How does Embassy Suites handle payment terms in its contracts with customers?

According to Embassy Suites's 2025 Franchise Disclosure Document, they typically do not include extended payment terms in their contracts with customers. The revenues are derived from franchise contracts with hotel owners, where the primary obligation involves IP licenses granting access to brand IP, reservation systems, and property management systems. These services are considered distinct and transferred over time, with variable consideration received through franchise royalty fees.

Franchise royalty fees are generally a percentage of the hotel's monthly gross room revenue and may include percentages of gross food and beverage revenues. These fees are typically billed and collected monthly as services are provided. Consideration paid to incentivize hotel owners is amortized over the contract's life, reducing franchise royalty fees. Franchise sales and change of ownership fees, including application and initiation fees, are collected upfront and recognized as revenue over the franchise contract term. These advance payments are not considered a financing component, as they protect Embassy Suites from the hotel owner failing to meet their obligations.

Franchise termination fees are charged when a franchise contract is terminated by the hotel owner and are generally recognized in the period the payment is received, assuming no further service is required and collection is reasonably assured. Accounts receivable primarily consist of amounts due from hotel owners under franchise contracts. The company also has financing receivables, which are loans to certain franchised hotel owners. An allowance for credit losses is maintained for both accounts and financing receivables, based on historical collection activity and current business conditions.