MOD A Sonesta Collection Franchise
Audited FinancialsRisk Score
Pending analysis
Investment Range
$1,689,097 - $97,180,953
Franchise Fee
$65,000
Total US Locations
1
Business Summary
MOD A Sonesta Collection offers franchises for upscale hotels that cater to both business and leisure travelers. These hotels operate under independent trade names alongside the Sonesta Marks. Franchisees can develop new hotels or convert existing ones, with variations in size and food and beverage options. The MOD A Sonesta Collection brand provides franchisees with access to a reservation service, advertising and marketing programs, training, and operational standards.
Corporate History
Sonesta RL Hotels Franchising Inc. was originally established as Vance Hotels, Inc. in Washington State in December 1986. It later changed its name to Red Lion Hotels Franchising, Inc. in 2005, and then to Sonesta RL Hotels Franchising Inc. in September 2021. Its parent company, Red Lion Hotels Corporation (RLHC), has been involved in hotel ownership and management since 1978 and became a wholly-owned subsidiary of Sonesta International Hotels Corporation in March 2021. Sonesta RL Hotels Franchising Inc. has expanded its brand portfolio through several acquisitions, including GuestHouse International in 2015, various Vantage Hospitality Group brands in 2016 (such as Lexington and Americas Best Value Inn), and the Knights Inn brand in 2018. An affiliate also acquired The James hotel brand in 2022. Sonesta RL Hotels Franchising Inc. began offering franchises for the MOD A Sonesta Collection brand in May 2023, while also operating and franchising other hotel brands within its Network.
Financial Overview
Investment Range
$1,689,097 - $97,180,953
Franchise Fee (Low)
$65,000
Franchise Fee (High)
$125,000
Royalty %
5%
Marketing %
2.5%
Equipment Costs (Low)
$568,375
Equipment Costs (High)
$90,298,750
Working Capital
$1,139,595
Audited Financials
Yes
Offers Financing
Yes
Audit Opinion
Unqualified opinion
Financial Health Notes
Red Lion Hotels Corporation, the parent company of Sonesta RL Hotels Franchising Inc., received an unqualified audit opinion on its financial statements, indicating that they are presented fairly. While there was a restatement of 2023 financials to correct cash flow presentation errors, this did not impact the company's net income, balance sheet, or shareholders' equity. The company experienced a decrease in cash and cash equivalents in 2024, reported a net loss, and an increased accumulated deficit. Despite these figures, the financial notes state that Red Lion Hotels Corporation has sufficient funds to maintain its operations and can seek additional funds from its owner, Sonesta International Hotels Corporation, if necessary, with no substantial doubts raised about its ability to continue as a going concern.
Financing Details
Sonesta RL Hotels Franchising Inc. may offer 'Incentives,' which are financial contributions for hotels new to the MOD A Sonesta Collection brand, typically ranging from $3,000 to $6,000 per guest room. To receive this, franchisees must sign a development incentive promissory note. This incentive does not require repayment unless the franchise agreement terminates prematurely or the hotel is transferred. The repayable amount is reduced annually by an equal percentage over the term of the agreement (e.g., 1/20th for a 20-year term). If the incentive becomes repayable and payment is not made on time, it will accrue interest at 18% per year. Sonesta RL Hotels Franchising Inc. may also require the franchisee to retain a specific Management Company as a condition for receiving an Incentive. Beyond this program, neither Sonesta RL Hotels Franchising Inc. nor its affiliates offer any other direct or indirect financing or guarantee any obligations for franchisees.
Performance Metrics
Total US Locations
1
Franchised Units
1
Corporate Units
0
Avg Square Footage
135,000
Franchising Since
2023
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
21
Litigation Summary
Sonesta RL Hotels Franchising Inc. and its parent, Red Lion Hotels Corporation, have been involved in several legal disputes. Currently, there is a class action lawsuit filed in August 2023 against former directors of TravelCenters of America Inc., including Adam Portnoy (a director of Sonesta RL Hotels Franchising Inc.), alleging breaches of fiduciary duties related to a merger. This case was dismissed in May 2024 but is now under appeal, with oral arguments anticipated in April 2025. Additionally, Sonesta RL Hotels Franchising Inc. is pursuing three collection lawsuits filed in June 2024 against former franchisees and guarantors for outstanding payments. In the past, eight class action lawsuits related to the merger of Red Lion Hotels Corporation with Sonesta were filed in early 2021 but were dismissed by March 2021 following supplemental disclosures and a settlement for attorneys' fees. Other resolved cases include a tortious interference dispute with a competitor settled for $500,000 in 2021, and several breach of contract lawsuits against former franchisees and guarantors, which were all settled or dismissed between 2018 and 2019.
Bankruptcy History
Sonesta RL Hotels Franchising Inc. has no bankruptcy history to report.
