This study examines the choice between management contracts and franchise agreements in the corporate development of international  hotel  companies.  The  fact  that  contractual  modes  of  corporate development are quite prevalent in the hotel sector world-wide, in combination with the lack of research in that direction, suggests the gap in this field.  This  study  attempts  to  fill  this  void  by  developing  a  theoretical framework in order for further empirical research to reveal important findings  regarding  the  factors  that  influence  the  choice  between  franchise agreements and management contracts as a means of non-equity hotel development. It has been suggested that management contracts should be viewed as a more hierarchical form of organisation in terms of the degree of control the firm can exercise. Additionally, a more robust theoretical discussion has been provided, combining both transaction cost theory and agency theory on the decision for corporate development in the hotel industry. Finally, important factors have been identified, which influence a hotel  company’s  choice  between  management  contracts  and  franchise agreement in its corporate development, followed by propositions, therefore, set out a guideline for further empirical studies.