Hotel franchise: how a franchisee grows on brand margin

A hotel franchise is less about the logo on the building and more about knowing what happens behind every line of the P&L. If you operate hotels and want to grow beyond what your own hours allow, the questions are practical: why franchise instead of building your own brand, how do you know the brand pays for itself, and how do you make a struggling hotel profitable?

Martin Hendricks, founder and CEO of Black Label Hotels, has answered those questions in practice. Working as a franchisee, he grew a hospitality group from a castle guesthouse to around ten hotels under brands such as Hilton.

Why growth needs a model beyond your own hours

Most operators start as a one-person show. After the 2008 financial crisis cancelled the acquisition career he had planned, Martin took on a castle with a guesthouse of eight rooms and began renting it out for weddings and short stays. In the first year he did the linen himself, with two or three washing machines running. Within a few years the venue went from one or two weddings a year to being fully booked with 80 to 90 weddings a year.

That success also showed the limits of a one man show. In his view you can put in 16 to 18 hours a day, but no more, and that makes scaling impossible. Events added another problem: every wedding starts from scratch, the stress is high and the cash flow goes up and down. A small boutique hotel of 12 rooms next to the event location told a different story. Guests checked in and out, occupancy was good and there was always cash coming in. That contrast made the choice clear: if you want to scale, hotels are the way to go.

Why choose a hotel franchise over your own brand

In this model the operator signs a lease with a developer and carries the full risk of the operation, while the hotel trades under an international brand. That is how Black Label Hotels works. The relationship with Hilton started almost by accident. A developer wanted to work with Martin but needed an international brand, so he searched LinkedIn and his hotel school network for the right contact. The result was a DoubleTree by Hilton, which the group still operates.

The case for a hotel franchise, as Martin sets it out for an operator who wants to grow, rests on three points:

• Distribution. The reach of a large chain is much bigger than what an independent operator can build alone, so the ramp up phase to a stable level of trading is shorter.
• Brand margin. Guests are willing to pay more for a room under a known brand than for an unbranded property. That difference is the brand margin.
• Measurable results. Because the market data is available, the value of the brand can be checked instead of assumed.

How to measure brand margin with STR data

Some people call brand margin a myth, but Martin sees it as something you can measure once a hotel has traded for a couple of years. Every hotel is in the STR database, so you can compare your own average daily rate with that of your competitive set. The test is simple: does the rate gap cover the fee you pay to the brand? It is a check that revenue management in hotel industry teams know well.

“What's our ADR? What's the ADR of the competitors? And you can see there is a gap between. And that gap, if the gap exceeds your franchise fee, it's happy days.”

Martin Hendricks, 32:38

Capital, guarantees and the right partner

Growth through leases is capital intensive. When an operator signs a lease for 25 years, developers usually ask for a bank guarantee of 12, 18 or even 24 months. With the excess cash of a small group, Martin explains, you can do that once or twice over a few years.

In early 2024 a Dutch family office joined as shareholder and started helping with these guarantees. Martin describes the effect as rocket fuel. He stresses that the partner has an evergreen, long-term strategy rather than a plan to sell in three to five years, which also gives developers confidence that the same operator will still be there when a hotel opens years later. You can hear more about this in the Lead the Experience series.

Small changes across the whole P&L

A turnaround rarely needs one big move. Martin's clearest example is a Holiday Inn in Eindhoven with 270 keys that had made a loss for nine years. The owner bought it to redevelop the property and asked Black Label to run the operation from 1 August 2024. By the end of that year the hotel was making money. The team did not change the hotel drastically; they aimed to improve every line of the P&L by 5 to 10 percent.

“If you change just small things but in a hundred different positions, you will have a massive impact on the operational effects.”

Martin Hendricks, 39:47

Some issues were obvious. The ratio of staff hours to total revenue was far too high, often because it had become easy to plan in an extra shift. Other gains took more digging, such as checking which supplier contracts were open to renegotiation. Being part of a larger group helped here.

“If you run one of them, you run 10 or 11, you get better prices, right?”

Martin Hendricks, 42:47

Combined with a stronger top line, these lower costs moved the hotel from loss to profit quickly. Restoring hotel profitability usually works this way, through many small gains.

What hoteliers can take from this approach

Martin's main argument is that his team are hospitality people, not real estate or finance people. That operational knowledge is what makes the hotel franchise model work for them. A few lessons stand out:

• Start before everything is perfect, but move to a model that does not depend on your own hours.
• Choose a brand on numbers: compare ADR with your competitive set and check it against the fee. Know your guests first through hotel market segmentation.
• Find capital partners whose time horizon matches the length of your leases.
• In a turnaround, check staffing ratios and supplier contracts first, then improve every cost line a little.
• Keep relationships alive. The Hilton contact and the Eindhoven deal both came through his hotel school network.

The group now focuses its growth on Belgium and Germany, with Luxembourg, Austria and Switzerland also in view, and has a secured pipeline of about ten more hotels with openings planned up to 2028 and 2029. For the full story, including how the team got through COVID, watch the full conversation.

Frequently asked questions

How does a hotel franchise work for the operator?

The franchisee runs the hotel under a brand such as Hilton, while carrying the operational risk itself. In Martin Hendricks' model, Black Label Hotels signs a lease with a developer, pays franchise fees to the brand and in return gets the brand's distribution and name. The operator is responsible for staffing, costs and results, so the profit or loss sits with the franchisee, not with the brand.

What is brand margin in a hotel?

Brand margin is the difference between what a guest is willing to pay for a room under a known brand and what the same guest would pay for an unbranded property. According to Martin Hendricks, you can only really measure it after a few years of trading, by comparing your ADR with your competitive set in STR data. If that gap is larger than the franchise fee, the brand pays for itself.

Why is a hotel lease so capital intensive?

When an operator signs a long lease, often 25 years, developers usually ask for a bank guarantee covering 12 to 24 months of rent. Martin Hendricks explains that with their own excess cash Black Label could only do that once or twice in a few years. A long-term shareholder that helps set these guarantees is what made faster growth possible for the group.

How do you turn around a loss-making hotel?

In the Eindhoven case discussed in the episode, the approach was not a drastic overhaul. The team checked staffing hours against total revenue, reviewed every supplier contract, used the buying power of a larger group and aimed to improve each line of the P&L by 5 to 10 percent. Many small gains across the whole P&L added up to a hotel that made money within months.