What is the role of Caption By Hyatt in providing access to Hyatt's IP?
Caption_By_Hyatt Franchise · 2025 FDDAnswer from 2025 FDD Document
- Access to Hyatt's IP, including the Hyatt brand names—We receive sales-based fees from hotel owners in exchange for providing access to our IP, including the Hyatt brand names and systems, among other services. Fees are generally payable on a monthly basis as third-party owners and franchisees derive value from access to our IP. Fees are recognized over time as services are rendered. Under our franchise agreements, we also receive initial fees from third-party owners and franchisees. The initial fees do not represent a distinct performance obligation, and therefore, are combined with the royalty fees and deferred and recognized in franchise and other fees over the expected customer life, which is typically the initial term of the franchise agreement.
- System-wide services—We provide system-wide services on behalf of owners of managed and franchised properties. The promise to provide system-wide services is not a distinct performance obligation because it is attendant to the access to our IP. Therefore, this promise is combined with the access to our IP to form a single performance obligation.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Caption By Hyatt's 2025 Franchise Disclosure Document, a key aspect of the franchise agreement involves Caption By Hyatt providing franchisees with access to Hyatt's intellectual property (IP), including the use of Hyatt brand names and systems. In exchange for this access, Caption By Hyatt receives sales-based fees from hotel owners. These fees are typically paid monthly, reflecting the ongoing value that franchisees derive from utilizing Hyatt's IP. The fees are recognized as revenue over time as Caption By Hyatt renders these services.
In addition to ongoing royalty fees, Caption By Hyatt also collects initial fees from franchisees. However, these initial fees are not treated as a separate, distinct service. Instead, they are combined with the royalty fees and recognized over the expected customer life, which usually aligns with the initial term of the franchise agreement. This approach to revenue recognition ensures that the initial investment is amortized over the duration of the agreement, reflecting the long-term value provided to the franchisee.
Caption By Hyatt also provides system-wide services to managed and franchised properties. However, the provision of these system-wide services is considered integral to the access of Hyatt's IP and is not treated as a separate performance obligation. Therefore, the promise to provide system-wide services is combined with the access to Hyatt's IP to form a single performance obligation. This means that the value of the system-wide services is bundled into the overall value derived from using Hyatt's brand and systems, simplifying the accounting and revenue recognition process.