How to Finance a Clarion Franchise: Conversions and PIPs
By Marc Cornella
A Clarion franchise loan is usually about an existing hotel changing its flag. The franchisor positions Clarion for owners of full-featured hotels with food and beverage capabilities, and positions its select service extension, Clarion Pointe, for owners repositioning limited-service properties. Either way, the money tends to go toward buying a hotel, completing a property improvement plan (PIP) or refinancing an existing loan while converting.
This article covers what the franchisor discloses publicly, how its fees affect a lender’s cash flow analysis, what the brand’s SBA Franchise Directory note means and how buyers combine acquisition, renovation and working capital financing.
US Professional Funding is not affiliated with, sponsored by or endorsed by Clarion 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 lender review and 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.
Clarion Franchise Loan at a Glance
- Franchisor: Choice Hotels International, headquartered in North Bethesda, Maryland.
- Brand family: Clarion (including Clarion Inn and Clarion Inn & Suites hotels) and Clarion Pointe, a midscale select service extension the franchisor launched in 2018.
- System size: 266 Clarion family hotels with 36,516 rooms worldwide at December 31, 2025, including 181 hotels with 18,562 rooms in the United States, according to the franchisor’s annual report.
- Royalty: the annual report says royalties under the franchisor’s U.S. agreements typically range from 5% to 6% of gross room revenues across its brands.
- Marketing and reservation fees: typically 3% to 4% of gross room revenues, per the same report.
- Franchise term: U.S. franchise agreements generally run 10 to 30 years.
- Initial fees and investment: disclosed in Items 5 through 7 of the current FDD, not in the franchisor’s public filings.
- SBA Franchise Directory: listed as Clarion Inn, Clarion Inn & Suites and Clarion Pointe by Choice Hotels (code S0385), with a management agreement note explained below.
What Is Clarion?
Clarion is one of Choice Hotels International’s longest-established brands. Today the franchisor reports Clarion and Clarion Pointe together as the “Clarion family” and describes two distinct owner propositions.
Clarion. The franchisor’s annual report says Clarion helps owners of existing assets with food and beverage capabilities achieve strong returns with reasonable investment, using a focused food and beverage model suited to many conversion properties. Guests can expect meeting and banquet space, restaurants and lounges, free high-speed internet, a pool or fitness center and a business center.
Clarion Pointe. Launched in 2018 as a midscale select service extension, Clarion Pointe is aimed at owners repositioning a limited-service property. The franchisor describes a flexible, low-cost conversion approach with contemporary design, signature murals, a fitness center, a complimentary better-for-you breakfast with premium coffee and a marketplace selling craft beer, wine and small bites. The first Clarion Pointe opened in Sulphur Springs, Texas, and the company announced its 70th Clarion Pointe opening in March 2025, with 43 more hotels in the pipeline at that time.
How lenders see the brand. Lenders generally see Clarion as a conversion brand rather than a new-build prototype. That means the underwriting focuses on the specific building: its age and condition, the scope and cost of the PIP, the hotel’s operating history under its previous flag and how realistic the expected lift from the new brand is.
Clarion Franchise Costs
Initial franchise fee. The franchisor’s annual report describes its franchise fees in three parts: an affiliation fee, a royalty fee and a marketing and reservation fee. The Clarion and Clarion Pointe affiliation fees, any per-room component and any application fee appear in Item 5 of the current FDD, which the franchisor provides to prospective owners. The annual report also notes the company may discount fees during a hotel’s early years as a franchise sales strategy.
Acquisition or existing real estate. Because most Clarion hotels are conversions, the largest cost is usually the hotel itself, either a purchase price or the owner’s existing equity. Lenders value the real estate on its income and condition.
The property improvement plan. The franchisor may require a PIP for hotels entering the system and may require existing franchisees to complete improvement plans within set contractual windows. For a conversion, the PIP is the bridge between the hotel as it stands and brand standards: signage, guest room soft goods and case goods, bathrooms, lobby and public spaces, breakfast areas, fitness rooms and technology.
