How to Finance a Best Western Franchise: Membership and PIPs
By Anthony Cornella
A Best Western franchise loan is really a hotel loan with a brand attached. The buyer is financing land, a building, furniture and fixtures and an operating business, and the brand’s role is to deliver reservations, loyalty guests and standards that lenders recognize. What makes Best Western different is how owners join: the company has long operated as a membership organization of independently owned hotels rather than a conventional franchisor.
This article explains how that model affects financing, what to look for in the brand’s disclosure document, how the SBA Franchise Directory listing and its two special conditions work, and how buyers of new, converted and existing Best Western hotels typically structure their loans.
US Professional Funding is not affiliated with, sponsored by or endorsed by Best Western; the name is used only to describe the business. Figures from the franchisor’s disclosure document 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, and buyers should review the current disclosure document and membership agreement with a qualified franchise attorney and accountant.
Best Western Franchise Loan at a Glance
- Franchisor: Best Western International, Inc., headquartered in Phoenix, Arizona, and described in its public filings as an Arizona nonprofit membership corporation.
- Founded: 1946, as a referral network among independent hotels.
- Ownership model: each hotel is independently owned and operated; owners join through a membership agreement.
- System size: the company reports approximately 4,300 hotels worldwide, a figure that includes hotels in its development pipeline.
- Brand tiers: Best Western, Best Western Plus and Best Western Premier, alongside other brands in the company’s portfolio.
- Fees and investment: initial fees, ongoing dues and fees, and the estimated initial investment vary by brand, room count and whether the hotel is new construction or a conversion; confirm current figures in Items 5, 6 and 7 of the latest disclosure document.
- SBA Franchise Directory: listed (code S2125), with two conditions on management agreements and transient revenue explained below.
What Is Best Western?
Best Western was founded in 1946 by M.K. Guertin, a hotelier who organized an informal system in which member properties recommended one another to travelers. The company adopted its crown logo in 1962, became the largest motel chain in its segment in 1963 with 699 properties, and moved its headquarters to Phoenix, Arizona, in 1966. In 1974 it began positioning itself to compete directly with full-service hotel chains.
A membership model. Unlike most hotel franchisors, Best Western International, Inc. describes itself in its public filings as an Arizona nonprofit corporation and a membership organization. Owners hold membership interests, and member hotels vote on matters such as brand standards for building exteriors, public areas, guest room design and signage. Each property remains independently owned and operated.
Brand tiers. Best Western introduced Best Western Plus and Best Western Premier as twin brands in 2011, creating a midscale flagship, an upper-midscale tier and an upscale tier. The company now describes a portfolio of 18 brands across chain scales, and it opened its first company-owned hotel in 2022. The membership agreement and disclosure document describe which brands are offered and what each requires.
Loyalty and distribution. Best Western Rewards, the brand’s loyalty program, traces back to a frequent-guest program launched in 1988. The company states that points never expire and can be redeemed at hotels across the system.
Why lenders view Best Western the way they do. Lenders value a long-established flag with national distribution and loyalty, and they recognize that many Best Western hotels are conversions of existing properties. Underwriting still turns on the specific hotel: its market, condition, management and the improvements required to meet the brand’s standards.
Best Western Franchise Costs
Initial fees. Joining a hotel brand generally involves an application or evaluation step and an initial affiliation or entrance fee, which for many hotel brands is scaled to the number of guest rooms. Item 5 of Best Western’s current disclosure document lists the exact initial fees for each brand and how they are calculated. Confirm whether any part is refundable and when each payment is due, since lenders will want to see these funds in the sources and uses.
Real estate and construction. For new construction, land, site work and the building are the largest costs by far. Construction budgets depend on the brand tier, the prototype, the room count and the local market. A buyer who owns the land or is acquiring an existing building should still expect the lender to review the full project budget.
Conversions. Many Best Western hotels joined the system as conversions of existing independent or previously branded properties. A conversion replaces construction with a property improvement plan (PIP) that brings the building, guest rooms, public areas and signage up to the brand’s standards. The disclosure document presents separate investment estimates for new construction and for conversions.
