Under what two conditions does Best Western recognize revenue from the Best Western Travel Card?

According to Best Western's 2025 Franchise Disclosure Document, revenue from the Best Western Travel Card, which has no expiration date or usage fees, is recognized under two specific conditions. First, Best Western recognizes revenue when the Travel Card is actually redeemed by a customer for goods or services at a Best Western property. This is a straightforward recognition point, as the company has provided a service in exchange for the value stored on the card.

Second, Best Western recognizes revenue when the likelihood of the Travel Card being redeemed is considered remote, a concept referred to as "breakage." This occurs when the company determines that a significant portion of outstanding Travel Cards will likely never be used. However, there's a crucial condition attached to this: Best Western must also determine that there is no legal obligation to remit the unredeemed Travel Card balance to the relevant jurisdiction. This means that if state laws require the company to turn over unclaimed property (escheatment), revenue cannot be recognized as breakage.

The determination of the Best Western Travel Card breakage rate is based upon Company specific historical redemption patterns. Best Western includes Travel Card breakage in program revenues in the Consolidated Statements of Revenues and Expenses. This breakage is based on historical redemption patterns, suggesting that Best Western analyzes how Travel Cards have been used in the past to predict future redemption behavior. This revenue recognition approach is important for franchisees to understand, as it impacts the overall financial reporting and potential profitability of the Best Western brand.