How to Finance a Howard Johnson Franchise: Economy Hotel Loans
By Anthony Cornella
A Howard Johnson franchise loan usually finances a smaller economy hotel: the property itself, any renovation the brand requires, furniture and fixtures, franchise fees and the working capital to run the hotel through slower months. Howard Johnson by Wyndham is a value-tier brand with a century-old name, and most U.S. deals are purchases of existing hotels or conversions of independent and differently branded properties.
This article covers what the franchisor and its parent company publish about Howard Johnson, where the fees and cost estimates sit in the Franchise Disclosure Document (FDD), how SBA and conventional loans fit economy hotels, and what the brand’s SBA Franchise Directory note about management agreements means for owners.
US Professional Funding is not affiliated with, sponsored by or endorsed by Howard Johnson by Wyndham; the name is used only to describe the business. Figures from the franchisor’s disclosure document and the parent company’s reports can change, loan programs vary, and every loan is subject to approval. Nothing here is legal, tax or investment advice; review the current FDD and franchise agreement with a franchise attorney, an accountant and a hotel consultant.
Howard Johnson Franchise Loan at a Glance
- Brand history: founded in 1925 by Howard Johnson, according to the franchisor’s development site.
- Segment: an economy, value-tier brand positioned as “A Smile in Every Town,” aimed at family-oriented leisure travelers.
- System size: 304 hotels with 43,998 rooms as of December 31, 2025, including 133 hotels with 10,119 rooms in the U.S., according to the parent company’s annual report.
- Development paths: new construction and conversion, offered as a franchise opportunity.
- Royalty: the parent company says its direct franchisees typically pay about 5% of gross room revenue; the Howard Johnson rate is in Item 6 of the FDD.
- Marketing and reservation fees: generally 2% to 4% of gross room revenue across the parent company’s franchise system.
- Agreement term: the parent company’s franchise agreements generally run 10 to 20 years.
- Initial fee and total investment: disclosed in Items 5 and 7 of the FDD dated March 31, 2026; we could not verify current figures from the franchisor’s published materials.
- SBA Franchise Directory: listed as Howard Johnson / Howard Johnson by Wyndham (code S0830), with a note about third-party management agreements.
What Is Howard Johnson?
Howard Johnson started in 1925 and became one of the best-known names in American roadside travel. Today it is one of the economy brands of a large hotel franchising company, and the franchisor describes it as a brand with American roots and global reach that aims to be optimistic, happy and community-minded.
The U.S. footprint. At the end of 2025, the parent company reported 133 Howard Johnson hotels with 10,119 rooms in the U.S., an average of roughly 76 rooms per hotel. More than half of the brand’s 304 hotels are outside the U.S., but the U.S. properties are what American owners and lenders compare against.
Guest rooms and renovation. The franchisor has begun rolling out RENEW, a guest room redesign for the brand. For an owner, that matters because brand design updates usually show up in property improvement plans (PIPs) at a change of ownership or renewal, which affects the renovation budget a lender will review.
Performance disclosures. The franchisor’s development site cites franchisee performance data drawn from the FDD dated March 31, 2026, which means the FDD includes financial performance representations in Item 19. Read them with your attorney and accountant, but build your loan request around the specific hotel’s results and a realistic projection.
Why lenders view the brand the way they do. Lenders value the long-established name and the parent company’s reservation and loyalty systems. They also know that economy hotels operate on thinner rates, often in highway and small-town markets, and that many properties are older buildings in varying condition. Underwriting therefore centers on the individual hotel’s history, location, condition and the owner’s operating experience.
Howard Johnson Franchise Costs
The size of a Howard Johnson franchise loan depends mostly on how you enter the brand. Item 7 of the FDD estimates the initial investment for the development types the franchisor describes, but a lender will rebuild the budget around your actual property.
Initial franchise fee
Item 5 of the FDD lists the application or initial fee and any per-room component, along with any fees for a change of ownership or conversion. We could not confirm the current amounts from the franchisor’s public pages, so request the FDD before you budget.
