December 24, 1986, in Washington State as Vance Hotels, Inc. It later rebranded to Red Lion Hotels Franchising, Inc. in September 2005 and then to Sonesta RL Hotels Franchising Inc. in September 2021. The company, along with its parent Red Lion Hotels Corporation (RLHC), has been actively involved in hotel ownership and management since 1978. Knights Inn began offering franchises in June 2018. Over its history, the company has expanded its brand portfolio through acquisitions, including GuestHouse and Settle Inn in 2015, Vantage Hospitality Group's brands in 2016, and the Knights Inn brand from Wyndham Hotel Group in 2018. In March 2021, RLHC merged with Sonesta International Hotels Corporation, making RLHC a wholly-owned subsidiary of Sonesta. The company continues to license and operate hotels under various Network Brands, including Knights Inn, focusing on limited-service hotels.
Financial Overview
Investment Range
$151,696 - $9,623,807
Franchise Fee (Low)
$12,500
Franchise Fee (High)
$25,750
Minimum Cash Required
$30,000
Equipment Costs (Low)
$54,400
Equipment Costs (High)
$8,865,000
Working Capital
$60,000
Audited Financials
Yes
Offers Financing
Yes
Audit Opinion
Unqualified opinion
Financial Health Notes
The financial statements of Red Lion Hotels Corporation (RLHC), the parent company of Sonesta RL Hotels Franchising Inc., were restated for 2023 to correct errors in the cash flow statement related to key money disbursements and centralized cash management transfers. These corrections did not affect RLHC's net income, balance sheet, or shareholders' equity. As of December 31, 2024, RLHC had $7.2 million in payables to its parent, Sonesta, related to centralized cash management and vendor payments. RLHC maintains that it has sufficient funds for its operations and can seek additional funds from Sonesta if necessary. The company also reported federal and state net operating loss carryforwards of $58.8 million and $47.8 million, respectively, as of December 31, 2024, and has recorded a $20.0 million valuation allowance against deferred tax assets, indicating a belief that some of these assets may not be realized.
Financing Details
Knights Inn may, at its discretion, offer a development incentive to hotels new to the brand, providing a financial contribution ranging from $500 to $2,500 per guest room. This incentive is disbursed after the hotel opens and generally does not need to be repaid unless the franchise agreement is terminated early or the hotel is transferred. The repayable amount is reduced annually over the term of the franchise agreement. If repayment becomes due and is not made promptly, the outstanding amount will incur interest at 1.5% per month or the maximum rate allowed by law, and Knights Inn may seek to recover collection costs, including attorneys' fees. Apart from this development incentive program, Knights Inn and its affiliates do not offer any other direct or indirect financing arrangements or guarantee franchisee obligations.
Performance Metrics
Total US Locations
136
Franchised Units
136
Corporate Units
0
Avg Square Footage
25,000
Franchising Since
2018
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
20
Litigation Summary
Sonesta RL Hotels Franchising Inc. has several active and concluded litigation cases. Currently, there is a pending class-action lawsuit filed in August 2023 against the former board members of TravelCenters of America Inc. (including Adam Portnoy, a director of Sonesta RL Hotels Franchising Inc.). This lawsuit alleges breaches of fiduciary duty related to a merger and seeks unspecified monetary damages. Oral arguments for an appeal are anticipated in April 2025. Additionally, Knights Inn has three ongoing lawsuits filed in June 2024 against former franchisees and their guarantors, seeking to collect unpaid amounts and liquidated damages due to breach of contract. In terms of concluded litigation, Knights Inn was involved in eight lawsuits filed by stockholders in early 2021 regarding a merger, which were dismissed in March 2021 after supplemental disclosures, with a settlement payment of $240,000 for attorneys' fees. A lawsuit for tortious interference with franchise agreements, filed by Radisson Hotels International, Inc. in September 2018, was settled in August 2021 for $500,000. Knights Inn also resolved several other cases between 2016 and 2019 against former franchisees or guarantors concerning breach of contract, trademark infringement, and unpaid fees, all concluded through settlements or dismissals.
Bankruptcy History
Knights Inn has no bankruptcy information required to be disclosed.
Agreement Terms
Initial Term
3 years
Renewal Term
3 years
Renewal Conditions
To renew the franchise agreement, Knights Inn franchisees must ensure that neither party has provided 90 days' prior written notice of non-renewal. They must not be in default of the Franchise Agreement or any other agreements with Knights Inn, its affiliates, or suppliers/vendors. Franchisees are required to complete any necessary maintenance, refurbishing, renovation, or upgrades to their hotel to meet the then-current brand standards for new franchisees and any applicable Property Improvement Plan (PIP) at least 60 days before the scheduled expiration date. They must also be legally entitled to occupy the premises for the entire successor term and must not have received four or more default notices from Knights Inn during the current term. Additionally, franchisees must pay a $5,000 renewal fee. Knights Inn may also require franchisees to sign a new franchise agreement, which could have materially different terms, and to execute a general release of claims against Knights Inn and its affiliates.
Training & Support Program
Franchisor Assistance
Knights Inn provides comprehensive support to its franchisees. Before opening, assistance includes conducting initial inspections and developing a Property Improvement Plan (PIP) for existing hotel conversions, reviewing and approving architectural plans and designs, and inspecting the hotel during or after renovation/construction. Knights Inn also offers onboarding services, gathers necessary information for the Central Reservation System (CRS), and provides initial brand training for one hotel representative covering operations, marketing, sales, and brand culture. Franchisees receive a Brand Manual and are assigned a project manager or onboarding specialist. Ongoing operational support comprises access to the brand-designated CRS, regular training programs (available virtually or in-person, with associated fees for on-site or ad hoc virtual training), Revenue Management Insights, and Operations Insights for online review management. Knights Inn convenes a virtual Brand Conference at least every 24 months, offers access to an IT Help Desk and an owner's intranet portal, provides access to a Central Reservations Office (call center), and hosts one email address for each hotel.
Initial Training Hours
26
Training Location
Virtual or on-site
Ongoing Support
After opening, Knights Inn franchisees receive ongoing support through access to the brand-designated Central Reservation System (CRS) and required training programs, which can be virtual or in-person, with associated fees for on-site or ad hoc virtual training. Knights Inn provides Revenue Management Insights and Operations Insights for online review management. Franchisees are required to attend a virtual Brand Conference at least every 24 months. Additionally, Knights Inn offers access to an IT Help Desk, an owner's intranet portal, a Central Reservations Office (call center), and hosts one email address for each hotel.
Franchise Requirements
Ideal Candidate Profile
Knights Inn seeks experienced, professional hotel operators. Franchisees must have prior experience in the hotel industry or engage an approved, experienced hotel management company on their behalf. Qualified professional hotel management must be on-site at all times. If the franchisee is a legal entity, a designated 'Principal' must hold at least a 25% ownership interest and voting power in the entity, and possess the authority of a chief executive officer.
Industry Experience Required
Yes
Management Experience Required
Yes
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Commercial
Owner Participation
Supervisory
Territory Type
Non-Exclusive
Staffing Notes
Knights Inn requires franchisees to employ an on-premises general manager who is skilled and experienced in hotel operations. Franchisees are solely responsible for all employment decisions, including recruiting, hiring, training, and managing their staff. The general manager is not required to have an ownership interest in the franchisee entity. If a management company is used, it must be approved by Knights Inn and will be jointly and severally liable with the franchisee for most obligations, excluding actual payments to third parties or Knights Inn. All employees working at the hotel are considered employees of the franchisee, not Knights Inn.