In recent years, the short-term rental industry has been booming, and with the intense competition around, it’s becoming harder to get your business off on the right foot. Luckily, a vacation rental franchise can help hosts to launch a business or expand a current one with the help of a more established brand.
In fact, according to iTrip Vacations, the short-term rental property management franchise industry alone is worth $30 billion. Here are the ins and outs you need to know about this exciting business model.
A vacation rental franchise is a special type of license through which a franchise owner (a franchisor), in exchange for a franchise fee, grants the franchisee (local property manager) the right to utilize its business resources and sell its products under their brand’s name.
As mentioned above, in exchange for a franchise fee, royalty, or other benefits, you, as a host, can get access to multiple resources of an established property management company. A vacation rental franchise allows you to make use of a company’s trademarks, proprietary knowledge, technology, and processes. This way, you can start your own vacation rental business without acquiring a property.
A franchisor will be providing you with continuous support and training. This means you will be able to scale your business faster, having valuable knowledge and proven strategies up your sleeve. In return, as a franchisee, you will be accountable for handling the whole host of property management operations such as cleaning, maintenance, check-ins/checkouts, etc.
There are a few key aspects that set the franchise model apart from other well-known business models. By paying attention to the following five points, you will be able to gain a better understanding of which route will be best for your setup.
An established company has worked out its unique way of operation (strategies and tactics) that are shared with a franchisee. This way, a franchisee doesn’t have to look for the best practices to operate their business. These strategies are usually spelled out in a contract and you, as a franchisee, must adhere to them.
Usually, you will need to pay a franchise fee, setup costs, and ongoing royalties. The good news is that it might be easier for a franchisee than for a small business owner to receive financing. The reason for this is that, unlike a completely new business, a franchise uses a proven model. In fact, many banks employ specialist franchise advisors who will be able to share professional advice regarding the best financing option.
A franchisor might also help in obtaining funding for their franchise. For example, the franchisor might give you the option to pay the initial fee in installments.
Franchisors provide franchisees with their branding elements to incorporate them in all designs. As a private small business owner may have difficulties finding appropriate marketing channels and build a brand (this is an expensive process that requires lots of time and effort), franchisors also supply their franchisees with marketing and advertising. Usually, franchisees are charged royalties to cover these costs.
One of the major benefits that the franchise model offers over owning your own property management business is that the franchisor will give your initial training and ongoing support. As they have been in the business for years, they have a wealth of knowledge and often proprietary technology that they can share.
It is important to remember that a franchisee signs a legally binding agreement with a franchisor when joining a franchise program. This contract has certain terms and conditions that franchisees must adhere to for the duration of their franchise journey. In some instances, these rules can be quite restrictive if you want to run your business in your own way.
Considering all things, a franchise program can offer a long list of advantages. The biggest benefit is that it gives you the chance to do what you love while earning money for it. However, there are a few key drawbacks that you also need to keep in mind. While it offers you flexibility, there are certain elements that you will have little to no control over.
The good news is that you do not need to boast any prior experience in the vacation rental industry if you want to become a franchisee. That being said, you need to have certain traits which will help you along the way and increase your chances for long-term success. These include an entrepreneurial spirit, motivation, an interest in customer service, and organizational skills.
After all, most vacation rental franchise programs offer comprehensive resources to get you started. So, you can also rest assured knowing that they will share their experiences with you to help you kickstart your own business.
If a vacation rental franchise sounds like the type of business model that will suit your preferences and goals, here are the top seven programs that you can look at.
Founded in 2008, iTrip Vacations is a multimillion-dollar vacation rental franchise program that operates from Panama City Beach, Florida. Their team of short-term rental and real estate experts can help you to build and manage your own real estate empire. Currently, there are open markets in the majority of the states across the US.
To get started, you will require an initial franchise fee of at least $55,000. Other costs include a 5% royalty fee and a monthly SaaS fee of $540.
Boasting more than 7,000 units, Direct Booker is one of the biggest European property management companies. Included in their franchise package are registered know-how, branding, in-house developed technology, and support. As they have been in the business for more than a decade, they use proven and tested standards and procedures.
The entrance fee starts from €3,000. This one-time payment will include the costs or initial training. The franchise fee is worked out as a percentage of the reservations’ gross revenue.
SkyRun adds resorts by identifying local entrepreneurs that work and reside close to the resort area. They will then assist them in beginning a new vacation rental property management business or expand their existing one. Highlights of their program include a hosted website that has been optimized, a back-office system, and a network of wholesalers.
To start, you will need an investment of $75,000 – $100,000. The initial SkyRun license fee of $65,000 is included in this liquid capital. Other costs include 4.5% of your gross rental receipts for ongoing support and royalties (a minimum of $350 per month) and a mandatory 1% for national marketing.
Book by Owner is a property management company that is based in the United States and operates in 9 states. Unlike other vacation rental franchises, they do not include marketing services. Instead, they give franchisees access to proprietary software, processes, partners, suppliers. They also offer training and an exit strategy if you want to sell your business.
Based in Switzerland, Happy Holiday Homes boasts 1,500 property rentals in Italy and other European countries. They provide franchisees with an accounting system, property management software, and other technology they will need to manage 20+ homes. Initial training and continual support are also in place to help franchisees grow their businesses.
Property Management Inc. concentrates on residential, commercial, association, and vacation rental management. It was founded in 2008 and described by Entrepreneur Magazine as the property management franchise that has grown the fastest. What’s more, the magazine also ranked them as the best property management franchise for four consecutive years.
To start, you’re looking at anything from $21,000 to just over $100,000. There is also a franchise fee that ranges from $15,000 – $62,900. Other requirements are a minimum net worth of $60,000 and a minimum liquid capital of $50,000.
Based in London, Pass the Keys is a full-service property management company. Since it was founded in 2015, it has grown by 300% year on year. Currently, they operate in 17 cities in the United Kingdom and offer franchise opportunities to entrepreneurs who are new to the industry. Franchisees will also receive support regarding operations, branding, and advertising and can take advantage of the company’s technology. According to their website, with their technology, one person will be able to manage as many as 50 properties successfully.
The short-term rental industry remains highly competitive. To keep up, you will need to draw from others’ experiences where you can and implement best practices to be ahead of the curve. While franchising can offer you access to proprietary software, in many instances, you do not need to look further than a vacation rental software like iGMS.
Used by professional hosts and property management companies, iGMS leverages innovative approaches that are inspired by new trends. It can help you to save time on routine tasks like guest messages, cleaning management, and many of your other daily responsibilities, including:
About the Author
Olga Vasylieva is the Content and Social Media Team Lead at iGMS. Olga is on a mission to help hosts and property managers grow their businesses and deliver an excellent guest experience. She is a travel enthusiast and is inspired by life in all its aspects.
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