How to Finance a HomeTowne Studios Franchise: Extended-Stay Rules
By Anthony Cornella
A HomeTowne Studios franchise loan finances an economy extended-stay hotel, which means real estate, guest suites with kitchenettes, brand-required improvements and the working capital to run the property. It also means dealing with a question most hotel buyers never face: whether enough of the hotel’s guests stay short enough for the deal to qualify for SBA financing.
This article explains what HomeTowne Studios by Red Roof is, how new builds and conversions are financed, what the brand’s SBA Franchise Directory listing and its two notes mean in plain English, and what lenders review before approving an extended-stay hotel loan.
US Professional Funding is not affiliated with, sponsored by or endorsed by HomeTowne Studios or Red Roof; the names are used only to describe the business. Figures from the franchisor’s disclosure document and company materials can change, loan programs and terms vary by lender and borrower, and every loan is subject to lender review and approval. Nothing here is legal, tax or investment advice, and buyers should review the current Franchise Disclosure Document (FDD) and franchise agreement with a qualified franchise attorney and accountant.
HomeTowne Studios Franchise Loan at a Glance
The franchisor does not publish fee or investment figures on its franchising website, and we were not able to review a current copy of its FDD, so this article does not quote them. Here is what the company’s own materials confirm:
- Concept: an economy extended-stay brand within the Red Roof family, with suites that include kitchenettes.
- Prototype: a new-build prototype designed around what the company called a cost-effective development footprint; the first hotel built on the new prototype opened in Tampa, Florida, in August 2024 with 124 extended-stay suites.
- Parent system: Red Roof reported nearly 700 properties and over 60,000 rooms in the U.S. and Japan in 2024, with offices in New Albany, Ohio.
- Development paths: new builds and full conversions of existing hotels, plus dual-branded properties.
- Fees: disclosed in Items 5 and 6 of the FDD; the franchisor says only that it has some of the lowest fees in the industry.
- SBA Franchise Directory: listed as HomeTowne Studios by Red Roof under code S6329, with two notes covering transient revenue and management agreements.
What Is HomeTowne Studios?
HomeTowne Studios by Red Roof is the extended-stay brand of Red Roof, the economy lodging company whose corporate offices are in New Albany, Ohio. The company describes HomeTowne Studios as an economy extended-stay concept and promotes its lower operating costs to developers.
The guest suite. According to the company, suites at the new-prototype Tampa hotel include kitchenettes with refrigerators, microwaves, stovetops, sinks and dining space, along with HD flat-screen televisions and free Wi-Fi. The prototype also adds expanded storage for guests who stay longer.
Public spaces and operations. The new prototype includes guest laundry, an exercise room, a marketplace, a business center and lobby coffee. The company says the layout places onsite offices and laundry rooms near guestrooms, can be secured after hours, and is designed for operational efficiency.
Why lenders view HomeTowne Studios the way they do. Lenders like economy extended-stay hotels for their lean staffing, steady occupancy from longer-stay guests and lower construction cost per room than full-service hotels. They also know that extended-stay revenue can tilt toward guests who stay weeks or months, which affects SBA eligibility, and that many older conversions need significant renovation. A HomeTowne Studios franchise loan therefore turns on the property, the guest mix and the operator.
HomeTowne Studios Franchise Costs
Hotel financing is about real estate first, followed by furniture, fixtures and equipment, brand-required improvements and opening costs.
Initial franchise and application fees
The application and initial franchise fees are disclosed in Item 5 of the FDD. Ask whether they differ for new builds, conversions and dual-brand projects, and whether development incentives apply. The franchisor states on its development site that it has some of the lowest fees in the industry; get the actual figures in writing before building a budget.
Land, building and construction
For a new build, land, site work and vertical construction dominate the budget. For a conversion, the purchase price of the existing hotel is the largest number. The franchisor’s development team supports both paths, from design and construction through grand opening.