Furniture, fixtures and equipment (FF&E). Case goods, bedding, soft goods, televisions, lobby furniture, fitness equipment, breakfast area equipment, laundry and property management technology all fall here. FF&E scales with room count and tier.
Opening costs and working capital. Expect line items for signage, computer systems and reservation connectivity, insurance, permits, pre-opening payroll and training, and additional funds to cover the first months of operations.
Total investment. Item 7 of the current disclosure document gives estimated initial investment ranges by brand and by new construction versus conversion. When reading it, expect line items such as:
- Initial affiliation and application fees paid to the franchisor
- Land, site work and construction, or the purchase of an existing property
- Renovation and PIP work for conversions
- Furniture, fixtures and equipment
- Signage and exterior identification
- Computer systems, property management and reservation technology
- Insurance, permits and professional fees
- Pre-opening expenses and training
- Additional funds for the initial operating period
Use the current table, with its notes and assumptions, to build your sources and uses. A lender will compare your budget with those ranges and with bids for the specific property.
Ongoing Fees and How They Affect Your Loan
Dues and fees. Members pay ongoing amounts that, for hotel brands generally, may include annual dues, monthly fees tied to room revenue, marketing and advertising assessments, reservation and distribution charges, loyalty program costs and technology fees. Item 6 of Best Western’s disclosure document lists each one, its amount and how it is calculated.
Brand standards and quality reviews. Members must maintain the brand’s standards for design, cleanliness and guest satisfaction. The company’s public filings have described requirements tied to guest ratings and other performance measures, and design reviews when a hotel changes hands. Falling short can lead to required improvements or loss of the brand.
Renovation cycles. Hotels age quickly. Soft goods, case goods and public areas need periodic replacement, and brand standards evolve. A loan plan that ignores the next renovation can leave a property short of capital in the middle of its term.
How lenders factor these costs in. Lenders deduct all brand fees, a management fee and a reserve for FF&E replacement before calculating cash available for debt service. Because many hotel fees are tied to room revenue, lenders stress-test occupancy and average daily rate rather than relying on a single forecast.
Franchisor Requirements for New Owners
Best Western does not appear to publish a single minimum net worth or liquidity figure for prospective members, and requirements depend on the project. In practice, what the brand evaluates looks much like what lenders evaluate:
- The property: location, market demand, physical condition and suitability for the chosen brand tier.
- The owner’s resources: the ability to fund construction or the PIP and to operate the hotel to standard.
- Operating capability: hotel experience, or a qualified management company.
- Compliance with standards: willingness to meet design, guest-satisfaction and quality requirements on an ongoing basis.
- Membership agreement: acceptance of the term, renewal, transfer and termination provisions in the current agreement.
The approval process. Expect a development discussion, an application, a property evaluation and, for conversions, an inspection that leads to a PIP. Approval comes with conditions and an opening or conversion deadline. Coordinate the brand’s approval timeline with your lender’s, because most lenders will not close until the membership agreement and the PIP are settled.
Ways to Own a Best Western
New construction. A developer builds a new hotel to a Best Western, Best Western Plus or Best Western Premier prototype. Financing usually combines a construction loan with permanent financing after opening, underwritten on projections and the developer’s track record. Our hotel start-up and construction financing page outlines how new builds are evaluated.
Converting an existing hotel. An owner of an independent or differently branded hotel joins Best Western and completes a PIP. The loan may refinance existing debt and fund the renovation in one structure. Our article on financing a hotel PIP explains how lenders treat renovation budgets.
Buying an existing Best Western. Hotels change hands regularly. A buyer purchases the real estate and business, applies to Best Western for approval and typically receives a change-of-ownership PIP. Our hotel acquisition financing page covers how these deals are structured.
Growing a portfolio. Owners can add hotels one at a time, mixing new builds, conversions and acquisitions as markets allow.
