What are the primary revenue sources for Baymont Inn Suites from its franchised hotels?
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)
According to the 2025 FDD, the primary revenue sources for Baymont Inn Suites from its franchised hotels are ongoing royalty fees, initial franchise fees, and marketing and reservation fees. The ongoing royalty fees are typically a percentage of the gross room revenues of each franchised hotel. Baymont Inn Suites recognizes these royalty fee revenues as the underlying sales occur.
Baymont Inn Suites also collects non-refundable initial franchise fees from franchisees. These fees are recognized as revenues over the initial non-cancellable period of the franchise agreement, which typically ranges from 10 to 20 years. The revenue recognition commences when all material services or conditions have been substantially performed, such as when a hotel opens for business or when a franchise agreement is terminated because the hotel will not open.
In addition to royalty and franchise fees, Baymont Inn Suites collects marketing and reservation fees. These fees are intended to cover the expenses associated with operating a centralized reservation system, e-commerce channels, third-party distribution channels, advertising and marketing programs, global sales efforts, operations support, training, and other related services. Baymont Inn Suites recognizes these fees as revenue when the underlying sales occur and is generally contractually obligated to spend these fees in accordance with the franchise agreements. The company also recognizes occupancy taxes on a net basis.