Kitchenettes, FF&E and technology
Extended-stay rooms carry more equipment than standard economy rooms. Each kitchenette needs a refrigerator, microwave, cooktop, sink and dining surface, and each suite needs beds, case goods, storage, televisions and Wi-Fi. Laundry equipment, fitness equipment, marketplace fixtures and property management systems round out the furniture, fixtures and equipment (FF&E) budget.
Property improvement plan for conversions
When an existing hotel converts to HomeTowne Studios, the franchisor typically issues a property improvement plan (PIP) listing the work required to meet brand standards. Adding kitchenettes to rooms that never had them can be one of the larger items, along with plumbing and electrical upgrades. Our article on financing a hotel PIP explains how these costs are funded.
Opening costs and working capital
Pre-opening payroll, training, supplies, insurance, utilities and marketing all come before the first guest checks in. Conversions may also see reduced revenue while rooms are renovated.
Total investment
The estimated initial investment appears in Item 7 of the FDD and depends heavily on whether you build or convert. When you receive it, match these categories to your own quotes:
- Initial franchise and application fees
- Land or existing hotel purchase price
- Site work, construction or renovation
- Kitchenettes and guest room FF&E
- Laundry, fitness and marketplace equipment
- Signage and exterior improvements
- Technology and property management systems
- Pre-opening expenses and training
- Insurance, permits and professional fees
- Additional funds for the initial operating period
Ongoing Fees and How They Affect Your Loan
Royalty, marketing and reservation fees. Hotel franchise agreements typically charge royalty, marketing and reservation or technology fees as a percentage of room revenue, plus loyalty program charges. Item 6 of the FDD lists each fee and how it is calculated.
Reinvestment. Brand standards evolve, and franchise agreements typically require periodic renovations. Build future capital spending into your plans.
How lenders factor these costs in. Lenders start with projected room revenue based on occupancy and average daily rate, subtract franchise fees, payroll, utilities, housekeeping, insurance, taxes and reserves for replacement, then compare the result with debt service. Extended-stay hotels often run leaner than standard hotels, which can help, but lenders still stress-test occupancy.
Franchisor Requirements for New Owners
The franchisor’s franchising website does not list a minimum net worth or liquidity requirement, so ask the development team and review the FDD. In practice, hotel franchisors and lenders look for:
- Capital: enough equity to fund the project and reserves after closing.
- Hotel experience: a track record owning or managing hotels, or a qualified management team.
- An approved site or property: the franchisor reviews the market, the site or existing building and the project plan.
- Brand standards: commitment to the prototype or conversion requirements and the PIP.
The approval process. Owners typically submit an application with property and market details, receive the FDD, work with the development team on the plan or PIP and then sign the franchise agreement before construction or conversion begins.
Ways to Own a HomeTowne Studios
New construction. Developers can build on the new prototype. Lenders treat these as construction and start-up loans, relying on the developer’s experience, equity, a feasibility study and the franchise commitment. Our page on hotel start-up financing explains how we approach new projects.
Converting an existing hotel. Buyers can acquire an existing hotel and convert it, which can be faster than building from the ground up. Financing covers the purchase and the PIP. Learn more about financing a franchise conversion.
Buying an existing HomeTowne Studios. A buyer purchases a hotel already flying the flag, subject to franchisor approval and usually a change-of-ownership PIP. Lenders can underwrite the hotel’s actual performance. Our hotel acquisition financing page and our article on how to buy a hotel cover the steps.
Dual-branded properties. The company also develops dual-branded properties that pair HomeTowne Studios with another brand from the same family on one site, so one location can serve short-stay and extended-stay guests.
Financing Options for a HomeTowne Studios Franchise
SBA 7(a) loans. The SBA 7(a) program can finance the purchase or construction of a hotel, FF&E, PIP work and working capital, provided the deal satisfies the directory notes explained below.
SBA 504 loans. The SBA 504 program is built for owner-occupied real estate and long-lived fixed assets, which makes it a frequent fit for hotel land, buildings and major renovations, subject to the same eligibility notes.
