How to Finance a Sleep Inn Franchise: New-Build Midscale Hotels
By Anthony Cornella
A Sleep Inn franchise loan most often finances something many hotel brands no longer emphasize: a ground-up, new-construction midscale hotel. Choice Hotels International describes Sleep Inn as a new-construction brand built to be cost-efficient to build and operate, so most deals involve land, construction, furniture and equipment, and a ramp-up period, or the purchase of an existing Sleep Inn that is already open.
US Professional Funding is not affiliated with, sponsored by or endorsed by Sleep Inn or Choice Hotels International; the names are 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.
Sleep Inn Franchise Loan at a Glance
- Franchisor: Choice Hotels International, headquartered in North Bethesda, Maryland
- Segment: midscale; the franchisor calls Sleep Inn a new-construction brand
- System size: 404 hotels with 28,199 rooms in the United States, and 426 hotels with 30,648 rooms in total, at December 31, 2025, per the company’s annual report
- 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
- 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 Sleep Inn by Choice Hotels and Sleep Inn & Suites by Choice Hotels (code S1582), with a management agreement note
What Is Sleep Inn?
Sleep Inn is a midscale hotel brand franchised by Choice Hotels International. Sleep Inn is positioned as a new-construction brand: every hotel is built to a specific prototype, with the stated goal of keeping construction and operating costs low.
The prototype. The franchisor’s releases describe a prototype introduced in 2016 and a redesigned prototype, called Scenic Dreams, unveiled in 2024. Scenic Dreams features nature-inspired murals, a breakfast area that can be zoned for gaming, television and work, guest room lighting and thermostat controls, a fitness center, outdoor spaces and energy-saving features such as LED lighting and low-flow fixtures, with electric vehicle charging at select locations. The franchisor calls it one of the lowest-cost hotels to build and operate in the midscale segment.
Growth. In an April 2026 release, the franchisor reported more than 440 Sleep Inn locations open worldwide and more than 40 Scenic Dreams hotels in the pipeline. The first new-construction Scenic Dreams hotel, a 52-room property in Ashland City, Tennessee, opened in September 2025, and a dual-brand new-construction property opened in Middletown, Pennsylvania, in March 2026.
Typical size. The annual report’s U.S. totals work out to about 70 rooms per hotel on average, which places most Sleep Inn projects in the range that owner-operators, families and small investment groups commonly develop.
How lenders view the brand. Lenders value Sleep Inn’s standardized prototype, the franchisor’s reservation system and loyalty program and the brand’s long presence in the midscale segment. They also know that new construction carries cost-overrun and ramp-up risk, so a strong request shows a realistic budget, a contingency and enough reserves to carry the hotel until it stabilizes.
Sleep Inn Franchise Costs
Affiliation and application fees. 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 Sleep Inn fee amounts, including any per-room charges, appear in Item 5 of the current FDD. The annual report also notes that the company may offer developers incentives such as discounted fees and payments toward franchise agreement acquisition costs.
Land and site work. For a new build, land acquisition, entitlements, utilities, grading and parking come first.
Construction. Hard costs for the building, soft costs (architecture, engineering, permits, inspections) and a contingency usually make up the largest share of the budget. Because the brand uses a prototype, plans are standardized, which can help with budgeting and lender review.
Furniture, fixtures and equipment (FF&E). Guest room furniture and soft goods, lobby and breakfast furniture, fitness equipment, laundry equipment, televisions, technology and signage.
Opening costs and working capital. Pre-opening payroll and training, opening supplies, property management and reservation technology, insurance and additional funds to cover operating shortfalls while occupancy builds.
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 or per-room fees
- Land acquisition or ground lease costs
- Site work, construction and contingency
- Architecture, engineering and permits
- Furniture, fixtures and equipment
- Exterior and interior signage
- Property management and reservation technology
- Opening supplies, linens and training
- Insurance, professional fees and licenses
- Additional funds for the initial operating period
For a hotel acquisition, the purchase price replaces the land and construction lines, and a property improvement plan (PIP) may be added.
Ongoing Fees and How They Affect Your Loan
Royalty and marketing fees. Choice Hotels International’s annual report says U.S. royalties typically range from 5% to 6% of gross room revenues and marketing and reservation fees from 3% to 4%. Confirm the exact Sleep Inn rates, any ramp-up schedule and loyalty program charges in Item 6 of the current FDD.
PIPs and renovation cycles. The annual report says the franchisor may require hotels to execute property improvement plans at specified contractual windows. Even a new hotel will eventually face soft goods replacement and renovations, which belong in long-range projections.
How lenders factor these costs in. Lenders build projections from room revenue, deduct brand fees and operating expenses, and size the loan so net operating income comfortably covers debt service. For a new build, they also look at how long the hotel will take to reach stabilized occupancy and whether reserves cover the gap.
