HomeTowne Studios by Red Roof: Economy Extended-Stay Financing in 2026 and What Lenders Need to See

HomeTowne Studios by Red Roof is the economy extended-stay brand of the Red Roof system. In 2026 it is financed the way the segment is financed: a construction or conversion loan sized on stabilized NOI at 55% to 70% of cost, a C-PACE layer on the mechanical scope, SBA 7(a) or 504 for owner-operators, and 25% to 35% equity. Third-party summaries of the 2026 franchise disclosure document put the cost at $11,734,393 to $14,457,291, covering construction or conversion of 20- to 124-room properties. The fees are a $30,000 initial fee for up to 100 rooms, a 5.5% royalty and a 3% marketing and reservation fee. Red Roof's own franchising FAQ frames the brand's new-build and conversion affordability at $4,000 to $113,000 per key. Red Roof provides the FDD through its development team, so the summarized figures should be confirmed against it.

Two facts make HomeTowne easier to finance than its size suggests. It is on the SBA Franchise Directory as code S6329 with a clean record: 10 SBA 7(a) loans from 2021 to 2025 totaling $30.9 million and a 0% default rate in third-party loan data. And Red Roof owners have a lending partner in Bridge, which charges Red Roof franchisees a 50-basis-point placement fee on acquisitions and refinances of $10 million or more and lends directly on construction and PIPs. This guide gives the costs and fees with their sourcing, the dual-brand budget from Red Roof's primary 2026 FDD, the SBA position, the corporate-to-franchise conversion path, the lenders and a worked stack. The partner terms are on Bridge's Red Roof owner page.

Key takeaways

• 2026 FDD cost about $11.7M to $14.5M for a 20- to 124-room build or conversion (third-party summary).
• Fees: $30,000 up to 100 rooms plus $300 per room above, 5.5% royalty, 3% marketing and reservation (third-party).
• Red Roof's primary 2026 FDD budgets a 140-room Red Roof Inn plus HomeTowne dual-brand at $13.6M to $15.8M new.
• SBA approved as code S6329 (February 2021) with 10 loans and a 0% default rate; the transient test applies.
• Red Roof owners get Bridge's 50-basis-point placement fee and direct construction and PIP capital.

What does a HomeTowne Studios cost, and what are the fees?

The one primary number is in the parent brand's filing. Red Roof's 2026 FDD on the Minnesota registry budgets a 140-room dual-brand Red Roof Inn plus HomeTowne Studios new build at $13,569,518 to $15,836,090 excluding land, about $97,000 to $113,000 per key, and a 120-room dual-brand conversion at $693,268 to $2,284,813. That dual-brand figure is the cleanest cost benchmark for a HomeTowne build. It sits inside WoodSpring's $72,400 to $119,400 per key and far under HVS's $170,000 to $197,000 median for limited-service and midscale extended-stay hotels. The summarized Item 7 is the headline number, but it is the wrong one to budget from: it blends a 20-room conversion with a 124-room build, so a lender will read the dual-brand filing instead and ask for the current HomeTowne FDD before crediting any of it.

How do owners finance a Red Roof corporate-to-franchise conversion?

Many HomeTowne Studios and Red Roof Inns were company-operated until recently. Red Roof's affiliate count fell from 35 to 27 between the 2025 and 2026 FDDs as hotels moved to franchisees, and the HomeTowne data showed 39 company-operated hotels in the prior cycle. A corporate-to-franchise conversion is an acquisition of an operating hotel with a franchise agreement signed at closing. It is the easiest hotel deal to underwrite: there is a trailing-12, the flag stays, and the PIP is defined.

The financing is one of three routes:

• An SBA 7(a) at up to 90% of cost for an owner-operator under $5 million of debt.
• A 504 for the real estate above that.
• A bank or debt fund loan at 55% to 75% for an investor; the seller, Red Roof's affiliate, sometimes carries a note.

What the lender needs to see:

• The hotel's own trailing-12 and STR report.
• The executed franchise agreement and the PIP addendum.
• On an SBA loan, the S6329 or S1414 code with the manager unaffiliated with Red Roof.