Property, construction or purchase price
For an acquisition, the purchase price is the largest cost. For a conversion, the purchase or existing value is joined by the cost of bringing the building up to brand standards. New construction adds land, site work, architecture and building costs, which vary widely by market.
PIP and renovation costs
Most Howard Johnson deals involve some renovation. A PIP may call for new case goods, bedding, flooring, bathroom updates, signage, exterior work or guest room redesign elements. On an older economy property, deferred maintenance on roofs, parking lots and mechanical systems can add more.
Furniture, fixtures, equipment and technology
Guest room furniture, televisions, breakfast area equipment, laundry and the brand’s required reservation and property management systems all fall into this category.
Opening costs and working capital
Owners need cash for training, insurance, licenses, supplies, initial marketing and enough working capital to carry the hotel through ramp-up, renovation disruption and seasonal dips.
Item 7 categories to review
- Initial or application fee
- Real estate, purchase price or construction
- PIP or conversion renovations
- FF&E and signage
- Technology and reservation systems
- Training, travel and pre-opening expenses
- Insurance, licenses and permits
- Opening inventory and supplies
- Additional funds for the period stated in the FDD
Ongoing Fees and How They Affect Your Loan
The parent company reports that its direct franchisees typically pay a royalty of about 5% of gross room revenue, plus marketing and reservation fees generally ranging from 2% to 4% of gross room revenue. Item 6 of the Howard Johnson FDD gives the brand’s exact rates and lists other charges, such as loyalty program, technology and training fees.
Because these fees come off the top of room revenue, they directly reduce the cash flow available for debt service. In an economy hotel with modest rates, a few percentage points can noticeably change the loan amount a lender will support. Lenders also deduct a management fee if you hire an operator and a reserve for replacing furniture and fixtures.
Renovation and term obligations. The franchise agreement sets quality standards and renovation requirements over its term. Make sure the loan term, the franchise term and the expected renovation timing work together.
Franchisor Requirements for New Owners
The franchisor does not publish a fixed net worth or liquid capital minimum for Howard Johnson. Instead, it reviews the owner and the property together: the market, the building’s condition, the room count, the renovation plan and the owner’s financial capacity and hotel experience.
For an existing hotel, the franchisor typically inspects the property and issues a PIP before approval. The franchisor’s offices are in Parsippany, New Jersey, and its development team handles inquiries and delivers the FDD. Run brand approval and loan approval in parallel, because each depends on the other.
Ways to Own a Howard Johnson
Buying an existing Howard Johnson. An operating hotel comes with a revenue history that a lender can underwrite. The franchisor must approve the buyer, and the transfer usually comes with a PIP. Our page on hotel acquisition financing covers how purchases are structured, and how to buy a hotel or motel walks through the deal steps.
Converting an existing hotel. Conversion is a central path for the brand. An owner of an independent or differently branded hotel applies to join, completes the required renovations and reopens under the new flag. See conversion franchise financing for how lenders view the switch.
New construction. The franchisor offers new construction as well, though new-build economy hotels need careful feasibility work because construction costs must be justified by economy-level rates. Our page on hotel start-up financing covers how new projects are funded.
Financing Options for a Howard Johnson Franchise
SBA 7(a) loans. The SBA 7(a) program can combine the hotel purchase, PIP renovations, franchise fees and working capital in one loan for an eligible owner-operator. The 7(a) program maximum is currently $5 million, and program rules can change. Many economy hotel acquisitions fall within a range where 7(a) is worth evaluating.
SBA 504 loans. The 504 program pairs a first loan with a loan through a certified development company for owner-occupied real estate and long-lived assets. It can fit hotel purchases and major renovations, subject to program rules. Our comparison of SBA 7(a) vs. 504 loans for hotels explains when each tends to fit.
Conventional loans. Experienced owners with strong liquidity, larger properties or multiple hotels may use conventional financing, especially when the deal exceeds SBA limits.
