How are incentive management fees recognized by Caption By Hyatt?
Caption_By_Hyatt Franchise · 2025 FDDAnswer from 2025 FDD Document
ices, but the timing of revenues received from the owners may not align with the timing of the expenses incurred to operate the programs. Therefore, any difference between the revenues and expenses will impact our net income.
• Management and hotel services agreement services—Under the terms of our management and hotel services agreements, we provide management and hotel services, which form a single performance obligation that qualifies as a series. In exchange, we receive variable consideration in the form of management or hotel services fees which are comprised of base and/or incentive management fees. Incentive fees are typically subject to the achievement of certain profitability targets, and therefore, we apply judgment in determining the amount of incentive management fees recognized each period. Incentive management fees are recognized to the extent it is probable that we will not reverse a significant portion of the fees in a subsequent period. We rely on internal financial forecasts and historical trends to estimate the amount of incentive management fees recognized and the probability that incentive fees will reverse in the future. Generally, base management and hotel services fees are due and payable on a monthly basis as services are provided, and incentive fees are due and payable based on the terms of the agreement, but at a minimum, incentive fees are billed and collected annually. Revenues are recognized over time as services are rendered.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Caption By Hyatt's 2025 Franchise Disclosure Document, incentive management fees are a form of variable consideration that Caption By Hyatt receives under its management and hotel services agreements. These fees are tied to the achievement of specific profitability targets. Caption By Hyatt exercises judgment in determining the amount of incentive management fees to recognize each period. They recognize these fees to the extent that it is probable that a significant portion of the fees will not be reversed in a subsequent period. To estimate the amount of incentive management fees to recognize and the probability of reversal, Caption By Hyatt relies on internal financial forecasts and historical trends.
Generally, base management and hotel services fees are due and payable on a monthly basis as services are provided. Incentive fees, however, are due and payable based on the terms of the agreement, but at a minimum, incentive fees are billed and collected annually. Caption By Hyatt recognizes revenues over time as services are rendered. Gross fees, as defined by Caption By Hyatt, include base management fees, incentive management fees, and franchise and other fees.
For a prospective Caption By Hyatt franchisee, this means that a portion of the fees paid to Caption By Hyatt are directly linked to the profitability of the hotel. The incentive fees are not fixed but depend on meeting certain financial targets. The recognition of these fees is based on Caption By Hyatt's internal estimates and historical data, which may be subject to change. Franchisees should understand the specific profitability targets and payment terms outlined in their management and hotel services agreements to accurately forecast their financial obligations to Caption By Hyatt.