Who establishes the fees, dues, and assessments payable by Best Western members?
Best_Western Franchise · 2025 FDDAnswer from 2025 FDD Document
efined by the statutes of limitations for all major jurisdictions, which include federal, state, and foreign. As of November 30, 2024 and 2023, the Company has not recognized any asset or liability for unrecognized income tax benefits or liabilities. It is the Company's policy to recognize interest and penalties related to uncertain tax positions as a component of the income tax provision.
(o) Revenue Recognition
Fees, dues and assessments
Fees, dues and assessments are established by the membership and the Board of Directors to compensate the Company for providing services to Members, soft brand licensees, SureStay franchisees, and WorldHotels licensees. The Company has performance obligations to provide hotel support and marketing, and a license to our hotel system intellectual property for the use of our brand names. Our performance obligations are a series of distinct goods or services, for which the Company receives the following types of variable consideration through our membership agreements with our Members. Monthly fees and assessments (which include advertising, sales and marketing and reimbursement for the Company's technology expenses) represent fixed and variable consideration and are billed monthly and recognized as revenue in the same month as the services are provided and charges become fixed or determinable and payable. Annual dues are established, billed and payable each year for continuing membership during the succeeding year. Annual dues are recognized as revenue ratably in the year to which the continuing membership applies. Any Member may resign from the Company at any time, but if the Member resigns or is terminated, fees and
November 30, 2024
dues become immediately due and payable per the terms of the applicable contract and are recognized as revenue when cash is received regardless of the term of the contract.
Affiliation fee revenues from Best Western branded hotels are fixed consideration payable upon approval of the Member or licensee by the Board of Directors and acceptance of membership or license terms by the property owner. These revenues are recognized on a straight-line basis over the hotelier's expected life as a Best Western branded hotel or over the initial contract term. SureStay franchisee initial fees are due upon execution of a franchise agreement and recognized over the initial term of the franchise agreement. WorldHotels hotel integration fees are recognized on a straight-line basis over the expected life as a WorldHotels branded hotel. Affiliation fee revenues were $8.8 million and $9.8 million for the years ended November 30, 2024 and 2023, respectively.
Best Western Rewards® frequent stay program ("BWR® program")
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.
Best Western Travel Card® (a card having no expiration date and no usage or non-usage fees) revenue is recognized when: (i) the Best Western Travel Card is redeemed, or (ii) the likelihood of the Best Western Travel Card being redeemed is remote (Best Western Travel Card breakage), and the Company determines that there is not a legal obligation to remit the unredeemed Best Western Travel Card balance to the relevant jurisdiction. The determination of the Best Western Travel Card breakage rate is based upon Company specific historical redemption patterns. Best Western Travel Card breakage is included in program revenues in the Consolidated Statements of Revenues and Expenses.
Source: Item 23 — Receipts (FDD pages 108–413)
What This Means (2025 FDD)
According to Best Western's 2025 Franchise Disclosure Document, the membership and the Board of Directors establish the fees, dues, and assessments. These charges compensate Best Western for providing services to its members, soft brand licensees, SureStay franchisees, and WorldHotels licensees. These services include hotel support and marketing, as well as licensing the use of Best Western's brand names and intellectual property.
The Board of Directors has the authority to adjust the advertising assessment once per fiscal year. However, this annual increase cannot exceed the greater of two percent of the prior year's assessment or the rate of inflation for the previous year, as measured by the United States Bureau of Labor Statistics Consumer Price Index. Any increase beyond this limit requires approval from a majority vote of all Best Western members.
Specifically, the Board of Directors establishes entrance fees for new applicants, annual dues for continuing memberships, and monthly fees to cover the cost of providing services to members. For members approved on or after January 1, 2018, the monthly fees are determined annually by the Board. However, if a member or group of members holds at least a 50% financial ownership in the Best Western property and were members as of July 1, 2016, the monthly fees are set at 3.5% of the property room revenue. This limitation on monthly fee increases does not apply to members who pay monthly fees as a percentage of property room revenue.