Restaurants, hotels and travel
Asset-light model
Growing a business without owning the heavy assets, by franchising, managing or leasing them.
Facts checked against sources onWhat does Asset-light model mean?
An asset-light company earns money from its brand, systems and know-how while other parties own the physical assets. Hotel groups franchise or manage hotels owned by others, restaurant brands franchise outlets, and airlines lease aircraft. It needs much less capital, so return on capital is high and growth can be fast, and fee income is steadier than property profits. Example: a hotel company earning 1 million of fees a year from a managed hotel has almost no capital tied up, while owning the same hotel might need 100 million. The trade-offs are less control over quality, a smaller share of the profit and dependence on owners and franchisees.
Where does it come up in case interview prep?
Related terms
- Management contract (hotels)A deal where a hotel company runs a hotel it does not own, in return for fees.
- Franchise royaltyThe ongoing fee a franchisee pays the brand, usually a percentage of sales.
- Capex intensityCapital spending as a share of revenue.
- Return on investment (ROI)The gain from an investment relative to its cost.
- Prime costFood and drink cost plus labour cost, the two biggest restaurant costs.
- Table turnsHow many times each table is used by a new group in a meal period or day.
- CoverOne guest served a meal: the unit restaurants count.
- Same-store sales (comparable sales)The US name for like-for-like sales: growth at restaurants or stores open in both periods.
Learn it in context
See Asset-light model at work in a lesson from How industries work: the toolkit, with checks as you go.
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