Franchisor Requirements for New Owners
Minimum net worth and liquidity requirements for Sleep Inn are not published in materials we could verify. Expect the franchisor to review:
- The development team’s hotel ownership or construction experience
- Financial statements showing the capacity to fund equity and reserves
- The proposed site, market and feasibility
- Plans and specifications that follow the brand prototype
- The proposed management structure for the hotel
- For acquisitions, the hotel’s condition and the PIP the buyer will complete
The approval process. Developers typically submit a franchise application for a specific site, receive approval, sign the franchise agreement and then move through design review, construction and an opening inspection. Coordinate the lender’s timeline with each step so construction financing is in place when the franchise agreement is signed.
Ways to Own a Sleep Inn
Ground-up new construction. This is the brand’s primary growth path. A Sleep Inn franchise loan for a new build covers land, construction, FF&E and working capital through stabilization. Learn how we approach hotel start-up financing.
Buying an existing Sleep Inn. Purchasing an open hotel lets lenders underwrite actual performance. The buyer applies for a new franchise agreement or transfer, and the franchisor may issue a PIP. See our hotel acquisition financing options and read about financing brand-required PIP renovations.
Dual-brand projects. The franchisor has opened a dual-brand new-construction Sleep Inn property. These projects share land and some operations and need approval for both brands.
Financing Options for a Sleep Inn Franchise
SBA 7(a) loans. Because Sleep Inn is on the SBA Franchise Directory, an SBA 7(a) loan can finance an acquisition, construction, FF&E and working capital for eligible owner-operators, up to the program maximum of currently $5 million (program rules can change). Many hotel projects exceed that, so 7(a) is often paired with other financing or used for smaller acquisitions.
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 building or buying a hotel. It combines a senior loan with a portion financed through a certified development company and the borrower’s equity.
Conventional loans. A conventional business loan, including construction-to-permanent structures, can work well for experienced developers and larger projects. Lenders typically look for hotel ownership experience, significant equity and a feasibility study.
Equipment and FF&E financing. Guest room furniture, televisions, laundry equipment, fitness equipment and technology can be financed separately to preserve cash for construction contingencies.
Working capital and lines of credit. A new hotel needs cash for payroll, supplies and marketing while occupancy builds, and an existing hotel may need cash during a PIP. See our hotel working capital options.
Seller financing on resales. A seller may carry part of the price of an existing Sleep Inn. Any seller note would need to be acceptable to the senior lender and is typically subordinate to it, and SBA programs may limit how a seller note is structured.
SBA Loans for Sleep Inn Franchisees
The SBA Franchise Directory lists franchise brands whose agreements have been reviewed for SBA eligibility, and SBA lenders generally require a brand to be listed before making an SBA-guaranteed loan to its franchisee. A listing clears the franchise relationship; it does not approve any borrower.
The directory listing. Sleep Inn appears as Sleep Inn by Choice Hotels and Sleep Inn & Suites by Choice Hotels, code S1582. 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.
What the note means in plain English. If you will run the hotel yourself, the note generally does not affect you. If you plan to hire a hotel management company, the SBA lender will review the management agreement to decide whether that company’s relationship with you counts as affiliation, which can affect size and eligibility. And if the management company is the franchisor or tied to it, an SBA loan is not available. Raise this early if a third-party manager is part of your plan.
SBA application tips. Provide the directory code, the franchise application or approval, a feasibility study, construction budget and schedule (for new builds), several years of hotel financials (for acquisitions), any management agreement and a personal financial statement for each owner. Our article on SBA loans for hotels covers more detail, and our SBA loan calculator can help with early payment estimates (for planning only, not an offer or approval).
How Lenders Evaluate a Sleep Inn Deal
Personal credit and financial history. Lenders review credit, tax returns and personal financial statements, and typically require personal guarantees from major owners.
Net worth and liquidity. Hotel lenders look for meaningful equity plus post-closing liquidity to cover cost overruns, ramp-up losses or a PIP.
Hotel experience. Prior hotel ownership or management experience, or a qualified management plan, strongly affects approval. First-time owners often strengthen a request with an experienced general manager.
Feasibility and projections. For a new build, lenders usually want an independent feasibility study covering the market, competing hotels and a realistic ramp-up. For an acquisition, projections should start from the hotel’s actual results and adjust for brand fees, PIP costs and the new owner’s operating plan.
The FDD and franchise agreement. Lenders review the term, fees, PIP provisions, transfer rights and liquidated damages, which the annual report says franchise agreements typically contain for early termination. Item 10 shows whether the franchisor offers financing; the company’s annual report describes a program to offer investment, financing and guaranty support to qualified franchisees, so ask whether anything applies to your project.
Construction budget and contractor. For new construction, lenders review the general contractor, the budget, the contingency, the schedule and the builder’s experience with similar hotels.
Historical financials for acquisitions. Expect to provide several years of profit and loss statements, monthly operating reports and the seller’s tax returns.
Construction, FF&E and Renovation Planning
Building to the prototype. The brand’s prototype approach standardizes plans and finishes, which helps lenders compare your budget with other projects. Still, build in a contingency.
