How are base management fees generally calculated for a Caption By Hyatt franchise?

According to Caption By Hyatt's 2025 Franchise Disclosure Document, base management fees are generally calculated as a percentage of gross revenues. These fees, along with incentive management fees, are considered part of the gross fees. The incentive management fees are typically based on a hotel profitability measure. These management fees also include compensation for providing the hotel access to Hyatt's intellectual property.

For a prospective Caption By Hyatt franchisee, this means that a portion of their revenue will be allocated to base management fees, calculated as a percentage of their total gross revenue. Additionally, they may be subject to incentive management fees if the hotel achieves certain profitability targets. Understanding the specific percentages and profitability targets is crucial for forecasting expenses and potential earnings.

The FDD also mentions that these fees are part of a broader category of gross fees, which are later reduced by key money assets amortization and performance cure payments. Franchisees should be aware of these additional fees and deductions, as they can impact the overall financial performance of the franchise. It is important to review the specific terms and conditions outlined in the franchise agreement to fully understand how these fees are calculated and when they are due.

In the hotel franchise industry, it is common for franchisors to charge a base management fee as a percentage of gross revenues, along with incentive fees based on performance. This structure aligns the franchisor's interests with the franchisee's, as the franchisor benefits from higher revenues and profitability. However, the specific percentages and targets can vary widely, so it is essential for prospective franchisees to carefully evaluate the fee structure and ensure that it is reasonable and sustainable for their business.