Financing Options for a Best Western Franchise
SBA 7(a) loans. Because Best Western is on the SBA Franchise Directory, an SBA 7(a) loan can be used for acquisitions, conversions and some construction projects, subject to the directory’s conditions and the SBA’s size and eligibility rules. 7(a) loans can combine real estate, renovation, FF&E and working capital in one package.
SBA 504 loans. Hotels are owner-occupied real estate with long-lived improvements, which is the core use of the SBA 504 program. A 504 structure pairs a first mortgage from a lender with a second loan through a certified development company, and it is often considered for new construction, major renovations and larger acquisitions.
Conventional hotel loans. Larger or more complex properties, or owners who want different terms, may use conventional commercial real estate loans. Underwriting focuses on the property’s cash flow, appraised value and the sponsor’s experience.
Equipment and FF&E financing. A Best Western franchise loan does not have to cover every replacement item. Case goods, mattresses, televisions, laundry equipment, fitness equipment, breakfast area equipment and property management systems can sometimes be financed separately, which can help with mid-term renovations without refinancing the mortgage.
Working capital and lines of credit. Hotels carry payroll, utilities and supplies every night regardless of occupancy, and many markets are seasonal. A working capital line can bridge slow months, ramp-up after opening or a renovation period. See our hotel working capital options.
Seller financing on acquisitions. In some hotel sales, the seller carries part of the price. Any seller note must be acceptable to the senior lender and is typically subordinate to it, and SBA and other programs may limit how it is structured or repaid.
SBA Loans for Best Western Franchisees
SBA franchise lending runs through the SBA Franchise Directory, which lists brands whose agreements have been reviewed for SBA eligibility. A listing does not approve any borrower; it clears the franchise relationship so that lenders can consider an SBA-guaranteed loan. Read our article on SBA loans for hotels for a wider look at how the programs apply to lodging.
Best Western’s listing. Best Western appears on the SBA Franchise Directory under code S2125. The membership agreement covered by the listing spans Best Western, Best Western Plus, Best Western Premier and several other brands in the company’s portfolio. The listing carries two notes, explained in plain English below.
Note 1: management agreements. If the hotel will also be run under a management agreement with a third-party management company, the lender must review that agreement under SBA rules to decide whether the borrower and the management company are affiliated. The borrower is not eligible if the management company is the franchisor or is affiliated with the franchisor. In practice, owners who plan to hire a management company should share the draft agreement with their lender early, and should avoid structures where the brand’s own company manages the hotel if they want SBA financing.
Note 2: transient revenue. The lender must review the hotel’s revenue. The borrower is eligible only if more than 50% of revenue in the prior year came from transient guests who stay 30 days or less at a time, or, for a start-up, if projections show that. This matters for properties with extended-stay rooms, long-term crew or contract business, or residential components. Owners of hotels with a large share of longer stays should document their guest mix carefully.
Size and structure. The SBA 7(a) program maximum is currently $5 million, though program rules can change. Many hotel projects exceed that, so buyers often combine programs or use a 504 structure for larger real estate. Our SBA loan calculator can help with early payment estimates, which are for planning only and are not an offer or approval.
Application tips. Bring the current disclosure document, the membership agreement or approval letter, the PIP or construction budget, a management agreement if any, and historical or projected revenue split between transient and longer-stay guests.
How Lenders Evaluate a Best Western Deal
Personal credit and financial history. Lenders review credit, tax returns and a personal financial statement for each significant owner, and typically require personal guarantees.
Net worth and liquidity. Hotel projects require equity and reserves. Lenders look at the cash injection, post-closing liquidity and the sponsor’s ability to fund cost overruns or a slow ramp-up.
Hotel and management experience. Prior hotel ownership or management is one of the strongest factors in a request. First-time owners often strengthen their application with an experienced general manager or a qualified management company, keeping in mind the SBA’s affiliation rule.
