What was the amount of deferred revenue for Surestay Hotel By Best Western in 2023?
Surestay_Hotel_By_Best_Western Franchise · 2025 FDDAnswer from 2025 FDD Document
revenues in the Consolidated Statements of Revenues and Expenses.
Contract balances
The Company records a receivable as performance obligations are satisfied and there is an unconditional right to receive payment. Deferred revenue is recorded when the Company receives payment, or has the unconditional right to receive payment, in advance of the satisfaction of the Company's performance obligations related to initial affiliation fees and the BWR program.
Certain costs to obtain contracts with Members, soft brand licensees, SureStay franchisees, and WorldHotels licensees are capitalized and amortized on a straight-line basis over the hotelier's expected life as a branded hotel or over the initial contract term. The costs of obtaining a contract with a Member, soft brand licensee, SureStay franchisee, and WorldHotels licensee are recorded in prepaid expenses and other current assets, and other assets, net in our Consolidated Statements of Financial Position.The related amortization is recorded in compensation, taxes and benefits in our Consolidated Statements of Revenues and Expenses. The Company had capitalized costs to obtain contracts with customers of $12.9 million a
Source: Item 23 — Receipts (FDD pages 88–286)
What This Means (2025 FDD)
According to Surestay Hotel By Best Western's 2025 Franchise Disclosure Document, deferred revenue is recorded when the company receives payment, or has the unconditional right to receive payment, in advance of satisfying performance obligations related to initial affiliation fees and the BWR program. The document states that capitalized costs to obtain contracts with customers were $12.9 million as of November 30, 2023. These costs consist of contracts with Members, soft brand licensees, SureStay franchisees, and WorldHotels licensees. These costs are amortized on a straight-line basis over the hotelier's expected life as a branded hotel or the initial contract term. The costs of obtaining a contract are recorded in prepaid expenses and other current assets, and other assets, net in the Consolidated Statements of Financial Position. The related amortization is recorded in compensation, taxes, and benefits in the Consolidated Statements of Revenues and Expenses.
For a prospective Surestay Hotel By Best Western franchisee, understanding deferred revenue and capitalized costs is crucial. Deferred revenue represents cash received for services not yet rendered, while capitalized costs are expenses incurred to acquire franchise contracts. The amortization of these costs impacts the franchisee's financial statements over the contract term.
It is important for potential franchisees to consult with a financial advisor to fully understand the implications of deferred revenue and capitalized costs on their investment and profitability. Understanding these accounting practices will aid in assessing the true financial health and performance of a Surestay Hotel By Best Western franchise.