How does Best Western recognize revenue from monthly fees and assessments?
Best_Western Franchise · 2025 FDDAnswer from 2025 FDD Document
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
Source: Item 23 — Receipts (FDD pages 108–413)
What This Means (2025 FDD)
According to Best Western's 2025 Franchise Disclosure Document, the company recognizes revenue from monthly fees and assessments in the same month the services are provided. These fees and assessments, which include advertising, sales and marketing, and technology expense reimbursement, are considered fixed and variable consideration. They are billed monthly and recognized as revenue when the services are provided and the charges become fixed, determinable, and payable.
This means that Best Western accounts for these revenues on an accrual basis, matching the revenue with the period in which the related services are delivered. This is a common accounting practice that provides a clear picture of the company's financial performance in a given period. For a prospective franchisee, this indicates that Best Western's revenue recognition practices for these fees are straightforward and tied directly to the provision of services.
In contrast, Best Western handles annual dues differently. Annual dues are billed and payable each year for continuing membership and are recognized as revenue ratably over the year to which the continuing membership applies. This means that the revenue from annual dues is spread out evenly over the course of the year, rather than being recognized all at once when the dues are collected. This approach aligns the revenue recognition with the period of membership coverage.