Conventional loans. A conventional business loan may suit experienced operators, larger projects, or hotels whose guest mix does not meet the SBA’s transient test. Terms vary by lender and borrower.
FF&E and equipment financing. Kitchenette appliances, laundry and fitness equipment and technology can be financed separately when they are replaced or upgraded.
Working capital. A working capital line can cover pre-opening costs, renovation periods and seasonal dips. See our hotel and motel working capital options.
Seller financing on acquisitions. A seller may carry part of the price on a hotel sale. A seller note is typically subordinate to the senior loan, and SBA rules can limit how it is structured.
SBA Loans for HomeTowne Studios Franchisees
SBA lenders generally require a franchise brand to appear on the SBA Franchise Directory before making an SBA-guaranteed loan to one of its franchisees. HomeTowne Studios by Red Roof is listed under code S6329, with two notes that matter a great deal for an extended-stay hotel.
Note 1: the transient revenue test. The lender must review the hotel’s revenue, or projected revenue for a start-up. The applicant is eligible only if more than 50% of the prior year’s revenue came from transient guests staying 30 days or less at a time, or, for a new business, if projections show that. In plain English, an extended-stay hotel whose guests mostly stay longer than 30 days can look more like an apartment building than a hotel, and the SBA treats it differently. Buyers should ask for revenue broken down by length of stay before applying.
Note 2: management agreements. If the owner will use a third-party management company, the lender must review the management agreement to see whether the owner and manager are affiliated. The applicant is not eligible if the management company is, or is affiliated with, the franchisor. An owner-operator, or a manager unrelated to the franchisor, avoids this problem.
Program basics. The SBA 7(a) program maximum is currently $5 million, though program rules can change, so larger hotel projects may combine programs or use conventional financing. Our article on SBA loans for hotels covers the details, and our SBA loan calculator provides early payment estimates for planning only.
How Lenders Evaluate a HomeTowne Studios Deal
Personal credit and financial history. Lenders review credit, tax returns and a personal financial statement and typically require personal guarantees from significant owners.
Net worth and liquidity. Hotel projects require meaningful equity and post-closing reserves for debt service, renovations and slow periods.
Hotel experience. Prior hotel ownership or management experience, especially in economy or extended-stay properties, is one of the strongest factors in a HomeTowne Studios franchise loan request.
Feasibility and projections. For a new build or conversion, lenders want a market study covering demand from longer-stay guests such as project workers, relocating families and traveling professionals, along with competing hotels. Projections should show occupancy, average daily rate and the length-of-stay mix needed for the SBA test.
The FDD and franchise agreement. Lenders review the term, renewal, transfer and termination provisions in Item 17, fees in Items 5 and 6, and whether Item 19 includes financial performance representations.
The property. Appraisals, environmental reports, building condition and the PIP all shape the loan. For conversions, lenders look closely at how many rooms need kitchenettes added and how long renovation will take.
Historical financials for existing hotels. For an acquisition, expect to provide several years of operating statements, monthly occupancy and rate reports, and revenue by length of stay.
Extended-Stay Operations and Financing
Extended-stay hotels differ from standard economy hotels in ways that show up in a loan file.
Guest mix. Longer stays can mean steady occupancy and lower turnover costs, but the SBA’s transient test means the share of guests staying more than 30 days must be watched carefully.
Rate structure. Weekly and monthly rates may be lower per night than daily rates, so projections should reflect the expected mix of stay lengths.
Staffing. Housekeeping may be less frequent for longer stays, and the prototype’s layout was designed for efficiency, both of which can lower operating costs.
Multi-Unit Growth and Development
Developers who succeed with one HomeTowne Studios often pursue a second property or a dual-branded site. Lenders will underwrite the existing hotel’s performance alongside the new project, and the company’s development team can discuss pipeline opportunities. Many owners finance each hotel separately so one property’s debt does not depend on another’s.
