Quality Inn Franchise
Audited FinancialsRisk Score
Pending analysis
Investment Range
$316,945 - $2,045,895
Franchise Fee
$2,500
Min Cash Required
$25,000
Total US Locations
1,621
Business Summary
QUALITY operates hotels under brand names such as QUALITY INN®, QUALITY INN & SUITES®, QUALITY SUITES®, QUALITY HOTEL®, or QUALITY RESORT®. These hotels provide accommodations and associated services, typically offering amenities like breakfast, in-room coffee, and high-speed internet access. Depending on the specific brand, Quality hotels can be mid-scale, multi-story facilities with a certain number of guestrooms, some including two-room suites, full-service restaurants, or specialized resort features. Quality aims to provide a warm atmosphere and helpful service to its guests.
Corporate History
Choice Hotels International, Inc. was originally founded in 1939 as Quality Courts United by seven independent motel owners in Florida who gathered to discuss customer needs and share best practices. In 1941, the group formalized its relationship, creating the nation's first hotel chain. In January 1963, the organization officially became a for-profit corporation named Quality Courts Motels, Inc. The company changed its corporate name to Choice Hotels International, Inc. on July 25, 1990, after expanding and developing additional hotel brands and entering new markets. Quality Inn, one of its primary trademarks, has been franchised since 1968. Choice Hotels International has also been involved in international franchise operations through indirect subsidiaries since approximately 1958. In 2013, it established SkyTouch Solutions, LLC, a subsidiary for cloud-based technology products. More recently, in 2022, Choice Hotels International acquired Radisson Hospitality, LLC and its subsidiaries.
Financial Overview
Investment Range
$316,945 - $2,045,895
Franchise Fee (Low)
$2,500
Franchise Fee (High)
$47,850
Minimum Cash Required
$25,000
Royalty %
5.25%
Marketing %
3.5%
Equipment Costs (Low)
$153,800
Equipment Costs (High)
$1,396,800
Working Capital
$37,500
Audited Financials
Yes
Offers Financing
Yes
Audit Opinion
Unqualified opinion
Financial Health Notes
The consolidated financial statements of Choice Hotels International, Inc. received an unqualified opinion from its independent registered public accounting firm for the years ended December 31, 2024, 2023, and 2022, indicating that the statements present fairly in all material respects. However, the company's total shareholders' (deficit) equity was negative $45.271 million as of December 31, 2024, a decrease from positive $35.598 million in 2023, primarily due to treasury stock repurchases. The company has significant long-term debt, totaling $1.768 billion in 2024, an increase from $1.068 billion in 2023. A critical audit matter noted was the complexity of accounting for the Choice Privileges Loyalty Program, particularly in estimating future redemption rates, although the auditor concluded that controls were effective.
Financing Details
Choice Hotels International, Inc. offers several direct financing options to its franchisees. For the affiliation fee, Choice Hotels International may provide a no-interest promissory note, typically due in a single lump sum within three months of signing, which may require personal guarantees from the owners. In cases of default, an 18% annual interest rate (10% in California) applies. Choice Hotels International also offers 'Selected Capital Support' to offset development and opening costs for strategically important properties. The amount varies based on creditworthiness, evidenced by a promissory note (Exhibit H.A.), with forgiveness amortized over 10 or 20 years if certain defaults are avoided, and interest only accruing upon default. An 'Incentive Program' provides $2,000 per room (up to a maximum of $174,000) for qualifying new construction or conversions, documented by a 10-year forgivable promissory note (Exhibit H.B.). Franchisees can opt for a 5-year note for 50% of this incentive. If a default occurs, interest at Prime plus 2% (or Prime plus 7% if the default payment is delayed) becomes due on the unforgiven balance. For existing Quality branded hotels that are re-licensed, qualifying franchisees receive a 50% discount on the affiliation fee. Choice Hotels International also has non-exclusive Qualified Vendor agreements with third-party lenders like PMC Commercial Trust, Balboa Capital Corporation, and Ascentium Capital LLC, which offer conventional and lease financing for various costs, but these are not direct financing from Choice Hotels International.
