How does Best Western account for lease agreements that contain both lease and non-lease components?

According to Best Western's 2025 Franchise Disclosure Document, the company uses a practical approach for handling lease agreements that include both lease and non-lease elements. Specifically, Best Western accounts for these agreements as a single lease component across all asset classes. This means that instead of separating the lease and non-lease portions for accounting purposes, they are treated as one combined unit.

This approach simplifies the accounting process for Best Western. By treating the entire agreement as a single lease component, Best Western avoids the complexities of allocating costs and expenses between the lease and non-lease portions. This can save time and resources in financial reporting.

For potential Best Western franchisees, this accounting practice is relevant if they lease property that includes services or components beyond just the physical space. For example, if a lease includes maintenance services, Best Western would account for the entire package as a single lease. This consolidated approach could affect how the lease is valued and how expenses are recognized over the lease term. Franchisees should be aware of this accounting method as it may impact their financial statements and lease-related expenses.