FF&E, technology and opening costs. Furniture, fixtures and equipment, property management and reservation systems, initial supplies, training and pre-opening payroll all appear in the FDD’s Item 7 table.
Total investment. Item 7 of the current FDD shows the estimated initial investment ranges for each brand and project type. Typical categories include:
- Affiliation fee and any application fee
- Land and building, or the cost of acquiring an existing hotel
- Renovation and PIP construction
- Furniture, fixtures and equipment
- Signage
- Technology, reservation and property management systems
- Opening inventory, supplies and training
- Additional funds for the initial operating period
Lenders will want the actual PIP for your hotel and contractor bids, not just the Item 7 range.
Ongoing Fees and How They Affect Your Loan
Royalty. The franchisor’s annual report says royalties under its U.S. franchise agreements typically range from 5% to 6% of gross room revenues across its brands. Confirm the Clarion and Clarion Pointe rates in Item 6 of the current FDD.
Marketing and reservation fees. These typically range from 3% to 4% of gross room revenues, according to the same report, and support national marketing, reservations and the loyalty program.
Other fees. Item 6 of the FDD lists technology, training, transfer and other charges, and shows how each is calculated.
How lenders factor these costs in. Lenders build fees into the hotel’s projected operating statement before calculating debt service coverage. A royalty plus a marketing and reservation fee together can claim a meaningful share of room revenue, and any early-year discount should be modeled as temporary. The annual report also notes that agreements typically include liquidated damages for franchisee termination outside designated anniversaries.
Franchisor Requirements for New Owners
The franchisor does not publish a minimum net worth or liquidity figure for Clarion in its annual report. Hotel franchise approval generally centers on the property itself and the ownership group.
- Property fit: the hotel must suit the brand, either a full-featured property with food and beverage for Clarion or a limited-service property that can be repositioned for Clarion Pointe.
- PIP commitment: owners agree to complete the required improvements within the franchisor’s deadlines.
- Ownership and financial review: the application process reviews the ownership group and its capacity to complete the conversion and operate the hotel.
The approval process. Owners typically receive the FDD, apply for the specific hotel, receive a PIP and sign a franchise agreement once approved. Lenders want to see that approval, or at least a signed application and PIP, before finalizing a Clarion franchise loan.
Ways to Own a Clarion
Converting a hotel you already own. An owner of an independent or differently branded hotel can apply to convert. Financing usually covers the PIP and may be combined with a refinance of the existing mortgage. See our hotel debt refinancing options.
Buying a hotel and converting it. A buyer acquires a property and converts it to Clarion or Clarion Pointe. The loan finances the purchase and, often, the PIP in one package. Learn about our hotel acquisition financing.
Buying an existing Clarion. The franchisor reviews the buyer and may issue a change-of-ownership PIP, and lenders underwrite actual results under the brand.
Our article on branded versus independent hotels covers how a flag affects value and financing.
Financing Options for a Clarion Franchise
Most Clarion franchise loan requests combine two or more of the tools below.
SBA 7(a) loans. The SBA 7(a) loan program can finance a hotel purchase, PIP work, FF&E and working capital in one loan for qualifying borrowers. Its flexibility suits smaller Clarion Pointe and Clarion Inn properties where the purchase and renovation fit within program limits.
SBA 504 loans. The SBA 504 program is built for owner-occupied real estate and long-lived fixed assets, which makes it a natural fit for buying or substantially renovating a hotel building. It is less suited to soft costs and working capital, which may need a separate loan.
Conventional term loans. A conventional commercial loan may fit larger full-service Clarion hotels, borrowers with strong equity and experience, or deals that fall outside SBA rules, including properties run under certain management agreements.
Renovation and PIP financing. PIP work can be funded inside the acquisition loan, through a renovation draw facility or as a separate loan. Read about financing a hotel PIP.
Equipment financing. Guest room televisions, mattresses, fitness equipment, breakfast and marketplace equipment, laundry machines and, at full-service Clarion hotels, commercial kitchen and banquet equipment can sometimes be financed separately.
