For Crowne Plaza, what items are deducted from settlements to franchisees?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchise royalty fees also include any liquidated damage settlements the Company receives from franchisees that terminate arrangements prior to expiration.
Under the Agreement, the Company is deemed to be acting as agent in the provision of these services and, as such, nets 95% of the license cost and contract asset amortization against revenue and reports a royalty fee equal to the 5% commission it earns through the Agreement.
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
Based on the 2025 Crowne Plaza Franchise Disclosure Document, franchise royalty fees include any liquidated damage settlements the company receives from franchisees that terminate arrangements prior to expiration. The FDD also states that under an agreement, the company nets 95% of the license cost and contract asset amortization against revenue and reports a royalty fee equal to the 5% commission it earns through the Agreement.
This means that if a Crowne Plaza franchisee terminates their agreement early and owes liquidated damages, those damages are considered part of the franchise royalty fees collected by the company. From the license cost and contract asset amortization, Crowne Plaza deducts 95% against revenue, reporting only the 5% commission earned through the agreement as a royalty fee.
For a prospective franchisee, this indicates that early termination can result in owing liquidated damages, which Crowne Plaza counts as revenue. Additionally, the netting of license costs and asset amortization against revenue, retaining only a 5% commission, highlights the financial structure of the agreement and how Crowne Plaza recognizes revenue from these arrangements.