How are costs of operating the BWR program charged to BWH hotels 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 Bw Premier Collection's 2025 Franchise Disclosure Document, the costs of operating the Best Western Rewards (BWR) program are charged to BWH hotels through an assessment fee. This fee is based on BWR members' qualified expenditures at the hotels. These costs encompass marketing, promotion, and other member services associated with the BWR program.
The assessment fees collected from BWH hotels are initially deferred and then recognized as program revenues in the company's financial statements. This revenue recognition occurs as loyalty points are redeemed and the related services are provided, after deducting redemption expenses. The revenue amount recognized is influenced by the company's estimate of breakage, which accounts for points that BWR members are unlikely to redeem. This breakage is estimated using historical data, expectations regarding future member behavior, and analyses from third-party actuaries.
Program revenues that exceed redemption costs are allocated to cover the operational expenses of the BWR program. This structure ensures that the costs of the loyalty program are primarily borne by the hotels benefiting from it, while also allowing for the reinvestment of excess revenues to sustain and improve the program.