How does Bw Premier Collection mitigate credit risk related to accounts receivable from hoteliers?
Bw_Premier_Collection Franchise · 2025 FDDAnswer from 2025 FDD Document
gnificant credit risk to cash and cash equivalents.
Accounts receivable, principally from Members, net, are primarily from Member, franchisee, licensee fees and services, and product sales. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of hoteliers located throughout the world comprising the Company's customer base. The Company does not require collateral within credit limits established. In those instances when a Member, franchisee, or licensee requests product in excess of the credit limit allowed by Company policy, the Company requests a letter of credit, deposit, or prepayment to secure the collection of accounts receivable. The Company performs ongoing evaluations of its hotelier receivables; non-payment can lead to cancellation of the applicable membership, license or franchise.
The Company is also potentially subject to concentrations of credit risk in its investments. The Company has investments in certificates of deposits, mutual funds, common shares, U.S. treasury and government agency bonds, corporate bonds, mortgage and asset-backed securities, and municipal and provincial notes and bonds. The Company has appointed an investment advisory firm to oversee the Company's investment strategy who have assigned various fund managers to manage the Company's investments. The Company believes it is not exposed to any material credit risk to investments based on its analysis through the implementation of ASC 326: Measurement of Credit Losses on Financial Instruments.
Source: Item 23 — Receipts (FDD pages 54–203)
What This Means (2025 FDD)
According to Bw Premier Collection's 2025 Franchise Disclosure Document, the company takes several measures to mitigate credit risk related to accounts receivable from its hoteliers. One key factor is the diversification of its customer base, as the company serves a large number of hoteliers located throughout the world. This reduces the risk associated with relying on a small number of clients.
Bw Premier Collection does not typically require collateral within established credit limits. However, when a member, franchisee, or licensee requests products or services exceeding their credit limit, the company may request a letter of credit, deposit, or prepayment to secure the accounts receivable. This ensures that the company has some form of security for larger transactions.
Furthermore, Bw Premier Collection performs ongoing evaluations of its hotelier receivables. If a hotelier fails to make payments, this can lead to cancellation of their Best Western membership, license, or franchise agreement. This provides a strong incentive for hoteliers to maintain timely payments. The company also records allowances for current expected credit losses based on their assessment of customer credit risk, the age of outstanding invoices, and forecasts of future economic conditions. This allows Bw Premier Collection to account for potential losses in its financial statements.
In addition, Bw Premier Collection evaluates the collectability of accounts receivable balances based on the type of relationship they have with the account, their prior experience with accounts in each relationship type, and an evaluation of current and projected economic conditions. This comprehensive approach helps Bw Premier Collection manage and minimize its credit risk effectively.