You own a hotel in France, or you are considering buying one, and you are weighing up whether to run it yourself, hand it to an operator, let it out or join a brand. The management model decides who takes the decisions, who carries the risks and how income is shared between owner, operator and brand. It also decides what the valuer is actually valuing: the building (the murs, literally “the walls”), the business (the fonds de commerce: the business as a going concern, with its goodwill, lease rights, fixtures and clientele), or both. Here are six common arrangements, with their usual orders of magnitude.
1. Direct operation
The owner of the building runs the hotel personally. He keeps the whole of the result and full control over strategy, with no fees or external management costs.
In return, he carries the financial risk alone and needs both hotel skills and time. This is the historical model of the family hotel, and the one that raises the most questions at the point of transfer, when part of the value rests on the person of the operator.
2. The management contract
A hotel operator manages the establishment in the name and on behalf of the owner, who remains the operator of record and bears the result. The operator brings its know-how, its brand and its distribution networks.
- Usual remuneration: a base fee of 2 to 4 % of turnover, plus an incentive fee of 8 to 12 % of gross operating profit (GOP).
- Average term: 20 to 25 years, with negotiated exit conditions.
The owner gets professional operation but gives up part of the control and commits for the long term. The drafting of the contract (performance targets, termination clauses, capital expenditure budget) deserves the help of a specialist lawyer; a balanced contract is the best guarantee of longevity for both sides.
3. Franchise
The owner runs the hotel personally under a brand, in exchange for royalties. He obtains the right to use the brand name, its standards, its central reservation system and its marketing.
- Usual fees: an entry fee, then 4 to 6 % of turnover, to which a marketing contribution and distribution costs are often added.
- Average term: 15 to 20 years.
Operational independence is preserved. In return, brand standards impose upgrade investments and operating constraints. Before signature, the franchise agreement is subject to the pre-contractual disclosure duty laid down by the French Commercial Code (article L. 330-3) where the franchisor requires exclusivity or near-exclusivity.
4. Letting the building under a commercial lease
The owner of the building lets it to an operator, who becomes the owner of the fonds de commerce. The lease falls under the French commercial lease regime (bail commercial, the statutory 3-6-9 lease, articles L. 145-1 et seq. of the Commercial Code). Three rent formulas coexist:
- Fixed rent: guaranteed income, low risk for the owner, but no share in performance.
- Variable rent: rent linked to turnover, sharing both the risks and the good years.
- Mixed rent: a guaranteed minimum plus a variable share; this is the most frequent formula for branded hotels.
The owner obtains a regular income and transfers the operating risk. He depends on the strength of his tenant and bears the risk of unpaid rent. Major works generally remain his responsibility, according to the allocation set out in the lease.
5. Asset management
This is not an operating model but a supervisory layer. The asset manager represents the investor, oversees the operator or manager, tracks the indicators (occupancy rate, average daily rate, RevPAR, GOP), decides on investments and reports to the lenders.
The function brings strategic vision and specialist expertise, at the cost of an additional fee and a more complex organisation. It is found mainly in portfolios held by funds or property companies.
6. Leasing the business: location-gérance
The owner of a fonds de commerce (the lessor) entrusts its operation to a business lessee (locataire-gérant), who runs it in his own name and at his own risk, against a fee. The regime is set out in articles L. 144-1 et seq. of the Commercial Code.
- The business lessee has the status of trader and is registered as such.
- The contract is for a fixed term, in practice two or three years minimum, often renewable.
- It is published in a legal notices journal (article R. 144-1 of the Commercial Code).
- The former requirement that the lessor should have operated the business for two years beforehand was removed by Law no. 2019-744 of 19 July 2019.
Legal points to watch:
- until the contract is published, and for six months afterwards, the lessor is jointly and severally liable with the business lessee for the debts the latter incurs in operating the business (article L. 144-7 of the Commercial Code);
- the lessor is jointly and severally liable for certain direct taxes assessed on the operation of the business (article 1684 of the French General Tax Code);
- current employment contracts transfer to the business lessee (article L. 1224-1 of the French Labour Code), then return to the lessor at the end of the contract;
- a detailed inventory of equipment, stock and contracts, although not required by law, is in practice indispensable to avoid disputes when the business is handed back;
- a non-compete clause on exit is common; it is a matter of contract and must be proportionate.
For the lessor, location-gérance preserves ownership of the business, produces a fee and allows him to wait for a sale on better terms. For the business lessee, it allows him to test an activity without heavy investment, with an existing clientele and often a purchase option. The main risk is the erosion of the business through poor operation.
Choosing between them
- Strategic: the investor’s objectives, the positioning sought, the holding period.
- Operational: available skills, the team in place, the ability to manage day to day.
- Financial: capital available, expected return, risk tolerance.
- Market: location, competition, growth potential of the destination.
What the management model changes for the valuation
The management model defines what is being valued. Under direct operation or location-gérance, the value of the building and the value of the business are linked; under a commercial lease, the owner holds an investment property and the tenant holds a fonds de commerce, and the two are valued separately. For hotels, the Charte de l’expertise en évaluation immobilière (French property valuation charter, 6th edition, November 2025, Title III, § 2.4) provides for a valuation based on the operator’s accounts, often starting from EBITDA, distinguishing the value of the property from that of the business and stripping out the outperformance of a particular operator. The European Valuation Standards 2025 of TEGOVA apply the same reasoning to properties whose value depends on trading results.
In practice, a management contract or a franchise shows up in the profit and loss account as fees; a lease shows up in the rent and its formula; a location-gérance shows up in the fee and in the condition of the business when it is handed back. I examine the contracts in force, their remaining term and their exit clauses before choosing my methods.
Further reading
The Business and company shares page describes the valuation of a hotel, building and business, with its timescale and fee. Two articles complete this one: how to value a hotel, seven methods and a worked example and the top 10 hotel brands in France.
What next
A business, a hotel or company shares to value?
Sale, contribution, divorce of a business owner, withdrawal of a partner, wealth tax: premises, business and shares valued together, with the consistency banks and the tax authorities expect.
Free quote, by email or by phone. No commitment before the quote is accepted. Fees are never linked to the value of the property (Charte de l’expertise, Title I, §2.1).
