What performance obligations does the Company have to Surestay Hotel By Best Western franchisees?
Surestay_Hotel_By_Best_Western Franchise · 2025 FDDAnswer from 2025 FDD Document
tax provision.
(o) Revenue Recognition
Fees, dues and assessments
Fees, dues and assessments are established by the membership and the Board of Directors to compensate the Company for providing services to Members, soft brand licensees, SureStay franchisees, and WorldHotels licensees. The Company has performance obligations to provide hotel support and marketing, and a license to our hotel system intellectual property for the use of our brand names. Our performance obligations are a series of distinct goods or services, for which the Company receives the following types of variable consideration through our membership agreements with our Members. Monthly fees and assessments (which include advertising, sales and marketing and reimbursement for the Company's technology expenses) represent fixed and variable consideration and are billed monthly and recognized as revenue in the same month as the services are provided and charges become fixed or determinable and payable. Annual dues are established, billed and payable each year for continuing membership during the succeeding year. Annual dues are recognized as revenue ratably in the year to which the continuing membership applies. Any Member may resign from the Company at any time, but if the Member resigns or is terminated, fees and
November 30, 2024
dues become immediately due and payable per the terms of the applicable contract and are recognized as revenue when cash is received regardless of the term of the contract.
Affiliation fee revenues from Best Western branded hotels are fixed consideration payable upon approval of the Member or licensee by the Board of Directors and acceptance of membership or license terms by the property owner. These revenues are recognized on a straight-line basis over the hotelier's expected life as a Best Western branded hotel or over the initial contract term. SureStay franchisee initial fees are due upon execution of a franchise agreement and recognized over the initial term of the franchise agreement. WorldHotels hotel integration fees are recognized on a straight-line basis over the expected life as a WorldHotels branded hotel. Affiliation fee revenues were $8.8 million and $9.8 million for the years ended November 30, 2024 and 2023, respectively.
Best Western Rewards® frequent stay program ("BWR® program")
The Company administers the BWR program for the benefit of BWH and BWR program members. Under our BWR program, the Company has a performance obligation to provide or arrange for the provision of goods or services between BWR program members and BWH hotels in exchange for the redemption of points earned from past activities. Costs of operating the BWR program, including costs for marketing, promotion, and other member services, are charged to the BWH hotels through an assessment fee that is based on members' qualified expenditures. The assessment fees received from BWH hotels are deferred and recognized as program revenues in the Consolidated Statements of Revenues and Expenses as the loyalty points are redeemed and the related service, net of redemption expense, is provided. The amount of revenue the Company recognizes upon point redemption is impacted by the Company's estimate of the breakage for points that BWR members will never redeem. The Company estimates breakage based on historical experience and expectations of future BWR member behavior, including analyses performed by and input of third-party actuaries. All BWR program costs are recognized as incurred and are recorded in program cost of sales in the Consolidated Statements of Revenues and Expenses.
Source: Item 23 — Receipts (FDD pages 88–286)
What This Means (2025 FDD)
According to the 2025 Franchise Disclosure Document, Best Western, the parent company of Surestay Hotel By Best Western, has performance obligations to Surestay franchisees. These obligations include providing hotel support and marketing services, as well as granting a license to use their hotel system's intellectual property, including brand names. These services are considered a series of distinct goods or services.
Surestay Hotel By Best Western will market the hotel on its Reservation Service and any loyalty programs associated with the Surestay system, and include the Hotel in advertising of System Hotels and in marketing programs in accordance with their general practice for System Hotels.
Best Western uses the Monthly Sales and Marketing Fee to pay for various programs, including advertising, promotions, publicity, public relations, market research, loyalty programs and other marketing programs for the benefit of System Hotels and their affiliates' licensees and franchisees operating under other hotel brands, investing in the internal technology platform and assets of Best Western International, Inc. and administrative costs and overhead related to the administration or direction of these projects and programs and other such services as they may determine from time to time. Best Western has sole control over how and when they spend these funds, including sole control over the creative concepts, materials and media used in the programs, the placement and allocation of advertising, and the selection of promotional programs. The marketing fees may be spent for the benefit of System Hotels and other BWH Operators, and they will not be used to exclusively promote or benefit the Marks or any one System Hotel or market. Best Western has no obligation in administering any activities paid for with the Monthly Sales and Marketing Fee to make expenditures for you that are equivalent or proportionate to your payments or to ensure that the Hotel benefits directly or proportionately from such expenditures. They may create any programs and allocate monies derived from Monthly Sales and Marketing Fees to any regions or localities, as they consider appropriate in their sole business judgment.