Franchising, Marketing and Reservation Activities |
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| Franchising and Marketing and Reservation Activities |
Royalties and franchise fee revenues on the Consolidated and Combined Statements of Income (Loss) include initial franchise fees of $20 million, $18 million and $20 million in 2020, 2019 and 2018, respectively.
In accordance with its franchise agreements, generally Wyndham Hotels is contractually obligated to expend the marketing and reservation fees it collects from franchisees for the operation of an international, centralized, brand-specific reservation system and for marketing purposes such as advertising, promotional and co-marketing programs, and training for the respective franchisees.
Development advance notes
The Company may, at its discretion, provide development advance notes to certain franchisees or hotel owners in order to assist them in converting to one of Wyndham Hotels’ brands, in building a new hotel to be flagged under one of Wyndham Hotels’ brands or in assisting in other franchisee expansion efforts. Provided the franchisee/hotel owner is in compliance with the terms of the franchise/management agreement, all or a portion of the development advance notes may be forgiven by Wyndham Hotels over the period of the franchise/management agreement, which typically ranges from 10 to 20 years. Otherwise, the related principal is due and payable to Wyndham Hotels. In certain instances, Wyndham Hotels may earn interest on unpaid franchisee development advance notes.
As a result of COVID-19 and the significant negative impact it has had on travel demand, the Company performed a quantitative assessment on its development advance notes and determined that it is more likely than not that the carrying value of those assets are recoverable from future expected cash flows as of December 31, 2020.
The Company recorded the following related to development advance notes on the Consolidated and Combined Financial Statements:
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(a) Included within other non-current assets.
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(a) Amounts are recorded as a reduction of royalties and franchise fees and marketing, reservation and loyalty revenues.
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