Business plan and projections. A Best Western franchise loan request should include a market study or comparable-property analysis, occupancy and average daily rate assumptions, the full schedule of brand dues and fees, a management fee, an FF&E reserve and a renovation plan. Projections for conversions should show the ramp from current performance to post-PIP performance. Our article on hotel loan requirements lists the documents lenders request.
The disclosure document and membership agreement. Lenders review the term, renewal and transfer provisions, termination rights and any liquidated damages if the hotel leaves the brand. They also look at the PIP and the deadline to complete it.
The real estate. Expect an appraisal, an environmental review, a property condition report and, for construction, a budget and contractor review.
Historical financials for existing hotels. On an acquisition, lenders typically want several years of profit and loss statements, monthly operating reports, tax returns and any brand quality review results.
Property Improvement Plans and FF&E
A PIP is the list of improvements the brand requires when a hotel joins the system or changes ownership. It can range from signage and soft goods to full guest room renovations, lobby redesigns and exterior work. The company’s public filings have described a design visit for hotels changing hands to check compliance with current design requirements.
Financing the PIP. Lenders generally prefer to finance the PIP together with the acquisition or refinance, with funds held and released as work is completed. Get contractor bids before closing, add a contingency, and confirm the completion deadline. A PIP that is underfunded or late can put both the membership and the loan in jeopardy.
FF&E reserves. Even after the PIP, furniture and soft goods wear out on a predictable cycle. Most hotel lenders expect an FF&E reserve funded from operations. Plan for it in projections so that the next renovation does not require emergency borrowing.
Brand tier and investment. Moving a hotel from Best Western to Best Western Plus or Best Western Premier usually means a higher standard of finish and amenities. Owners should weigh the cost of a higher tier against the market’s ability to support higher rates.
Multi-Unit Growth
Best Western members can own multiple hotels, each with its own membership. Owners typically grow through a mix of acquisitions and conversions in markets they know, adding new construction as experience and capital allow.
Financing a second or third hotel. Once an owner has operating history, lenders can underwrite existing hotels’ cash flow alongside the next project. Each hotel usually carries its own mortgage, and lenders will review global cash flow across the portfolio. Some owners later consolidate or refinance debt as the group grows.
Managing the portfolio. As the group expands, lenders expect consolidated financial statements, a clear management structure and capital plans for each property’s next renovation. Read about branded versus independent hotels if you are deciding whether to flag an additional property.
Real-World Scenarios
Converting an independent roadside hotel. An owner of a well-located independent hotel joins Best Western to gain distribution and loyalty guests. The lender refinances the existing mortgage and funds the PIP through an SBA 7(a) loan, holding renovation funds until work is completed, and reviews the hotel’s guest mix to confirm transient revenue.
Buying an existing Best Western Plus. A buyer with hotel management experience acquires a Best Western Plus from a retiring owner. Best Western issues a change-of-ownership PIP, and the lender sizes the loan to include the purchase and the improvements, underwriting the hotel’s historical performance.
New construction with a 504 structure. A developer with two operating hotels builds a new Best Western Premier. A construction lender and a certified development company structure a 504 loan, and the developer’s existing hotels support the request during ramp-up.
Adding a management company. An investor buys a Best Western and hires a third-party management company. Before closing, the lender reviews the management agreement to confirm there is no affiliation with the franchisor, as the SBA directory note requires.
Common Mistakes to Avoid
- Relying on fee figures from an old disclosure document instead of the current Items 5, 6 and 7
- Underestimating the PIP or leaving no contingency in the renovation budget
- Ignoring the SBA directory’s transient-revenue condition for properties with many longer stays
- Signing a management agreement before the lender has reviewed it for affiliation
- Leaving out an FF&E reserve and the next renovation cycle from projections
- Choosing a brand tier the local market cannot support
- Misaligning the brand’s approval timeline with the loan closing
For more pitfalls that apply across the lodging industry, read the hotel loan mistakes that cost owners the most.
Next Steps to Finance Your Best Western Franchise
Step 1: Define the project. Decide whether you are building, converting or acquiring, and which Best Western tier fits the market.