Working capital and lines of credit. A conversion can disrupt revenue while rooms are offline, and a line of credit can cover payroll, supplies and seasonal swings. See our hotel working capital solutions.
Seller financing on resales. A seller may carry part of the price on a hotel sale. Any seller note is typically subordinate to the senior lender, and SBA and other programs may limit how it is structured.
SBA Loans for Clarion Franchisees
An SBA-backed Clarion franchise loan starts with the directory. SBA lending for franchises runs through the SBA Franchise Directory, which lists brands whose franchise agreements have been reviewed for eligibility. SBA lenders generally need a brand on the directory before they can make an SBA-guaranteed loan to one of its franchisees. A listing clears the franchise relationship; it does not approve any borrower.
Clarion’s listing. The SBA Franchise Directory lists Clarion Inn by Choice Hotels, Clarion Inn & Suites by Choice Hotels and Clarion Pointe by Choice Hotels under code S0385. The SBA 7(a) program maximum is currently $5 million, though program rules can change, so loan size matters for larger full-service properties.
The management agreement note, in plain English. The listing carries this note: if the applicant also operates under a management agreement with a third party, the lender or certified development company must review that agreement under SBA rules to determine whether the applicant and the management company are affiliated, and the applicant is not eligible if the management company is, or is affiliated with, the franchisor. For a borrower, that means:
- Owner-operated Clarion hotels avoid this review entirely.
- A hotel run by an independent management company is still eligible, but the lender will read the management agreement closely.
- A hotel managed by the franchisor or a franchisor affiliate cannot use SBA financing.
SBA application tips. Have the signed franchise application or agreement, the PIP, contractor bids, the hotel’s historical statements and a management plan ready. Our page on SBA loans for hotels covers program fit, and the SBA loan calculator can help with early payment estimates, which are for planning only.
How Lenders Evaluate a Clarion Deal
Personal credit and financial history. Lenders review credit, tax returns and personal financial statements for significant owners and typically require guarantees.
Net worth and liquidity. Equity for the purchase and PIP, plus reserves to absorb a longer renovation or slower ramp-up, are central.
Hotel experience. Prior hotel ownership or a qualified management company strengthens a request, and full-service properties benefit from food and beverage experience.
Business plan and projections. Projections should start from the hotel’s actual performance and show how the conversion affects occupancy and rate, with fees, PIP downtime, staffing changes and breakfast or marketplace costs built in.
The FDD and franchise agreement. Lenders look at the term, termination rights, liquidated damages, PIP deadlines and transfer provisions. The franchisor’s annual report notes that either party may terminate at certain designated anniversaries, subject to applicable law.
The real estate. An appraisal, property condition report and environmental review are standard. Our article on how hotels are valued explains what appraisers weigh.
Historical financials. Expect to provide several years of profit and loss statements and tax returns.
PIPs, FF&E and Food and Beverage
The PIP is the defining cost of a Clarion conversion: signage, guest rooms, bathrooms, public spaces and technology that connects to the franchisor’s systems. A Clarion Pointe conversion adds the breakfast area, marketplace, fitness room and mural design.
Full-service considerations. Restaurants, lounges, banquet rooms and meeting space bring kitchen equipment, bar fixtures, banquet furniture and audiovisual systems into the budget, and add revenue that lenders underwrite separately from rooms.
Multi-Unit Growth and Development
Because Clarion is conversion-led, growth usually means acquiring and repositioning additional hotels rather than signing a development schedule for new builds. Owners often add a second or third property once the first conversion has stabilized.
Financing additional hotels. Lenders can weigh the combined cash flow of existing hotels when sizing a new loan and will want consolidated statements. Some owners refinance stabilized hotels to fund equity for the next acquisition. Each new hotel requires its own franchise approval and PIP.
Real-World Scenarios
An independent hotel joining the system. An owner of an older independent hotel with a small breakfast room applies to become a Clarion Pointe. The lender refinances the existing mortgage and adds funds for the PIP, using the hotel’s operating history as the base for projections.
A buyer converting a full-service property. A buyer acquires a hotel with a restaurant and meeting space that is leaving another flag and converts it to Clarion. The acquisition loan includes a renovation budget, and the lender asks for a food and beverage plan and a working capital reserve.
