Explanation

This risk was not identified as the franchise system is new and has no operating history. Item 20 tables show zero franchised outlets at the start or end of the last three years. High franchisee turnover is a critical indicator of systemic problems in an established system, such as unprofitability or poor support. Since no data exists here, this specific risk cannot be assessed, but the newness of the system presents its own set of risks.

Potential Mitigations

• Once the system matures, it is critical to have your accountant analyze the turnover rates in Item 20 of future FDDs.
• Engaging a business advisor to monitor franchisee satisfaction and system health through industry publications and networking can provide early warnings.
• Your attorney can help you understand the standard reasons for franchisee turnover and what to look for in future disclosures.

Explanation

This risk was not identified in the FDD package. Rapid system growth can strain a franchisor's ability to provide adequate support. However, as a new system with zero operating units reported in Item 20, MIF, L.L.C. (MIF) is not currently experiencing this specific issue. The risk of an unproven system is more relevant here.

Potential Mitigations

• A business advisor can help you monitor the pace of future growth against the franchisor's expansion of its support infrastructure.
• As the system grows, regularly communicate with other franchisees to gauge the quality and responsiveness of franchisor support.
• Your accountant can review future financial statements to assess if the franchisor is adequately investing in support systems to match growth.

Explanation

This risk was not identified in the FDD package. Item 2 shows that the management team of the parent company, Marriott International, Inc. (MII), consists of executives with extensive careers within MII and other major corporations in the hospitality, retail, and technology sectors. The team appears to possess significant experience in managing large-scale operations and franchise systems, which is a positive factor for a new brand launch.

Potential Mitigations

• It is still prudent to have your business advisor research the specific track record of the key executives involved in this new brand's launch.
• In discussions with the franchisor, inquire about the specific team members who will be dedicated to supporting this new system.
• Your attorney can help you verify the backgrounds of key personnel responsible for franchise sales and support.

Explanation

This risk was not identified in the FDD package. The franchisor, MIF, L.L.C. (MIF), is a subsidiary of Marriott International, Inc. (MII), a publicly-traded corporation, not a private equity firm. However, the business dynamics of a large public corporation can still involve prioritizing shareholder returns, which may sometimes conflict with the long-term interests of individual franchisees.

Potential Mitigations

• Your financial advisor can help you research MII's public filings and analyst reports to understand its strategic priorities and relationship with its franchisees.
• Speaking with franchisees of other Marriott brands can provide insight into how the parent company manages its franchise relationships.
• Your attorney should review the assignment clause in the Franchise Agreement to understand what happens if MII sells this brand or the franchisor entity.

Explanation

This risk was not identified in the FDD package. Item 1 clearly discloses that the franchisor, MIF, L.L.C. (MIF), is a subsidiary of Marriott International, Inc. (MII). Furthermore, Item 21 provides audited financial statements for the franchisor entity, MIF, L.L.C. While the parent company's financials are not included, MIF itself is the direct franchisor, and its own financials are provided as required.

Potential Mitigations

• It is always good practice for your accountant to review the provided financials in Exhibit J to understand the franchisor's specific financial condition.
• Your attorney can confirm that the disclosure of the parent-subsidiary relationship in Item 1 is clear and sufficient.
• A financial advisor can help you understand the potential benefits and risks associated with being franchised by a subsidiary of a large public company.

Explanation

This risk was not identified in the FDD package. Item 1 does not list any predecessors for MIF, L.L.C. (MIF), as it appears to be a purpose-formed entity for franchising. The litigation and bankruptcy history disclosed in Items 3 and 4 pertains to the parent company, MII, and its other subsidiaries, not to a predecessor from whom this specific franchise system was acquired.

Potential Mitigations

• Your attorney should confirm the corporate history detailed in Item 1 to ensure no predecessor information appears to be missing.
• A business advisor can help research the history of the Marriott brand portfolio for context, even if no direct legal predecessor is listed.
• When a franchisor does have predecessors, it is critical for an attorney to review their litigation and bankruptcy history for inherited risks.