Sonesta Hotels and Resorts Franchise
Audited FinancialsRisk Score
Pending analysis
Investment Range
$1,686,832 - $99,911,224
Franchise Fee
$15,000
Total US Locations
49
Business Summary
Sonesta Hotels and Resorts Franchising Inc. grants franchises to operate full-service, upscale hotels under the Sonesta Hotels and Resorts brand or upper upscale hotels under the Royal Sonesta brand. These Brand Hotels offer stylish rooms and authentic local touches. Franchisees become part of the Franchise System, gaining access to a reservation service, marketing programs, training, and operational standards for construction, furnishing, operation, and appearance.
Corporate History
Sonesta RL Hotels Franchising Inc. was founded in Washington on December 24, 1986, as Vance Hotels, Inc. The company changed its name to Red Lion Hotels Franchising, Inc. in 2005, and then to Sonesta RL Hotels Franchising Inc. in 2021. Its parent company, Red Lion Hotels Corporation (RLHC), has been involved in hotel ownership and management since 1978. In 2021, RLHC merged with Sonesta International Hotels Corporation, becoming a wholly-owned subsidiary of Sonesta. Sonesta RL Hotels Franchising Inc. has expanded its brand portfolio through several acquisitions, including GuestHouse and Settle Inn brands in 2015, and Vantage Hospitality Group brands (such as Lexington and Americas Best Value Inn) in 2016. In 2018, it acquired the Knights Inn brand, and in 2022, an affiliate acquired The James hotel brand. Sonesta RL Hotels Franchising Inc. began offering franchises under the Sonesta Hotels and Resorts brand in September 2021 and the Royal Sonesta brand in October 2022. The company also offers franchises for numerous other hotel brands, including Sonesta ES Suites, Sonesta Simply Suites, Sonesta Select Hotels, Sonesta Essential Hotels, Red Lion Hotel, Red Lion Inn & Suites, Signature Inn, Knights Inn, and Americas Best Value Inn, maintaining its focus on hotel franchising and management.
Financial Overview
Investment Range
$1,686,832 - $99,911,224
Franchise Fee (Low)
$15,000
Franchise Fee (High)
$125,000
Royalty %
5%
Marketing %
3.5%
Equipment Costs (Low)
$232,875
Equipment Costs (High)
$14,101,875
Working Capital
$1,252,095
Audited Financials
Yes
Offers Financing
Yes
Audit Opinion
Unqualified opinion
Financial Health Notes
Red Lion Hotels Corporation's financial statements for 2023 were restated to correct errors in the cash flow statement, though this did not impact net income or the balance sheet. The company has experienced losses in two of the last three years (2024 and 2022), resulting in an increasing accumulated deficit. Cash and cash equivalents significantly decreased from $37.7 million in 2023 to $13.3 million in 2024. However, the company's parent, Sonesta, provides support for working capital and vendors, and Red Lion Hotels Corporation has the ability to seek additional funds from Sonesta if needed. A partial valuation allowance was recorded against deferred tax assets in 2023 and 2024, indicating uncertainty about the realization of those assets. Despite these factors, the independent auditor issued an unqualified opinion, without a going concern qualification, on Red Lion Hotels Corporation's financial statements.
Financing Details
Sonesta RL Hotels Franchising Inc. may offer financial incentives to hotels new to the Sonesta brand, at its discretion. These incentives are financial contributions to help with the development or conversion of a hotel, ranging from $3,000 to $6,000 per guest room for Sonesta Hotels and Resorts, and $4,000 to $9,000 per guest room for Royal Sonesta. To receive this incentive, franchisees must sign a development incentive promissory note. The incentive amount is disbursed within 45 days after the hotel opens, provided certain conditions are met, such as the hotel operating in accordance with the agreement and the franchisee's financial condition being satisfactory. The repayable portion of the note is forgiven annually based on the Franchise Agreement's term (e.g., 1/20th per year for a 20-year term). Repayment of the remaining balance is required if the Franchise Agreement is terminated early or if there is a transfer of the hotel. If repayment is late, the outstanding amount accrues interest at 18% per annum or the highest legal rate, plus collection costs. Sonesta RL Hotels Franchising Inc. does not require a security interest, but owners with 20% or more ownership must guarantee these obligations. Aside from this incentive program, Sonesta RL Hotels Franchising Inc. and its affiliates do not offer other direct or indirect financing to franchisees.
Performance Metrics
Total US Locations
49
Franchised Units
6
Corporate Units
43
Avg Square Footage
148,500
Franchising Since
1999
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
20
Litigation Summary
Sonesta RL Hotels Franchising Inc. has a history of both pending and concluded litigation. Currently, a class action lawsuit filed in August 2023 is pending against former TravelCenters of America Inc. board members, including Adam Portnoy, a director of Sonesta RL Hotels Franchising Inc. This lawsuit alleges breaches of fiduciary duties related to a merger and claims conflicts of interest. The case was dismissed in May 2024 but is currently under appeal, with oral arguments anticipated in April 2025. Additionally, Sonesta RL Hotels Franchising Inc. filed three new lawsuits in June 2024 against former franchisees and their guarantors to collect unpaid amounts and liquidated damages. In terms of concluded litigation, eight lawsuits were filed in early 2021 by stockholders of Red Lion Hotels Corporation, Sonesta RL Hotels Franchising Inc.'s parent, concerning a merger. These lawsuits, alleging insufficient information in the proxy statement, were dismissed by March 2021, and a settlement for $240,000 in attorneys' fees was reached in September 2021. Other past cases include a September 2018 lawsuit by Radisson Hotels International alleging tortious interference, which was settled in August 2021 for $500,000. Sonesta RL Hotels Franchising Inc. was also involved in several breach of guarantee and breach of contract lawsuits against former franchisees and their guarantors between 2016 and 2019, which were subsequently settled. These settlements included payments to Sonesta RL Hotels Franchising Inc. ranging from $10,500 to $500,000.