Real-World Scenarios
A hotelier building on the new prototype. An owner of two economy hotels builds a new HomeTowne Studios near an industrial corridor. The lender reviews a feasibility study, the owner’s operating history and projections that show most revenue from stays of 30 days or less, and structures a construction loan that converts to permanent financing.
A buyer converting an older hotel. A buyer acquires an independent hotel and converts it, adding kitchenettes under the PIP. The financing covers the purchase price and renovation, with a working capital reserve for the transition.
An investor using a management company. An investor plans to hire a third-party manager. Before applying for SBA financing, the lender reviews the management agreement to confirm the manager is not affiliated with the franchisor.
Common Mistakes to Avoid
- Assuming every extended-stay hotel qualifies for SBA financing without testing the transient revenue mix
- Using a management company affiliated with the franchisor on an SBA deal
- Underestimating the cost of adding kitchenettes in a conversion
- Projecting daily rates without reflecting weekly and monthly pricing
- Leaving too little working capital for renovation periods and ramp-up
- Skipping a feasibility study for a new build
For more pitfalls, read the hotel loan mistakes that cost owners the most.
Next Steps to Finance Your HomeTowne Studios Franchise
Step 1: Talk with the development team. Discuss new build, conversion or dual-brand options for your market.
Step 2: Review the FDD with advisors. Study Items 5, 6, 7, 17 and 19 with a franchise attorney and accountant.
Step 3: Test SBA eligibility early. Model the share of revenue from stays of 30 days or less and decide how the hotel will be managed.
Step 4: Commission feasibility and property reports. Obtain a market study, appraisal, environmental report and, for conversions, a PIP estimate.
Step 5: Talk with a financing specialist. Compare SBA 7(a), SBA 504 and conventional structures for your project.
Step 6: Apply and close. Submit the loan request with your personal financial statement, tax returns, hotel experience, projections and franchise documents.
Step 7: Build or convert and open. Keep working capital in reserve through construction, renovation and ramp-up.
HomeTowne Studios Franchise Loan FAQs
How much does a HomeTowne Studios franchise cost?
The total estimated initial investment is in Item 7 of the FDD and depends on whether you build new, convert an existing hotel or develop a dual-branded property.
What are the HomeTowne Studios franchise fees?
Initial and ongoing fees are listed in Items 5 and 6 of the FDD. The franchisor says it has some of the lowest fees in the industry; ask for current figures in writing.
Is HomeTowne Studios eligible for SBA loans?
Yes, it is listed on the SBA Franchise Directory under code S6329, with notes requiring a transient revenue test and a review of any management agreement.
What is the SBA transient revenue test?
More than 50% of the hotel’s prior-year revenue, or projected revenue for a start-up, must come from guests who stay 30 days or less at a time.
Can I use a management company with an SBA loan?
Yes, as long as the lender confirms the management company is not the franchisor or affiliated with it.
Can I convert my existing hotel to HomeTowne Studios?
The franchisor offers full conversions. Expect a PIP that may include adding kitchenettes, and financing that covers the renovation.
Does the franchisor offer financing?
Review Item 10 of the current FDD for any franchisor financing or development incentives.
How long is the franchise term?
The term, renewal and transfer conditions appear in Item 17 of the FDD. Lenders generally want the term to extend beyond the loan maturity.
Can a first-time hotel owner get a HomeTowne Studios franchise loan?
It is possible with strong equity and an experienced management team, but lenders weigh hotel experience heavily.
Does the FDD include financial performance information?
Check Item 19 of the current FDD and base your projections on your own market study.
Final Thoughts
HomeTowne Studios gives owners an economy extended-stay option backed by a long-established lodging company and a prototype designed for efficiency. The financing works best when buyers test the guest mix against the SBA’s transient rule early, choose a management structure that keeps them eligible and budget fully for kitchenettes, renovation and working capital.
US Professional Funding helps hotel owners and franchise buyers finance acquisitions, construction, conversions and working capital. Learn more about our franchise financing and hotel and motel financing solutions.
