As many of the traditional franchised product developers recognized this powerful and profitable
market segment, they too began to consider the compelling factors: the restrictive nature of most
franchise agreements, the considerable franchiser costs (royalty, reservation, marketing, application
fee, etc.), which range up to 12 percent of gross income, the inconsistency between franchised
products, the premium revenue per available room of boutique hotels vs. luxury hotels and, finally, the
barriers to entry in the traditional boutique hotel marketplace.