What performance obligations does Caption By Hyatt satisfy over time?
Caption_By_Hyatt Franchise · 2025 FDDAnswer from 2025 FDD Document
We satisfy the following performance obligations over time: access to Hyatt's symbolic IP, services provided under management and hotel services agreements, administration of the loyalty program, and the license of our brand name through our co-branded credit card agreements. Each of these performance obligations is considered a sales-based royalty or a series of distinct services, and although the activities to fulfill each of these promises may vary from day to day, the nature of each promise is the same and the customer benefits from the services every day.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Caption By Hyatt's 2025 Franchise Disclosure Document, several performance obligations are satisfied over time. These include providing access to Hyatt's symbolic intellectual property, delivering services under management and hotel service agreements, managing the loyalty program, and licensing the brand name through co-branded credit card agreements. Caption By Hyatt considers each of these obligations as either sales-based royalties or a series of distinct services. The brand recognizes revenue based on the value transferred to the customer, using observable outputs related to each performance obligation to gauge progress.
For franchisees, this means that Caption By Hyatt recognizes revenue as they provide ongoing services and access to the brand's resources, rather than recognizing all revenue upfront. The value that third-party owners and franchisees derive from access to Hyatt's IP is reflected in the revenues and operating profits earned by the hotels during the reporting period. Similarly, revenues and operating profits of the hotels reflect the promise to provide services to the hotels under management and hotel services agreements. The administration of the loyalty program is measured by award night redemptions or point redemptions with third-party partners, while the value derived from the use of the Hyatt name is measured by cardholder spend for the license through co-branded credit card programs.
Within management and hotel services agreements, Caption By Hyatt identifies two performance obligations: providing access to Hyatt's IP and providing management and hotel services. Although these are separate obligations, both are satisfied over time, and revenue is recognized using an output method based on the hotel's performance. Therefore, Caption By Hyatt does not allocate the transaction price between these two obligations, as the allocation would result in the same pattern of revenue recognition. This approach simplifies revenue recognition for these agreements, aligning it with the actual delivery of services and the benefits received by franchisees and hotel owners over the term of the agreement.