What is the purpose of the Reimbursement Agreement required for a Springhill Suites By Marriott franchise?
Springhill_Suites_By_Marriott Franchise · 2025 FDDAnswer from 2025 FDD Document
s:
| 2024 | 2023 | |
|---|---|---|
| Costs incurred to obtain contracts with customers | $ 31,016 | $ 30,858 |
| Other contract intangibles | 1,764 | 1,764 |
| $ 32,780 | $ 32,622 | |
| Accumulated amortization | (11,143) | (9,782) |
| $ 21,637 | $ 22,840 |
We capitalize only incremental costs that Marriott incurs on our behalf to acquire franchise and license agreements, which we reimburse through a related party payable. We record these costs incurred to obtain contracts with customers within the "Intangible assets, net" caption of our Balance Sheets. We amortize these costs on a straight-line basis over the initial term of the underlying agreements, ranging from 10 to 30 years, in the "Contract investment amortization" and "Cost reimbursement revenue" captions of our Income Statements.
In 2019, the Company recorded intangible assets of $1,764 related to its Parent's acquisition of its partner's remaining interest in a joint venture. The related franchise contracts have a weightedaverage term of 24 years. We amortize the acquired intangible assets on a straight-line basis over the remaining term of the underlying agreements and record the expense in the "Amortization and depreciation expense" caption of our Income
Source: Item 17 — , "Renewal, Termination, Transfer, and Dispute Resolution," is amended by the addition of the following paragraph(s) at the conclusion of the Item: (FDD pages 285–553)
What This Means (2025 FDD)
According to the 2025 Franchise Disclosure Document, Springhill Suites By Marriott uses a Reimbursement Agreement to handle incremental costs related to acquiring franchise and license agreements. Marriott incurs these costs on behalf of its franchisees and recovers them through a related party payable. These costs are then recorded as intangible assets on Marriott's balance sheets.
These intangible assets are amortized over the initial term of the franchise agreements, which range from 10 to 30 years. The amortization is done on a straight-line basis and is reflected in the "Contract investment amortization" and "Cost reimbursement revenue" sections of Marriott's income statement. This accounting treatment allows Marriott to spread the cost of acquiring franchise agreements over the life of those agreements.
In 2019, Marriott recorded $1,764 in intangible assets due to acquiring its partner's interest in a joint venture, with these franchise contracts having a weighted-average term of 24 years. The estimated aggregate amortization expense for the five fiscal years leading up to December 31, 2029, is approximately $67. This shows how Marriott manages and accounts for the costs associated with franchise agreements over their lifespan.