When does Hawthorn Suites By Wyndham recognize initial franchise fees as revenue?

According to Hawthorn Suites By Wyndham's 2025 Franchise Disclosure Document, the company recognizes initial franchise fees as revenue over the initial non-cancellable period of the franchise agreement. This revenue recognition commences when all material services or conditions have been substantially performed.

For a Hawthorn Suites By Wyndham franchisee, this means that the initial franchise fee paid to the company isn't immediately recognized as revenue by the franchisor. Instead, Hawthorn Suites By Wyndham spreads the recognition of this revenue over the term of the franchise agreement, which typically spans 10 to 20 years. The start of this revenue recognition is triggered when Hawthorn Suites By Wyndham has fulfilled its obligations, primarily when the hotel opens for business under the Hawthorn Suites By Wyndham brand. Revenue recognition can also occur if the franchise agreement is terminated before the hotel opens, but only after it has been determined that the hotel will not open.

This accounting practice is common in the franchise industry, as it aligns the revenue recognition with the ongoing services and support that the franchisor provides to the franchisee throughout the term of the agreement. It also reflects the value that the franchisee receives over time from the franchisor's brand, systems, and expertise. This approach ensures that the franchisor's financial statements accurately reflect the economic substance of the franchise relationship.