Explanation

The financial statements for the franchisor, Holiday Hospitality Franchising, LLC (Holiday), and its parent guarantor, Six Continents Hotels, Inc., do not indicate financial instability. Holiday's financial statements show significant net income and positive member's equity. The parent's financials also appear strong. Financial stability is crucial as it underpins the franchisor's ability to support the brand and its franchisees over the long term, invest in system improvements, and withstand economic downturns without compromising services.

Potential Mitigations

• A franchise accountant should still review the complete, audited financial statements for both the franchisor and any parent guarantor.
• Understanding the notes to the financial statements is vital, and a discussion with your accountant can clarify any complex inter-company transactions.
• Ask a business advisor to assess the franchisor's financial health in the context of its growth plans and support commitments.

Explanation

This risk was not identified in the FDD package. The Atwell Suites brand is positioned as a modern, all-suite hotel concept targeting longer stays, which appears to be a durable segment of the lodging market rather than a short-term fad. A fad business model presents a significant risk because its appeal may diminish quickly, leaving you with a long-term contract for a business with declining consumer demand, potentially leading to financial failure.

Potential Mitigations

• A business advisor can help you research long-term trends in the hotel and extended-stay industry to validate the concept's sustainability.
• Questioning the franchisor about their long-term vision and plans for brand evolution is a key step in your due diligence.
• Your accountant can assist in modeling financial performance under various market conditions to test the business model's resilience.

Explanation

This risk was not identified. While the Atwell Suites brand itself is new, the franchisor entity, Holiday, and its parent, IHG, are among the most experienced companies in the hotel and franchising industry. Item 1 details a long history of franchising numerous successful hotel brands, and Item 2 lists executives with extensive, long-term experience within IHG and the broader hospitality sector. This deep experience mitigates risks associated with unproven management or inadequate support systems.

Potential Mitigations

• It is still prudent to ask current franchisees about the quality and accessibility of the specific support team dedicated to the Atwell Suites brand.
• A business advisor can help you confirm that the deep experience of the parent company translates into effective support for this new concept.
• When speaking with the franchisor, inquire with your attorney about the specific personnel who will be your primary support contacts.

Explanation

This risk was not identified. The franchisor, Holiday, is a wholly-owned subsidiary of InterContinental Hotels Group PLC, a publicly traded company, not a private equity firm. A public company structure may suggest a focus on long-term brand health and shareholder value over the potentially shorter-term exit strategies often associated with private equity ownership, which can sometimes lead to decisions that are not in the franchisees' best long-term interest.

Potential Mitigations

• Even with a public company, a business advisor can help you understand its strategic priorities and how they align with franchisee success.
• Your attorney should review any clauses in the franchise agreement that permit the franchisor to sell or assign the brand.
• Discussing the long-term vision for the brand with both the franchisor and existing franchisees remains a valuable due diligence step.

Explanation

This risk was not identified. Item 1 clearly identifies the direct parent, Six Continents Hotels, Inc. (SCH), and the ultimate parent, InterContinental Hotels Group PLC. Further, Item 21 provides the audited financial statements for both Holiday and the parent guarantor, SCH, as Exhibits F1 and F2. This level of disclosure provides the necessary information to assess the financial health and structure of the entities you will be contracting with.

Potential Mitigations

• It is critical for your accountant to review the financials of both the franchisor and any parent entity providing a guarantee.
• Your attorney should examine any guarantee agreements to understand the parent's precise legal and financial obligations to you.
• Clarifying the operational relationship between the franchisor and its parent with a business advisor can provide useful context.

Explanation

This risk was not identified. The FDD clearly discloses in Item 1 that Holiday Hospitality Franchising, Inc. was formerly known as Holiday Inns Franchising, Inc. and converted from a corporation to an LLC. It also details the history of its predecessors offering licenses for other hotel brands since 1953. This appears to be a straightforward corporate history without any concealment of negative information related to predecessors.

Potential Mitigations

• Your attorney should still carefully review the corporate history presented in Item 1 for any ambiguities.
• A business advisor can help you research the public history of the parent company, IHG, to provide additional context.
• Speaking with long-term franchisees of other IHG brands could offer insights into the company's historical practices.