How is the Best Western Travel Card breakage rate determined for Bw Premier Collection?
Bw_Premier_Collection Franchise · 2025 FDDAnswer from 2025 FDD Document
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 54–203)
What This Means (2025 FDD)
According to Bw Premier Collection's 2025 Franchise Disclosure Document, the determination of the Best Western Travel Card breakage rate is based upon Company specific historical redemption patterns. Breakage refers to the likelihood that a Best Western Travel Card will not be redeemed. This breakage is then included as program revenues in the Consolidated Statements of Revenues and Expenses.
For a prospective franchisee, this means that Bw Premier Collection analyzes past redemption data to estimate how many travel cards will likely go unused. This estimate directly impacts the company's reported revenues.
This accounting practice is important for franchisees to understand because it reflects how Bw Premier Collection manages its liabilities related to outstanding travel cards and how it recognizes revenue from these cards. Franchisees may want to inquire about the historical breakage rates and how these rates have influenced the company's financial performance.