How to Finance an Econo Lodge Franchise: Roadside Motel Buys
By Chris Cornella
An Econo Lodge franchise loan usually finances a small roadside or highway hotel: buying one that already flies the flag, converting an independent motel, or paying for the renovation work the brand requires. Because the price of the real estate dominates the deal and the brand has a specific SBA Franchise Directory note about management companies, the way you structure ownership and operations matters as much as the purchase price.
US Professional Funding is not affiliated with, sponsored by or endorsed by Econo Lodge or Choice Hotels International; the name is used only to describe the business. Figures from the franchisor’s disclosure document and annual report can change, loan programs and terms vary by lender and borrower, and every loan is subject to approval. Nothing here is legal, tax or investment advice. Review the current Franchise Disclosure Document (FDD) and franchise agreement with a qualified franchise attorney and accountant.
Econo Lodge Franchise Loan at a Glance
- Franchisor: Choice Hotels International, headquartered in North Bethesda, Maryland
- Segment: economy; the franchisor calls Econo Lodge an “easy stop on the road” for value-oriented travelers
- System size: 642 hotels with 37,528 rooms in the United States at December 31, 2024, per the company’s annual report; 651 hotels with 37,023 rooms worldwide at December 31, 2025, per its full-year 2025 results
- Royalty: the annual report says royalties under the company’s U.S. franchise agreements typically range from 5% to 6% of gross room revenues
- Marketing and reservation fees: typically 3% to 4% of gross room revenues, per the same report
- Franchise term: U.S. agreements generally run 10 to 30 years
- Initial fees and investment: set out in Items 5 through 7 of the current FDD
- SBA Franchise Directory: listed as Econo Lodge by Choice Hotels and Econo Lodge Inn & Suites by Choice Hotels (code S0566), with a management agreement note
What Is Econo Lodge?
Econo Lodge is one of the best-known names in economy lodging. The brand celebrated its 50th anniversary in 2019, and today it is franchised by Choice Hotels International as that company’s economy brand. The franchisor describes it as one of the most recognized brands in the economy segment.
The guest offer. According to the franchisor, Econo Lodge hotels offer free Wi-Fi, a free continental breakfast, conveniently placed charging outlets, refrigerators, free morning coffee and premium movie channels, and many locations are pet-friendly. Guests can book through the franchisor’s loyalty program, which is free to join.
The typical property. Most Econo Lodge hotels are modest, limited-service buildings near highways and in smaller markets. The worldwide totals for 2025 work out to fewer than 60 rooms per hotel on average, which tells you most deals are small enough for owner-operators and family businesses.
A refreshed room standard. In 2019 the franchisor reported that the brand had completed a five-year, seven-phase Guestroom Improvement Program, adding wood-look luxury vinyl tile flooring, flat-panel televisions, micro refrigerators, new bedding, ergonomic desk chairs and modern lighting. Those standards shape what a property improvement plan (PIP) will ask of a buyer or converting owner.
How lenders see the brand. Lenders value Econo Lodge for its name recognition, reservation system and loyalty program, and they know economy hotels often run with lean staff. They also know the segment is sensitive to travel and fuel costs: the company reported lower U.S. economy-segment revenue per available room in 2025. A strong Econo Lodge franchise loan request accounts for both the brand’s reach and that sensitivity.
Econo Lodge Franchise Costs
Affiliation fee. The company’s annual report explains that its franchise fees have three parts: an affiliation fee due when the franchise agreement is signed, a royalty and a marketing and reservation system fee. The Econo Lodge affiliation fee and any per-room or application charges appear in Item 5 of the current FDD. The annual report also says the company may offer developers incentives such as fee discounts.
The hotel itself. For most buyers, the real estate is the biggest number. You are either buying an existing hotel at a price driven by its income and condition, or contributing a property you already own to a conversion.
The PIP. The franchisor may require a PIP for hotels joining the system and can require existing hotels to complete improvement plans at set contractual windows. For an economy hotel, typical PIP items include exterior paint and signage, guest room flooring and soft goods, televisions, bathroom updates, breakfast area equipment and technology.
FF&E, technology and opening costs. Furniture, fixtures and equipment, the property management system, initial supplies and linens, training and pre-opening payroll.
Total investment. Item 7 of the current FDD gives the estimated initial investment for each project type. Expect categories like these, and confirm they add up to the stated total:
- Affiliation fee and any application fee
- Purchase price or land and building costs
- PIP construction and renovation
- Furniture, fixtures and equipment
- Exterior and interior signage
- Property management and reservation technology
- Opening supplies, linens and training
- Additional funds for the initial operating period
Ongoing Fees and How They Affect Your Loan
Royalty. The company’s annual report says U.S. royalties typically range from 5% to 6% of gross room revenues. Your actual rate, and any early-year discount, is in your franchise agreement.
Marketing and reservation fees. These typically range from 3% to 4% of gross room revenues and support national marketing, the central reservation system and the loyalty program.