Step 2: Get the current disclosure document. Review Items 5, 6, 7, 10, 17 and 19 and the membership agreement with a franchise attorney and accountant.
Step 3: Start the brand approval process. Submit the application, schedule the property evaluation and obtain a PIP or construction requirements.
Step 4: Talk with a financing specialist early. Share the property, the PIP or budget and your management plan so the right program, whether SBA 7(a), SBA 504 or conventional, can be identified.
Step 5: Build the budget and projections. Combine purchase or construction costs, PIP, FF&E, fees and working capital, and project occupancy and rate with all brand fees included.
Step 6: Apply and coordinate approvals. Submit the loan package and align the closing with the membership approval, PIP deadlines and any management agreement review.
Step 7: Close and complete the work. Fund reserves, complete the PIP or construction on schedule and plan the opening or reflagging.
Best Western Franchise Loan FAQs
How much does it cost to open a Best Western?
Costs depend on the brand tier, room count, market and whether the hotel is new construction or a conversion. Item 7 of the current disclosure document gives estimated ranges for each scenario. New construction typically costs far more than converting an existing hotel.
What is the Best Western franchise fee?
Best Western charges initial fees to join, which for hotel brands are often based on the number of rooms. Item 5 of the current disclosure document lists the exact amounts and terms.
What are Best Western’s ongoing fees?
Members pay ongoing dues and fees that support marketing, reservations, loyalty and technology. Item 6 lists each fee and how it is calculated. Lenders include all of them in projections.
Is Best Western a franchise or a membership?
Best Western International, Inc. describes itself in its public filings as a nonprofit membership organization. Owners join through a membership agreement and each hotel is independently owned and operated, but for financing purposes lenders treat it much like a hotel franchise.
Can I get an SBA loan for a Best Western?
Yes. Best Western is listed on the SBA Franchise Directory under code S2125, subject to two conditions: a review of any third-party management agreement for affiliation, and a requirement that more than 50% of revenue come from transient guests staying 30 days or less. Each borrower must still qualify.
What is a PIP and can I finance it?
A property improvement plan lists the renovations the brand requires when a hotel joins or changes ownership. PIP costs can usually be financed with the acquisition or refinance, with funds held and released as work is completed.
Can I convert my existing hotel to a Best Western?
Many Best Western hotels are conversions. The brand evaluates the property and issues a PIP, and a loan can often refinance existing debt and fund the renovation together.
Can I buy an existing Best Western?
Yes, subject to the brand’s approval of the new owner. Expect a change-of-ownership review and PIP, and plan financing for both the purchase and the improvements.
Can a first-time hotel owner get a Best Western franchise loan?
It is possible, especially with strong liquidity and an experienced general manager or qualified management company. Lenders weigh hotel experience heavily, so a capable operating team is important.
Does Best Western offer financing?
Review Item 10 of the current disclosure document for any financing the franchisor or its affiliates offer. Most owners arrange their own financing through SBA or conventional lenders.
How long is a Best Western membership agreement?
Review Item 17 of the current disclosure document and the membership agreement for the term, renewal rights and what happens if the hotel leaves the brand early. Lenders will want the term to fit the loan.
What documents do I need to apply?
Expect to provide personal financial statements, tax returns, the disclosure document and membership approval, the PIP or construction budget, projections or historical financials, a management agreement if any, and appraisal and environmental reports.
Does the disclosure document include financial performance information?
Review Item 19 of the current disclosure document to see whether it includes financial performance representations. For an existing hotel, rely on its actual financial statements and operating reports.
Final Thoughts
A Best Western franchise loan means financing a hotel first and a brand second. Owners who read the current disclosure document closely, budget the PIP and FF&E realistically, understand the SBA directory’s two conditions and line up the brand and lender approvals together give themselves the best chance at a smooth closing, whether they are converting a property, buying an existing hotel or building new.
US Professional Funding helps hotel owners and franchise buyers finance acquisitions, construction, renovations, working capital and refinancing. Learn more about our franchise financing and hotel and motel financing solutions.