A managed hotel weighing SBA financing. An investor plans to hire an independent management company, so the lender reviews that agreement under the directory note before confirming SBA eligibility.
Common Mistakes to Avoid
- Budgeting from the Item 7 range instead of the actual PIP and contractor bids
- Underestimating revenue disruption while rooms are offline during conversion
- Treating early-year fee discounts as permanent in projections
- Overlooking liquidated damages and termination dates in the franchise agreement
- Assuming any management company arrangement qualifies for SBA financing
- Leaving no reserve for future FF&E replacement
- Choosing Clarion or Clarion Pointe without matching the brand to the building
For more pitfalls, read the hotel loan mistakes that cost owners the most.
Next Steps to Finance Your Clarion Franchise
Step 1: Match the hotel to the brand. Decide whether the property fits Clarion or Clarion Pointe based on its services, size and market.
Step 2: Contact the franchisor’s development team. Request the current FDD and discuss the conversion process for your hotel.
Step 3: Get the PIP and bids. Obtain the franchisor’s PIP for the property and contractor and FF&E pricing.
Step 4: Review the FDD with advisors. Study Items 5, 6, 7, 17 and 19 and the franchise agreement with a franchise attorney and accountant.
Step 5: Talk with a financing specialist. Compare SBA 7(a), SBA 504 and conventional structures early.
Step 6: Assemble your loan package. Gather personal financial statements, tax returns, hotel financials, projections, the PIP and the franchise application or agreement.
Step 7: Close and manage the conversion. Schedule construction to limit downtime and track PIP deadlines.
Clarion Franchise Loan FAQs
How much does it cost to open a Clarion hotel?
It depends on the building: most Clarion hotels are conversions, so the cost is the property plus the PIP, fees, FF&E and working capital. Item 7 of the current FDD gives the estimated initial investment ranges.
What is the Clarion franchise fee?
The franchisor charges an affiliation fee, which appears in Item 5 of the current FDD. Its annual report does not state the Clarion amount.
What royalty does Clarion charge?
The franchisor’s annual report says royalties under its U.S. agreements typically range from 5% to 6% of gross room revenues, with marketing and reservation fees typically 3% to 4%. Item 6 of the FDD gives Clarion’s specific rates.
What is the difference between Clarion and Clarion Pointe?
Clarion targets full-featured hotels with food and beverage, meeting and banquet space. Clarion Pointe is a midscale select service extension launched in 2018 for repositioning limited-service properties with a lower-cost conversion approach.
Is Clarion eligible for SBA loans?
Yes. Clarion Inn, Clarion Inn & Suites and Clarion Pointe are listed on the SBA Franchise Directory under code S0385, subject to the management agreement note. Each borrower must still qualify.
Can I use a management company and still get an SBA loan?
Possibly. The lender must review the agreement for affiliation, and the applicant is not eligible if the management company is, or is affiliated with, the franchisor.
Can a Clarion franchise loan cover the PIP?
Yes. PIP costs can be included in an acquisition or refinance loan or financed separately, subject to lender approval.
How long is a Clarion franchise agreement?
The franchisor’s annual report says U.S. franchise agreements generally run 10 to 30 years. Check Item 17 of the FDD for Clarion’s term, renewal and transfer conditions.
Can a first-time hotel owner qualify?
Possibly. Lenders weigh equity, reserves and a qualified management plan heavily when the owner is new to hotels.
Does the franchisor offer financing?
The annual report describes an investment, financing and guaranty support program for qualified franchisees and development incentives such as fee discounts. Item 10 of the FDD discloses any financing offered for Clarion.
Final Thoughts
A Clarion franchise loan is mostly about the building and the plan to bring it up to brand standards. Owners who match the property to the right brand, price the PIP carefully and keep conversion reserves put themselves in a strong position.
US Professional Funding helps hotel owners and franchise buyers finance acquisitions, renovations, equipment, working capital and refinancing. Learn more about our franchise financing and hotel and motel financing solutions.
