Expansion Tactics

With more than 1,100 locations, G6 Hospitality—the parent company of Motel 6—has a solid presence in the United States and Canada. Julie Arrowsmith explains the brand’s new plan for franchise growth and its strategy to expand south of the border

When G6 Hospitality first started franchising, it was pretty modest, a supplement to the business that was never meant to be a growth driver. But about three years ago, franchising became our primary strategy for growth. In 2013, we opened 90 new franchise locations; this year we’re projecting we’ll open up to 150. In 2015 and beyond, we expect to open approximately 200 a year. It’s been primarily domestic, but we also have properties in Canada.

The next logical step is Mexico. Latin America appeals to us, but some countries in the region are less stable, and thus unattractive as a new entry for us. But the economy in Mexico is thriving, the government has done a lot to make it an open environment for new business, and our targeted demographic, the middle class, is getting stronger every day. From a product standpoint, it’s also a great fit. We’re not looking at resort locations like Cancun; we’re looking at the heart of Mexico where you have a lot of automobile manufacturing and mining. We’ve seen tremendous interest there in the Motel 6 product.

The Mexican properties will be franchises. It makes sense: Mexican developers are experts when it comes to finding real estate and locating vendors in their own country. Plus, franchising is now our major growth strategy. Last year we tipped the scale to be slightly more franchise-owned than company-owned, about 55/45.

We had a lot of discussions about what the magic percentage of company-owned versus franchise locations is, but I don’t know that there is one. The way we think about it is, we’ll always have a strong core of company-owned properties, because it gives us that skin in the game. We can go to franchisees and talk about brand standards, and they know we’re following suit. Today we have 533 company-owned properties, and I think we’ll stay around that number. The exception is our extended-stay brand, Studio 6, which provides larger suites equipped with kitchens at a reduced weekly rate. We’d like to grow the Studio 6 brand further.

Expanding to Mexico requires strategic thinking. We need to make sure we have front-office systems available for franchisees. We have to be prepared to offer support from a back-office standpoint, getting our website adapted and our call centers prepared to provide franchisees with the same support they get in the United States. We’ve also done a lot of research into our Mexican customer, and it’s ongoing.

We know exactly who we are in the United States, and we want to be equally clear about brand standards in Mexico. But we may need to adjust our offering slightly, based on the needs of Mexican customers, which can differ from the needs of American customers. We thought they’d like a smaller room, for example, but they actually like the fact that Motel 6 rooms are typically bigger. They like a small refrigerator to accommodate drinks and snacks, which we don’t generally have in the United States.

We’re also considering adding a food and beverage service—not a restaurant, but more of a grab-and-go offering. In the United States, we will continue to adhere to our brand promise of offering a clean, comfortable room at the lowest price of any national chain, but in Mexico there’s an expectation, especially in locations not near restaurants, that there will be food available.

The first couple of franchising agreements are coming through now. We’re looking at opening those properties in late 2015 under the brand names Hotel 6 and Estudio 6. One property will be located in Saltillo, which is the capital and largest city of the northeastern Mexican state of Coahuila.