Bridge closed a $3 million refinance on a 103-key Red Roof Inn in Charlotte in 85 days, which is the live comparable. The brand-wide picture is in Red Roof vs Motel 6 vs Super 8 vs Econo Lodge.

Is HomeTowne Studios SBA approved?

Yes. HomeTowne Studios by Red Roof is on the SBA Franchise Directory effective October 15, 2026 as code S6329, listed since February 12, 2021, and Red Roof Inn (which covers Red Roof PLUS+) as S1414. The HomeTowne listing carries the hotel manager-affiliation condition and the extended-stay transient test, which requires more than 50% of revenue from guests staying 30 days or less. Third-party loan data records 10 SBA 7(a) loans on HomeTowne Studios from 2021 to 2025 totaling $30.9 million with a 0% default rate. That is an average of about $3.1 million per loan, the profile of a conversion or small build financed by an owner-operator.

The 2026 rules:

• A 7(a) runs to $5 million at a rate capped at 10.00%, which is prime plus 3.00 points.
• A 504 pairs a bank first mortgage with a 6.97% fixed debenture capped at $5.5 million and 15% to 20% equity on a hotel, combinable to $10 million.
• Every owner must be a U.S. citizen or national since March 1, 2026.

Every HomeTowne build sits under the 504 cap. The rules and brand table are in the SBA Franchise Directory check for hotel brands.

Who finances a HomeTowne Studios?

Bridge closed more than $500 million of hotel loans in 2025, and Red Roof owners get the 50-basis-point placement fee on acquisitions and refinances of $10 million or more with direct lending on construction and PIPs. Hotel debt funds mostly sit out: a $10 million to $14 million HomeTowne is under their minimums. Market terms for banks are from the Crittenden 2026 hotel lending survey.

How do lenders size a HomeTowne loan?

Off stabilized NOI at the economy extended-stay band. In the example, a 124-room HomeTowne runs 76% occupancy and a $58 ADR, about $44 of RevPAR, the WoodSpring legacy-hotel level. The stack from there:

• Room revenue: 124 rooms at about $44 of RevPAR is about $2.0 million a year.
• Total revenue with other income: about $2.04 million.
• Deductions in the example: an 8.5% fee load, a 4% FF&E reserve, a small payroll and property taxes.
• NOI at a 44% margin: about $900,000.

At a $65 ADR, the WoodSpring purpose-built level, NOI rises to about $1.07 million. Debt yield would then support $9.3 million, so the loan rises to the $8.8 million loan-to-cost cap, 65% of cost, and the cap takes over. In the example, HomeTowne's low cost per key is what lets a $44 RevPAR hotel carry 58% leverage. The requirements and draw process are in hotel construction loans in 2026.

Worked example: a 124-room HomeTowne Studios new build

Building cost $12.2 million (inside the summarized range and the dual-brand per-key benchmark), land $1.3 million, $13.5 million all-in, $109,000 per key.

Both stacks need the hotel to reach the purpose-built WoodSpring level of ADR, about $65, to cover comfortably, which is the honest reading of an economy extended-stay build in 2026 at any flag. The 504's 85% leverage is the draw for an owner-operator; the conventional stack's lower debt service is the draw for an investor. The segment-wide sizing is in the cost per key of an economy extended-stay hotel.

When is a HomeTowne Studios the wrong build?

• Avoid it if your guests stay by the month. The SBA transient test and the lender's revenue model both assume stays of 30 days or less dominate.
• Avoid budgeting from the summarized Item 7. It blends construction and conversion for 20 to 124 rooms; get the 2026 FDD from Red Roof.
• Avoid a site under about $50 of ADR. Neither stack covers there.
• Avoid SBA if any owner is a lawful permanent resident or a third party manages the hotel with full discretion.
• Avoid building where a WoodSpring, ECHO or Studio 6 opened inside three years without a demand study for your site; extended-stay supply grew 4.9% in 2025.