Other charges. Item 6 of the FDD lists technology fees, loyalty program charges, training fees and transfer fees. Read it closely, because economy hotels have thin margins and small fixed fees matter more on a low room rate.
How lenders factor these costs in. Brand fees tied to room revenue come out of net operating income before debt service, so lenders build them into projections as a percentage of rooms revenue. They also set aside a reserve for replacing furniture and equipment and treat any upcoming PIP as a near-term capital need. Those deductions decide how much debt the hotel can carry.
Franchisor Requirements for New Owners
Hotel franchisors evaluate the property as much as the owner. Expect the franchisor to inspect the hotel, issue a PIP and review your ownership structure, background and hotel experience before approving the franchise or a transfer. Any net worth or liquidity standards will be part of that review, so ask the franchisor’s development team directly.
Impact protection. The annual report describes a formal impact policy that protects existing franchisees from a new hotel of the same brand opening within a specified distance, depending on the market, though it does not apply to every brand.
Approval timing. Coordinate the franchise application, PIP and loan underwriting so the lender knows the final renovation scope before it sets loan terms.
Ways to Own an Econo Lodge
Buying an existing Econo Lodge. The most direct path is purchasing a hotel already in the system. The franchisor typically issues a change-of-ownership PIP, and the buyer signs a new franchise agreement or assumes the existing one under the franchisor’s rules. Lenders underwrite the hotel’s operating history. See our hotel acquisition financing page.
Converting an independent or other-brand hotel. The franchisor says Econo Lodge offers conversion flexibility tailored to specific properties, and its annual report also describes franchise agreement acquisition cost payments in some cases. Converting means paying for a PIP and possibly for exiting an old franchise agreement. Learn how lenders handle conversion franchise financing.
New construction. Economy hotels are rarely built from the ground up compared with conversions, but where they are, lenders treat the project as a construction loan underwritten on projections and the developer’s track record.
Financing Options for an Econo Lodge Franchise
SBA 7(a) loans. The SBA 7(a) program can fund the hotel purchase, PIP work, FF&E, franchise fees and working capital in one loan, which suits many owner-operated economy hotels.
SBA 504 loans. For a larger property or a project heavy on real estate, an SBA 504 loan can provide long-term fixed-rate financing for the land, building and major renovations.
Conventional term loans. Experienced owners with strong equity often use a conventional business loan, especially when the deal exceeds program limits or the owner wants a structure the SBA programs do not allow.
PIP and FF&E financing. When the main loan does not cover the full renovation, owners may finance the PIP or furniture and equipment separately. Our page on hotel PIP financing explains the options.
Working capital. Highway hotels see seasonal swings, and many economy properties depend on construction crews, truckers and leisure drivers whose travel changes with the economy. A reserve or line of credit covers payroll, supplies and repairs through slow months. Explore hotel working capital options.
Seller financing. Sellers of smaller motels sometimes carry part of the price. A seller note is typically subordinate to the senior loan, and SBA and other programs may limit its terms, so share it with your lender early.
SBA Loans for Econo Lodge Franchisees
The SBA Franchise Directory lists brands whose franchise agreements have been reviewed for SBA eligibility. Econo Lodge appears as “Econo Lodge by Choice Hotels/Econo Lodge Inn & Suites by Choice Hotels” under code S0566.
What the directory note means. The listing says that if the applicant also operates under a management agreement with a third party, the lender must review that agreement under the SBA’s rules to decide whether the applicant and the management company are affiliated. The applicant is not eligible if the management company is, or is affiliated with, the franchisor. In plain English: most owners who run their own hotel are unaffected, but if you plan to hire a management company, your lender will read that contract closely, and you cannot use a franchisor-affiliated manager on an SBA loan.
Program limits. The SBA 7(a) program maximum is currently $5 million, though program rules can change. Our article on SBA loans for hotels covers eligibility, equity and collateral in more detail, and our SBA loan calculator gives planning estimates only, not an offer or approval.
How Lenders Evaluate an Econo Lodge Deal
Personal credit and financial history. Lenders review credit, tax returns and a personal financial statement, and owners of significant stakes usually sign personal guarantees.
Net worth and liquidity. Lenders want to see the equity injection and post-closing reserves from documented sources. PIP overruns happen, so extra liquidity carries real weight.
Hotel experience. Prior hotel ownership or management is a major strength. If you are new to hotels, a seasoned general manager, family members with hotel experience or a reviewed management agreement can help. Our guide for the first-time hotel buyer explains how to build that case.
Projections. Start from the hotel’s trailing occupancy, average daily rate and revenue, then deduct brand fees, payroll, utilities, property taxes, insurance and a replacement reserve. Be conservative about how much the flag will lift revenue on a conversion.
The FDD and franchise agreement. Lenders check the term, termination rights at designated anniversaries and liquidated damages. The annual report notes that agreements typically include liquidated damages for terminations outside permitted windows, which matters if the hotel ever changes flags.
Property condition. Lenders order an appraisal and often a property condition report and environmental review. The PIP, contractor bids and timeline become part of the loan file.