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, Sonesta RL Hotels Franchising Inc. franchisees must give timely notice of election to acquire a successor franchise no more than one year and no less than nine months before the agreement expires. They must have substantially complied with the Franchise Agreement during its term and not have received four or more default notices. On both the date of renewal notice and the new term's commencement, they must be in full compliance with the Franchise Agreement and all Brand Standards. Franchisees need to maintain possession of their hotel premises and remodel or expand it as required to meet then-current Brand Standards. If required by Sonesta RL Hotels Franchising Inc., they must transition their hotel to a different brand concept offered by Sonesta RL Hotels Franchising Inc. or its affiliates, including necessary remodeling and replacement of branding elements. Any identified deficiencies must be corrected before renewal. Franchisees must sign Sonesta RL Hotels Franchising Inc.'s then-current form of franchise agreement, which may have materially different terms, and any other ancillary agreements then used for new franchises. A renewal fee equal 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 various forms of support before and after a hotel opens. Pre-Opening Assistance: For hotels converting to a Brand Hotel, Sonesta RL Hotels Franchising Inc. conducts an initial inspection and develops a Property Improvement Plan (PIP) detailing required renovations. It reviews and approves plans, layouts, specifications, and drawings for the hotel, including furnishings, fixtures, equipment, and décor. Sonesta RL Hotels Franchising Inc. inspects the hotel during or after renovation or construction to ensure compliance with Brand Standards. It provides onboarding services and initial brand training for one Hotel Representative, covering brand programs, marketing, sales, loyalty, and brand culture. Franchisees receive a Brand Manual outlining operational standards and a list of approved suppliers. A project manager or onboarding specialist is also assigned. Operational Phase Obligations: During operation, Sonesta RL Hotels Franchising Inc. provides access to required and optional training programs, which can be virtual or in-person. It convenes a Brand Conference at least every 24 months for networking and educational seminars. Sonesta RL Hotels Franchising Inc. may periodically advise franchisees on hotel operations, administers the Sonesta Travel Pass loyalty program, and provides access to IT and franchise services help desks. It updates the Brand Manual to reflect modifications to Brand Standards and provides access to a Third-Party Distribution Program for reservations. Sonesta RL Hotels Franchising Inc. indemnifies franchisees for authorized use of Marks in trademark disputes and operates and maintains the Central Reservation System. Franchisees are also offered the opportunity to participate in the Revenue Management for Hire program.
Initial Training Hours
33
Training Location
Virtual or on-site at your hotel or another designated location
Ongoing Support
After opening, Sonesta RL Hotels Franchising Inc. provides ongoing support to its franchisees. This includes access to required and optional training programs, which may be conducted virtually or in-person, at a cost of $2,000 per day for in-person, on-site training, or $200 per hour for virtual ad hoc training. Franchisees and their General Manager are required to attend a Brand Conference at least every 24 months, which offers networking opportunities and educational seminars. Sonesta RL Hotels Franchising Inc. may also periodically advise franchisees on hotel operations, manage the Sonesta Travel Pass loyalty program, and provide access to IT and franchise services help desks. The franchisor updates the Brand Manual with new standards and offers participation in a Third-Party Distribution Program for reservations. Additionally, franchisees can participate in the Revenue Management for Hire program. Franchisees are responsible for ensuring their personnel are adequately trained, with new Hotel Representatives required to complete initial brand training if the previous one leaves.
Franchise Requirements
Ideal Candidate Profile
Sonesta RL Hotels Franchising Inc. looks for franchise candidates who meet its current standards, including educational, managerial, and business standards. Ideal franchisees should possess a good moral character, business reputation, and credit rating. They need to demonstrate the aptitude and ability to operate a hotel and have sufficient equity capital for the venture. While personal participation in daily operations is recommended, it is not strictly required, as franchisees can engage an approved Management Company to manage the hotel.
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Commercial
Owner Participation
Supervisory
Territory Type
Non-Exclusive
Territory Size Requirements
Sonesta Hotels and Resorts and Royal Sonesta franchisees do not receive an exclusive territory. They may face competition from other franchisees, from company-owned outlets, or from other distribution channels or competitive brands controlled by the franchisor. In special circumstances, the franchisor may grant a Brand Hotel an exclusive or protected area where another Brand Hotel will not be franchised, if the franchisor's sole judgment deems it warranted. However, the default is a non-exclusive territory with no specified size or geographic boundaries.
Staffing Notes
Sonesta RL Hotels Franchising Inc. requires each hotel to be managed full-time by a General Manager who meets its minimum qualifications and has completed specific training. If the General Manager leaves or no longer qualifies, a replacement must be found within 60 days. Franchisees have sole responsibility for all employment decisions, including hiring, firing, training, compensation, and schedules, and must manage these functions in compliance with applicable employment laws. Franchisees can choose to hire a third-party Management Company, subject to Sonesta RL Hotels Franchising Inc.'s approval, with the Management Company being jointly and severally liable for most franchise obligations. All employees must be informed they are the franchisee's employees, not Sonesta RL Hotels Franchising Inc.'s. Additionally, the hotel's revenue manager must have at least four years of verifiable experience in a revenue management specific role and formal training/certification in the revenue management system, unless the hotel participates in Sonesta RL Hotels Franchising Inc.'s Revenue Management For Hire program.