FF&E lifecycles. Soft goods need replacement sooner than case goods, so plan a capital reserve for renovation cycles.
Older hotels and PIPs. Many existing Sleep Inn hotels were built to earlier designs. A buyer should expect the franchisor to compare the hotel with current standards and price any PIP before closing, ideally financing it in the purchase loan.
Multi-Unit Growth and Development
Developers often build a first Sleep Inn and then pursue a second site in a nearby market, or add a different Choice Hotels International brand on an adjacent parcel. Once the first hotel has stabilized, lenders can underwrite its cash flow alongside the new project. Each hotel requires its own franchise approval and, usually, its own loan. Our article on buying a second hotel explains how lenders view growing portfolios, and our page on hotel real estate expansion financing covers development capital.
Real-World Scenarios
A family building its first hotel. A family with experience managing hotels for others buys a site near a highway interchange and uses an SBA 504 loan for land and construction, financing FF&E separately and keeping reserves for the ramp-up.
A buyer acquiring an older Sleep Inn. A buyer purchases an existing hotel, receives a PIP and finances the purchase and renovation together, with projections based on the hotel’s actual results.
An owner planning third-party management. An investor who will hire a management company works with an SBA lender early to review the management agreement under the directory note before committing to the deal.
Common Mistakes to Avoid
- Budgeting a new build without a construction contingency
- Underestimating the time and cash needed to reach stabilized occupancy
- Ignoring the SBA directory note when planning third-party management
- Buying an existing hotel without pricing the PIP
- Overlooking liquidated damages and termination terms in the franchise agreement
- Assuming a hotel project will fit under the SBA 7(a) maximum without checking the total budget
For more pitfalls, read about the hotel loan mistakes that cost owners the most.
Next Steps to Finance Your Sleep Inn Franchise
Step 1: Request the current FDD. Review Items 5, 6, 7, 10, 17, 19 and 20 with a franchise attorney and accountant.
Step 2: Identify a site or a hotel. Choose land for a new build or an existing hotel to acquire.
Step 3: Commission a feasibility study. Understand demand, competition and the ramp-up timeline.
Step 4: Talk with a financing specialist. Decide between SBA 7(a), SBA 504 and conventional structures based on project size and your management plan.
Step 5: Apply to the franchisor. Submit the franchise application and coordinate approval with your financing timeline.
Step 6: Finalize budgets and contracts. Lock in the construction budget, contractor and FF&E plan, or the purchase agreement and PIP.
Step 7: Close and open. Close the loan, build or renovate, complete brand training and plan your opening.
Sleep Inn Franchise Loan FAQs
How much does it cost to build a Sleep Inn?
The estimated initial investment is disclosed in Item 7 of the current FDD. Costs depend on land, local construction costs, room count and whether the project is a new build or an acquisition with a PIP.
What are the Sleep Inn franchise fees?
The affiliation fee and any application or per-room fees appear in Item 5 of the current FDD. The franchisor’s annual report says U.S. royalties typically range from 5% to 6% of gross room revenues, with marketing and reservation fees of 3% to 4%.
How many Sleep Inn hotels are there?
The company’s annual report lists 404 Sleep Inn hotels with 28,199 rooms in the United States at December 31, 2025, and 426 hotels in total.
Is Sleep Inn SBA eligible?
Yes. The brand is listed on the SBA Franchise Directory under code S1582, with a note requiring lenders to review any third-party management agreement for affiliation.
Can I use a management company with an SBA loan?
Possibly. The lender must review the management agreement under SBA rules, and the applicant is not eligible if the management company is, or is affiliated with, the franchisor.
Can I convert an existing hotel to Sleep Inn?
The franchisor describes Sleep Inn as a new-construction brand, so most new Sleep Inn hotels are built from the ground up. Ask the franchisor whether any exceptions apply.
Can I buy an existing Sleep Inn?
Yes, subject to franchisor approval. Expect a review of the property’s condition and a possible PIP.
How long is a Sleep Inn franchise term?
The franchisor’s annual report says its U.S. franchise agreements generally run 10 to 30 years. Check the current FDD for the Sleep Inn term.
Does Choice Hotels International offer financing?
The company’s annual report describes a program to offer investment, financing and guaranty support to qualified franchisees. Review Item 10 of the FDD and ask the franchisor whether your project qualifies.
Can a first-time hotel owner get a Sleep Inn franchise loan?
It is possible, especially with strong liquidity and an experienced general manager or management plan. Lenders look closely at hotel experience for new construction.
Final Thoughts
Sleep Inn is a new-construction brand, so financing usually means building a hotel from the ground up or buying one that is already open. Owners who plan a realistic construction budget, account for ramp-up and the SBA management note, and line up lenders alongside franchisor approval give themselves the best chance of a smooth Sleep Inn franchise loan closing.
US Professional Funding helps franchise owners and hotel investors finance acquisitions, construction, equipment and working capital. Learn more about our franchise financing programs and our hotel and motel financing solutions.