FF&E financing. Guest room furniture, televisions and other equipment can sometimes be financed separately, though the primary lender counts that debt.
Working capital and lines of credit. Highway and leisure hotels feel seasonal swings, and renovations can take rooms out of service. Our page on hotel working capital and lines of credit covers those needs.
Refinancing. Owners who already operate a Howard Johnson may refinance to fund a PIP or restructure existing debt. See hotel debt refinancing.
Seller financing on resales. A seller may sometimes carry part of the price. A seller note is typically subordinate to the primary loan, and SBA rules may limit how it is structured.
SBA Loans for Howard Johnson Franchisees
SBA-backed loans are made by participating lenders with an SBA guarantee on part of the loan. Hotels fit the SBA’s focus on owner-operated businesses, and the lender also confirms the franchise relationship meets SBA eligibility rules.
The directory listing. The brand appears on the SBA Franchise Directory as Howard Johnson / Howard Johnson by Wyndham under code S0830. A listing simplifies the lender’s review of the franchise agreement but does not approve any borrower.
What the directory note means. The listing notes that if the applicant also operates under a management agreement with a third party, the lender or certified development company must review that agreement under SOP 50 10 to determine whether the applicant and the management company are affiliated, and that the applicant is not eligible if the management company is, or is affiliated with, the franchisor. In practice, owners who run the hotel themselves or hire an independent management company can still pursue SBA financing, but the lender must review any management contract, and management by the franchisor or its affiliates would make the deal ineligible.
SBA application tips. Prepare the purchase contract, PIP, franchise approval or application, any management agreement, a sources and uses statement, personal financial statements, tax returns and résumés. Our SBA loan calculator can help with early payment estimates for planning only; it does not represent an offer or approval.
How Lenders Evaluate a Howard Johnson Deal
Personal credit and financial history. Lenders review each principal’s credit, tax returns and debts, and significant owners usually sign personal guarantees.
Net worth and liquidity. Lenders want equity for the deal and reserves after closing to handle renovation, seasonality and surprises in an older building.
Hotel operating experience. Prior hotel ownership or management carries weight. Many economy hotels are owner-operated, and lenders like to see hands-on experience or a qualified manager.
Business plan and projections. Projections should show occupancy, average daily rate and revenue per available room, with royalty, marketing and reservation fees, payroll, utilities and a replacement reserve built in.
The FDD and franchise agreement. Lenders review the term, renovation obligations, transfer provisions and termination rights, and want the franchise term to run at least as long as the loan. Item 10 shows whether the franchisor offers financing, and Item 17 covers renewal and transfer.
Property condition. Expect an appraisal, property condition report and environmental review. Our hotel due diligence checklist covers what buyers should verify.
Historical financials. For an existing hotel, lenders study several years of operating statements, tax returns and performance against nearby competitors.
PIPs, FF&E and the Renovation Cycle
For a Howard Johnson buyer, the PIP often decides whether a deal works. A change of ownership or conversion can require new furniture, bathrooms, flooring, exterior paint, signage and brand-specific design updates such as RENEW elements. Lenders may fund the PIP at closing, hold funds in a reserve released as work is completed, or require the owner to fund part of it.
Price the PIP with contractor bids before you finalize the purchase price, and plan for lost revenue while rooms are out of service. Our article on hotel PIP financing explains how owners plan and fund brand-required work.
Multi-Unit Growth and Development Agreements
Each Howard Johnson hotel typically has its own franchise agreement and approval. Owners who add a second or third property are underwritten on the results of their existing hotels, their global cash flow and remaining liquidity. SBA program limits apply across a borrower’s SBA loans, so growing portfolios often blend SBA and conventional financing. Keeping clean, property-level financial statements makes each new request easier.
Real-World Scenarios
An owner-operator buying a first hotel. A buyer with hotel management experience purchases an existing Howard Johnson. An SBA 7(a) loan covers the purchase, the PIP and working capital, and the buyer runs the hotel personally.
