How are the costs of operating the Best Western Rewards® (BWR) program charged to BWH hotels?
Best_Western Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company administers the BWR program for the benefit of BWH and BWR program members. Under our BWR program, the Company has a performance obligation to provide or arrange for the provision of goods or services between BWR program members and BWH hotels in exchange for the redemption of points earned from past activities. Costs of operating the BWR program, including costs for marketing, promotion, and other member services, are charged to the BWH hotels through an assessment fee that is based on members' qualified expenditures. The assessment fees received from BWH hotels are deferred and recognized as program revenues in the Consolidated Statements of Revenues and Expenses as the loyalty points are redeemed and the related service, net of redemption expense, is provided. The amount of revenue the Company recognizes upon point redemption is impacted by the Company's estimate of the breakage for points that BWR members will never redeem. The Company estimates breakage based on historical experience and expectations of future BWR member behavior, including analyses performed by and input of third-party actuaries. All BWR program costs are recognized as incurred and are recorded in program cost of sales in the Consolidated Statements of Revenues and Expenses.
Program revenues in excess of redemption costs are used to fund the operational expenses of the BWR program.
Source: Item 23 — Receipts (FDD pages 108–413)
What This Means (2025 FDD)
According to Best Western's 2025 Franchise Disclosure Document, the costs of running the Best Western Rewards (BWR) program, which includes marketing, promotions, and other member services, are covered by BWH hotels through an assessment fee. This fee is calculated based on the qualified expenditures made by members.
Best Western defers the assessment fees it receives from hotels and recognizes them as program revenues in the Consolidated Statements of Revenues and Expenses. This revenue recognition occurs as loyalty points are redeemed and the related service is provided, after deducting redemption expenses. The amount of revenue recognized when points are redeemed is affected by Best Western's estimate of breakage, which refers to points that BWR members are not expected to redeem. Best Western estimates this breakage based on past trends, expected future member behavior, and analyses from third-party actuaries.
All costs associated with the BWR program are recognized as they are incurred and are recorded as program cost of sales in the Consolidated Statements of Revenues and Expenses. Program revenues that exceed redemption costs are then used to cover the operational expenses of the BWR program. This means that the BWR program aims to be self-sustaining, with revenue from member activity covering its costs.