Agreement Terms
Initial Term
20 years
Renewal Term
20 years
Renewal Conditions
To renew their MOD A Sonesta Collection franchise, franchisees must provide timely notice of their intent to renew. They must have substantially complied with their franchise agreement throughout its term, without receiving four or more default notices. Franchisees must be in full compliance with the franchise agreement and all Brand Standards both when they give renewal notice and when the new agreement would start. They need to maintain possession of the hotel premises and update or expand the hotel to meet the then-current Brand Standards for new MOD A Sonesta Collection hotels. If required, they might need to transition their hotel to a different brand concept offered by Sonesta RL Hotels Franchising Inc. or an affiliate. Any deficiencies noted by the franchisor must be corrected before renewal. Franchisees must sign the franchisor's then-current form of franchise agreement and any other necessary agreements, which may have materially different terms. A renewal fee, equivalent to the Initial Fee, must be paid, and the franchisee and its owners must sign a general release of claims against Sonesta RL Hotels Franchising Inc. and its affiliates.
Training & Support Program
Franchisor Assistance
Sonesta RL Hotels Franchising Inc. provides extensive support to MOD A Sonesta Collection franchisees. Before a hotel opens, the franchisor conducts an initial inspection and develops a Property Improvement Plan (PIP) for conversions, reviews and approves hotel plans and designs, and inspects the property during construction or renovation. It also offers onboarding services, initial brand training for a designated Hotel Representative (covering brand programs, marketing, sales, loyalty, and culture), and provides the Brand Manual and a list of approved suppliers. An assigned project manager or onboarding specialist is available for assistance. Once the hotel is operational, Sonesta RL Hotels Franchising Inc. offers required and optional ongoing training programs (virtually or in-person), convenes a Brand Conference at least every 24 months for networking and educational seminars, and provides periodic advice on hotel operations. The franchisor administers the Sonesta Travel Pass loyalty program, provides access to IT and franchise services help desks, and includes franchisees in its Third-Party Distribution Program. It continuously updates the Brand Manual, operates and maintains a Central Reservation System, offers participation in its Revenue Management for Hire program, and manages brand promotion programs, including a franchise system website. The franchisor also indemnifies franchisees for authorized trademark use.
Initial Training Hours
33
Training Location
Virtual or on-site
Ongoing Support
After opening, MOD A Sonesta Collection franchisees receive ongoing support including required and optional training programs, which can be virtual or in-person. Sonesta RL Hotels Franchising Inc. convenes a Brand Conference at least every 24 months, offering networking and educational seminars that the franchisee's General Manager must attend. The franchisor provides periodic advice on hotel operations and administers the Sonesta Travel Pass loyalty program. Franchisees have access to IT and franchise services help desks and are included in the Third-Party Distribution Program. The Brand Manual is regularly updated with new standards. Sonesta RL Hotels Franchising Inc. operates and maintains a Central Reservation System, offers participation in its Revenue Management For Hire program, and administers brand promotion programs, including managing a franchise system website.
Franchise Requirements
Ideal Candidate Profile
Sonesta RL Hotels Franchising Inc. seeks franchisees for its MOD A Sonesta Collection brand who demonstrate strong educational, managerial, and business capabilities. Ideal candidates should possess good moral character, a positive business reputation, and a solid credit rating. They need to have the aptitude and ability to effectively operate a MOD A Sonesta Collection hotel and have sufficient equity capital. While owners are not strictly required to have direct hotel management experience if they opt to retain an approved Management Company, it is clearly a valued asset for the hotel's operational success. Transferees are also evaluated based on these same standards.
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Retail
Owner Participation
Absentee Allowed
Territory Type
Non-Exclusive
Territory Size Requirements
The MOD A Sonesta Collection franchise does not provide franchisees with an exclusive or protected territory. Franchisees receive a non-exclusive license to operate a MOD A Sonesta Collection hotel at a specified location. The franchisor retains the right to establish and operate, or license others to establish and operate, other Brand Hotels, Network Hotels, or other businesses anywhere in the world, even if they compete with the franchisee's hotel. In special circumstances, the franchisor may grant an exclusive or protected area, but this is at the franchisor's sole judgment and is not a standard territory definition.
Staffing Notes
Each MOD A Sonesta Collection hotel must employ a full-time General Manager who meets specific qualifications and completes required training. If this manager leaves, a replacement must be found within 60 days. Sonesta RL Hotels Franchising Inc. allows franchisees to hire an approved Management Company to manage the hotel's direct operations; this company must agree to be bound by the franchise agreement terms and is jointly and severally liable with the franchisee for most obligations. If a franchisee opts out of the franchisor's Revenue Management For Hire program after the first year, they must employ a dedicated, full-time Hotel Revenue Manager with at least four years of relevant experience in similar hotels, who must also be certified in the revenue management system. Sonesta RL Hotels Franchising Inc. emphasizes that franchisees are solely responsible for all hiring and employment decisions for their hotel staff.