Historical financials. Expect to provide several years of the hotel’s profit and loss statements, tax returns and monthly performance reports.
The PIP Deep Dive
For an Econo Lodge buyer, the PIP is often the swing factor. The plan lists every item the franchisor requires before or after the hotel enters the system or changes hands, with deadlines.
Get it early. Request the PIP before you finalize the purchase price, and price it with contractor bids rather than estimates.
Build in contingency. Older roadside buildings can hide roof, plumbing and HVAC problems that surface during renovation. Lenders like to see a contingency line in the budget.
Plan for disruption. Taking rooms out of service during renovation reduces revenue, so the working capital plan should cover the construction period.
Multi-Unit Growth
Many economy hotel owners grow one property at a time. Once your first hotel has a track record, its cash flow and your management history support the next acquisition. Some owners eventually refinance several hotels together. The annual report also describes master development agreements for developers seeking geographic exclusivity, under which an upfront fee is later applied to affiliation fees on future hotels. Read our article on buying a second hotel for how lenders view a growing portfolio.
Real-World Scenarios
A family buying an existing Econo Lodge. A family with experience running an independent motel buys an Econo Lodge near an interstate. An SBA 7(a) loan covers the purchase and the change-of-ownership PIP, and the lender relies on the hotel’s trailing results.
An independent motel converting. An owner of an independent roadside motel joins the brand to gain reservation and loyalty program traffic. Financing pays for new signage, guest room upgrades and breakfast area equipment.
An owner using a management company. A buyer with a full-time career hires an unaffiliated management company. The lender reviews the management agreement under the SBA directory note before approving the loan.
Common Mistakes to Avoid
- Agreeing to a price before receiving and pricing the PIP
- Overestimating how much the flag will lift revenue on a conversion
- Ignoring the management agreement note on the SBA directory listing
- Leaving no contingency for hidden building problems
- Underfunding working capital during renovation
- Overlooking liquidated damages when leaving a previous brand
For more pitfalls, read about the hotel loan mistakes owners make most often.
Next Steps to Finance Your Econo Lodge Franchise
Step 1: Identify the hotel. Find an existing Econo Lodge for sale or a property suited to conversion.
Step 2: Request the FDD and PIP. Review Items 5, 6, 7, 17 and 20 with a franchise attorney and accountant, and price the PIP with contractors.
Step 3: Decide who will operate the hotel. If you plan to use a management company, make sure it is unaffiliated with the franchisor.
Step 4: Talk with a financing specialist. Compare SBA 7(a), SBA 504 and conventional options for your Econo Lodge franchise loan before you sign a purchase agreement.
Step 5: Assemble your loan package. Include the purchase agreement, PIP, bids, historical financials, projections and your personal financial documents.
Step 6: Coordinate approvals and close. Align the franchise approval, appraisal and loan approval, then schedule renovation work after closing.
Econo Lodge Franchise Loan FAQs
How much does it cost to open or buy an Econo Lodge?
The estimated initial investment for each project type is in Item 7 of the current FDD. For an acquisition, the hotel’s purchase price and PIP usually make up most of the cost.
What royalty does Econo Lodge charge?
The company’s annual report says U.S. royalties typically range from 5% to 6% of gross room revenues, plus marketing and reservation fees of 3% to 4%. Your franchise agreement sets your exact rates.
Is Econo Lodge eligible for SBA loans?
Yes. It is on the SBA Franchise Directory under code S0566, with a note requiring lenders to review any third-party management agreement for affiliation. An Econo Lodge franchise loan through the SBA still depends on normal underwriting.
Can I use a management company with an SBA loan?
Yes, if the lender’s review finds no disqualifying affiliation. The applicant is not eligible if the management company is, or is affiliated with, the franchisor.
Can I convert my motel to an Econo Lodge?
The franchisor says the brand offers conversion flexibility tailored to specific properties. Expect an inspection and a PIP.
Does Choice Hotels offer financing?
The annual report describes a program under which the company may offer investment, financing and guaranty support to qualified franchisees. Review Item 10 of the FDD and ask what applies to your project.
How long is the franchise term?
The annual report says U.S. franchise agreements generally run 10 to 30 years, with possible termination rights at designated anniversaries.
Can a first-time hotel owner get financing?
Yes, when the buyer brings adequate equity and reserves and shows a credible management plan, such as an experienced general manager.
What documents will a lender need?
Personal tax returns and financial statements, the purchase agreement, the hotel’s historical financials, the PIP and bids, the FDD and franchise documents, and projections.
Does the FDD include financial performance information?
Check Item 19 of the current FDD to see what, if anything, the franchisor discloses. For an existing hotel, rely on its actual financial statements.
Final Thoughts
An Econo Lodge is usually a real estate deal first and a franchise deal second. Buyers who price the PIP early, model brand fees honestly, plan for seasonality and take the SBA directory note seriously give themselves a strong chance at a smooth closing.
US Professional Funding helps hotel owners and franchise buyers finance acquisitions, conversions, renovations and working capital. Learn more about our franchise financing and hotel and motel financing solutions.
