What page outlines the Gross Room Revenue Calculation for a Baymont Inn Suites franchise?
Baymont_Inn_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
The principal source of revenues from franchising hotels is ongoing royalty fees, which are typically a percentage of gross room revenues of each franchised hotel. The Company recognizes royalty fee revenues as and when the underlying sales occur. The Company also receives non-refundable initial franchise fees, which are recognized as revenues over the initial non-cancellable period of the franchise agreement, commencing when all material services or conditions have been substantially performed. This occurs when a hotel opens for business in the Company's system or when a franchise agreement is terminated after it has been determined that the hotel will not open. The Company's standard franchise agreement typically has a term of 10 to 20 years. Additionally, the Company recognizes occupancy taxes on a net basis.
The Company's franchise agreements also require the payment of marketing and reservation fees, which are intended to reimburse the Company for expenses associated with operating an international, centralized reservation system, e-commerce channels such as the Company's brand.com websites, as well as access to third-party distribution channels, such as online travel agents, advertising and marketing programs, global sales efforts, operations support, training and other related services. Marketing and reservation fees are recognized as revenue when the underlying sales occur. The Company is generally contractually obligated to spend the marketing and reservation fees it collects from franchisees, in accordance with the franchise agreements. Marketing and reservations costs are expensed as incurred, which may not occur in the same period as the recognition of marketing and reservation revenues.
Source: Item 23 — RECEIPTS (FDD pages 97–443)
What This Means (2025 FDD)
Based on the 2025 Baymont Inn Suites Franchise Disclosure Document, Item 23 discusses revenue recognition, which is tied to gross room revenues. Specifically, the document states that the company's main source of revenue from franchising hotels comes from ongoing royalty fees, which are calculated as a percentage of the gross room revenues of each franchised hotel. Baymont Inn Suites recognizes these royalty fee revenues as the underlying sales occur.
In addition to royalties, Baymont Inn Suites also collects marketing and reservation fees, which are also based on a percentage of gross room revenues. These fees are used to cover expenses related to operating the centralized reservation system, e-commerce channels, and marketing programs. The company recognizes these fees as revenue when the underlying sales occur, and they are contractually obligated to spend these fees in accordance with the franchise agreements.
The FDD does not provide a specific page number outlining the gross room revenue calculation. To get more details on exactly how gross room revenue is calculated, including which specific revenue streams are included or excluded, a prospective franchisee should ask Baymont Inn Suites for clarification during their due diligence process. Understanding this calculation is crucial for forecasting potential royalty and marketing fee obligations.