How are all BWR program costs recognized for Bw Premier Collection?
Bw_Premier_Collection 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 54–203)
What This Means (2025 FDD)
According to the 2025 FDD, Bw Premier Collection participates in the Best Western Rewards (BWR) program. The costs of operating the BWR program, including marketing, promotion, and other member services, are charged to BWH hotels through an assessment fee based on members' qualified expenditures. These assessment fees are initially deferred and then recognized as program revenues as loyalty points are redeemed and the related services are provided, net of redemption expenses. The revenue recognized upon point redemption is influenced by the company's estimate of breakage, which accounts for points that BWR members are unlikely to redeem. This estimate is based on historical data, expectations of future member behavior, and analyses from third-party actuaries.
All costs associated with the BWR program are recognized as they are incurred. These costs are recorded as program cost of sales within the Consolidated Statements of Revenues and Expenses. This means that Bw Premier Collection recognizes these expenses immediately rather than deferring them.
For a prospective Bw Premier Collection franchisee, this accounting practice means that the costs associated with the BWR program will be reflected in the financial statements as they happen, providing a clear picture of the program's immediate financial impact. Additionally, program revenues exceeding redemption costs are used to fund the operational expenses of the BWR program.