Performance Metrics
Total US Locations
1,621
Franchised Units
1,621
Corporate Units
0
Franchising Since
1958
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
78
Litigation Summary
Choice Hotels International has several ongoing and resolved legal matters. Currently, there are four pending cases: Norma Knuth v. Radisson Hotels International, Inc. et al., a class action lawsuit filed in 2014 concerning undisclosed destination marketing fees in Canada; Jai Sai Baba, LLC, et al. v. Choice Hotels International, Inc., et al., a 2020 lawsuit alleging discriminatory and anti-competitive practices, Racketeer Influenced and Corrupt Organizations Act (RICO), Sherman Act, Civil Rights Act violations, breach of contract, and fraud, which is stayed pending individual arbitration; T&T Management, Inc. v. Choice Hotels International, Inc., et al., a 2023 case alleging breach of contract and guest data misappropriation, transferred to Minnesota and awaiting a decision on a motion to dismiss; and CS Anaheim Hotel Investments, LLC v. Choice Hotels International, Inc., a 2024 complaint alleging a fraudulent rebate scheme, misuse of system fees, misrepresentation, and other violations, for which Choice Hotels International filed a motion to compel arbitration. Additionally, in the past year (2024), Choice Hotels International initiated 70 actions in arbitration or federal/state court to recover royalties, liquidated damages, and other debts from various franchisees. Regarding resolved litigation, in 2021, Sender Kohl v. Choice Hotels International, Inc. settled with Choice Hotels International paying $85,000 to its former franchisee. In 2023, Highmark Lodging, LLC, et al. v. Choice Hotels International, Inc., et al. resulted in a final judgment against Choice Hotels International for $779,398.40. Dahya Investments Incorporated, et al. v. Choice Hotels International, Inc., et al. concluded in 2023 with Choice Hotels International paying $882 for breach of contract, while Dahya was ordered to pay Choice Hotels International $603,483 for attorneys' fees. Lastly, in 2024, Choice Hotels International v. DIP Hospitality, LLC, et al. resulted in Choice Hotels International winning $256,051.37 for unpaid fees, while DIP Hospitality, LLC won $4,411,678.56 for wrongful termination and was awarded $430,125.87 in fees and costs.
Bankruptcy History
Choice Hotels International, Inc. has no bankruptcy information required to be disclosed.
Agreement Terms
Initial Term
20 years
Renewal Conditions
Choice Hotels International, Inc. does not offer a provision for renewal after the initial 20-year term expires. However, both parties have the right to terminate the agreement, with or without cause, on the 5th, 10th, and 15th anniversaries of the Opening Date, provided a 12-month prior written notice is given and all fees are paid up to the termination date. Participation in the Incentive Program waives this termination right on the 5th anniversary, unless a 5-year Incentive Addendum is executed.
Training & Support Program
Franchisor Assistance
Choice Hotels International, Inc. provides extensive support to its Quality franchisees. Before opening, the franchisor assists with site selection approval and reviews construction plans for compliance with prototype design specifications. The Opening Services department assigns an Onboarding Project Director and Opening Services Manager to help franchisees meet contractual milestones, coordinate training, enroll in marketing programs, and ensure the hotel meets brand standards. The franchisor also makes electronic copies of the Rules and Regulations available. For training, mandatory programs include a 3-day Choice Onboard orientation at corporate locations (North Bethesda, Maryland or Scottsdale, Arizona) for owners and general managers, covering Choice's system, loyalty program, and operations. There's also a mandatory virtual Hospitality Operations Success Training (HOST) program for managerial staff, which includes self-paced online lessons, live workshops, and exams on various operational topics. For relicensed hotels, customized training videos and virtual sessions are provided. Additionally, mandatory choiceADVANTAGE remote onboarding offers dedicated support for software setup and usage. An annual Educational Resources Program is also available for a fee. Post-opening, Choice Hotels International administers quality assurance programs with periodic visits and guest satisfaction surveys. It provides a comprehensive advance reservation system and manages national, international, and regional advertising and promotional programs, funded by the Marketing and Reservation Fee. The franchisor also offers ongoing remote support and updates for the choiceADVANTAGE software and may periodically assemble franchise advisory councils.
Initial Training Hours
69
Training Location
North Bethesda, Maryland or Scottsdale, Arizona
Ongoing Support
After opening, Quality franchisees receive ongoing support from Choice Hotels International, Inc. This includes a quality assurance program with periodic visits to evaluate compliance and guest satisfaction surveys, with advice on necessary changes. Choice Hotels International provides an advance reservation system and manages national, international, and regional advertising and promotional programs, funded by the monthly Marketing and Reservation Fee, to promote the hotels and the system. Franchisees also receive continuous remote support for the choiceADVANTAGE software, including enhancements, updates, and online training. Choice Hotels International may also periodically convene franchise advisory councils to discuss System-related issues.
Franchise Requirements
Industry Experience Required
No
Management Experience Required
Yes
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Commercial
Owner Participation
Supervisory
Territory Type
Limited
Territory Size Requirements
Each Quality hotel is granted an Area of Enhanced Protection, defined in radial miles based on its market category (Primary/Airport, Highway, Urban, Resort, Suburban, Small Town Metro). For example, a Primary market location at an Airport has a 1-mile radius protection, while a Secondary market location at an Airport has a 5-mile radius. In these areas, Choice Hotels International generally will not grant a franchise for a same-brand hotel, unless the market is inadequately served and an incremental impact study concludes that a proposed new franchise will not reduce the existing hotel's annual gross room revenues by more than 5% (or 3% for new construction hotels within 18 months). Franchisees also have objection rights for same-brand applications outside their Area of Enhanced Protection, within specified notification areas (e.g., 7 miles for Primary markets).
Staffing Notes
Quality franchisees are required to have a certified General Manager at their hotel. Choice Hotels International, Inc. provides training for this role through its Hospitality Operations Success Training (HOST) program. At least one hotel staff member in a managerial role must complete this HOST certification within 90 days of the hotel's opening or re-licensing and must be present on the hotel premises.