What was the interest cost related to Franchise Royalty Fees for Crowne Plaza in 2022?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
by $11.7 million and $9.8 million for the years ended December 31, 2023 and 2022, respectively. As a result of amendments to the Agreement on January 1, 2024, 95% of contract asset amortization is passed to Six Continents Hotels, Inc. for 2024, consistent with the treatment of the license cost. Accordingly, Franchise royalty revenue was reduced by $0.6m for the year ended December 31, 2024.
Notes to Financial Statements (continued)
3. Franchise Royalty Fees (continued)
A reconciliation of gross to net revenue is as follows:
| 2024 | 2023 2022 | 2024 2023 2022 | |
|---|---|---|---|
| Service cost | $ | - $ - $ | - $ - $ - $ - |
| Interest cost | 1,517 | 1,656 1,058 | 593 628 405 |
| Amortization of unrecognized | |||
| actuarial loss (gain) | - - | 478 (597) (639) (280) | |
| Net periodic benefit cost (gain) | $ 1,517 | $ 1,656 $ 1,536 | $ (4) $ (11) $ 125 |
4. Related-Party Transactions
Six Continents Hotels, Inc. maintains certain marketing, reservation, and loyalty programs for the benefit of the Systems. Pursuant to the Agreement, all Company assessments to franchisees relating to these programs are remitted to Six Continents Hotels, Inc. Such amounts are not reflected in franchise royalty fees (see Note 3). All amounts due to or from affiliates, other than a line of credit from an affiliate (see Note 5), are non-interest-bearing and have no stated maturity date.
Net payables to affiliates included in the balance sheets are $202.6 million and $148.7 million at December 31, 2024 and 2023, respectively. These current amounts are of a working capital nature. Receivables from affiliates are considered to be fully recoverable on the basis of the Group's creditworthiness (see Note 5).
An affiliated company has made commitments to pay key money on behalf of the Company. During the years ended December 31, 2024, 2023 and 2022, contract assets, net of disposals, totaling $40.3 million, $24.9 million and $33.0
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the interest cost related to Crowne Plaza's Franchise Royalty Fees in 2022 is not explicitly disclosed. However, Note 3 regarding Franchise Royalty Fees mentions that the company nets 95% of the license cost and contract asset amortization against revenue and reports a franchise royalty fee equal to the 5% commission it earns through the Agreement. Franchise royalty revenue was reduced by $9.8 million for the year ended December 31, 2022, due to contract asset amortization.
Note 4 clarifies that amounts due to or from affiliates, other than a line of credit from an affiliate, are non-interest-bearing and have no stated maturity date. Note 5 details a line of credit facility with an affiliate, where interest income was recognized. Specifically, $13.3 million was recognized as interest income on the line of credit during the year ended December 31, 2022. This line of credit is not directly linked to franchise royalty fees but represents interest earned on funds due from an affiliate.
While the FDD provides details on franchise royalty fees, contract asset amortization, and interest income from a line of credit with an affiliate, it does not specify any interest costs directly associated with franchise royalty fees. A prospective franchisee should seek clarification from Crowne Plaza regarding any potential interest expenses or financial obligations related to franchise royalty fees to gain a comprehensive understanding of the financial aspects of the franchise agreement.