Converting an independent motel. An owner of an independent property joins the brand to gain reservation and loyalty distribution. The lender reviews the as-is value, the conversion budget and projected results under the new flag.
An investor hiring a manager. An investor without hotel experience hires an independent management company. The lender reviews the management contract early because of the directory note.
A refinance to fund renovations. An existing owner refinances the hotel’s mortgage to fund a brand-required renovation and keeps a working capital line for the months when rooms are out of service.
Common Mistakes to Avoid
- Agreeing on a purchase price before pricing the PIP
- Ignoring deferred maintenance on an older building
- Leaving royalty, marketing and reservation fees out of projections
- Underestimating working capital for slow seasons and renovation periods
- Hiring a management company without checking the SBA directory note
- Letting the franchise term end before the loan matures
For more, read the hotel loan mistakes that cost owners the most.
Next Steps to Finance Your Howard Johnson Franchise
Step 1: Choose your path. Decide whether you will buy, convert or build.
Step 2: Review the FDD. Study Items 5, 6, 7, 10, 17, 19 and 20 with a franchise attorney.
Step 3: Price the property and PIP. Get inspections and contractor bids before finalizing price and budget.
Step 4: Talk with a financing specialist. Compare SBA 7(a), 504 and conventional structures and confirm your likely equity.
Step 5: Assemble documents. Gather financial statements, tax returns, résumés, the contract, the PIP and any management agreement.
Step 6: Apply to the brand and lender in parallel. Keep approvals aligned with your purchase contract deadlines.
Step 7: Plan the transition. Schedule staffing, systems changeover and renovation work around the closing date.
Howard Johnson Franchise Loan FAQs
How much does a Howard Johnson franchise cost?
The franchisor’s estimates are in Item 7 of the FDD. Your real cost depends on the purchase price or construction cost, the PIP and working capital needs.
What is the Howard Johnson franchise fee?
The initial or application fee appears in Item 5 of the FDD dated March 31, 2026. We could not verify the current amount from the franchisor’s public pages.
What royalty does Howard Johnson charge?
The parent company says its direct franchisees typically pay about 5% of gross room revenue, plus marketing and reservation fees generally from 2% to 4%. Item 6 of the FDD gives Howard Johnson’s exact rates.
How much net worth or liquidity do I need?
The franchisor does not publish a fixed minimum. The franchisor and your lender will each judge whether your equity and reserves fit the hotel.
Can I use an SBA loan for a Howard Johnson hotel?
Possibly. The brand is on the SBA Franchise Directory under code S0830, and hotels are a common SBA property type. The management agreement note applies, and approval depends on the borrower, the property and lender review.
Can a Howard Johnson franchise loan cover the PIP?
Often, yes. Many buyers include PIP costs in their acquisition loan, depending on the program and lender.
How many Howard Johnson hotels are there?
The parent company reported 304 hotels worldwide, including 133 in the U.S., as of December 31, 2025.
How long is a Howard Johnson franchise agreement?
The parent company says its franchise agreements generally run 10 to 20 years. Item 17 of the FDD gives the Howard Johnson terms.
Does the FDD include financial performance information?
Yes. The franchisor’s development site cites performance data from the FDD dated March 31, 2026. Review Item 19 in full rather than relying on summaries.
Do I need hotel experience?
Experience helps with both the franchisor and lenders. Buyers without it can partner with an experienced operator or hire an independent management company.
Final Thoughts
A Howard Johnson franchise loan pairs a long-recognized name with the realities of economy hotel ownership: modest rates, older buildings and renovation requirements. Buyers who price the PIP early, budget every brand fee and keep healthy reserves give themselves the best chance of a smooth closing and a stable first year.
US Professional Funding helps buyers and owners finance franchised hotels, including acquisitions, conversions, renovations and refinancing. Learn more about our franchise financing and hotel and motel financing.
