Explanation

The financial statements for the franchisor, MIF, L.L.C. (MIF), do not indicate financial instability. The audited financials in Item 21 show significant profitability, positive net worth, and strong cash flow. This financial strength suggests MIF has the resources to support the system and meet its obligations. A weak franchisor could jeopardize your investment by failing to provide support, invest in the brand, or even remain in business.

Potential Mitigations

• An experienced franchise accountant should review the franchisor's financial statements, including all footnotes and the auditor's report, to confirm this assessment.
• It is wise to have your business advisor monitor the franchisor's financial health periodically throughout the term of your agreement.
• Discuss the franchisor's long-term financial strategy and reinvestment plans with your financial advisor.

Explanation

This risk was not identified. The data in Item 20's tables for the last three years shows a very low number of terminations, non-renewals, and other cessations relative to the total number of franchised outlets. This indicates a stable franchise system. High turnover can be a significant warning sign of systemic problems, such as franchisee unprofitability, dissatisfaction with the franchisor, or a flawed business model, so its absence here is a positive indicator.

Potential Mitigations

• To gain deeper insight, you should still contact current and former franchisees listed in Item 20 to discuss their experiences.
• Your franchise attorney can help you formulate questions for former franchisees to understand their reasons for leaving the system.
• A business advisor can help you compare the turnover rates in this FDD to available industry benchmarks for context.

Explanation

This risk is not present. The FDD indicates that the Autograph Collection brand has been franchising since 2009 and is part of the well-established Marriott International, Inc. system. The franchisor's management team, as described in Item 2, has extensive experience in the hospitality industry. A new system would present higher risks due to an unproven business model and potential lack of support infrastructure, which does not appear to be the case here.

Potential Mitigations

• Your business advisor can still help you research the brand's history and performance within its specific market segment.
• It is always a good practice to speak with long-standing franchisees to understand the brand's evolution and consistency of support.
• A review of the brand's competitive positioning with a hospitality consultant could provide additional valuable insights.

Explanation

This risk was not identified. The Autograph Collection concept, which focuses on unique, upscale, and luxury hotels, operates within a well-established segment of the lodging industry. It does not appear to be based on a fleeting trend. The business model relies on sustained demand for high-end, experience-oriented travel, which is generally considered to have long-term market viability. A business based on a fad could face a rapid decline in consumer interest.

Potential Mitigations

• A consultation with a business advisor specializing in the hospitality industry can help validate the long-term market demand for this hotel category.
• It is still beneficial to review industry reports on travel and lodging trends with your financial advisor to assess future market stability.
• Ask the franchisor about their strategies for keeping the brand collection relevant and competitive over the long term.

Explanation

This risk is not present. Item 2 of the FDD details the business experience of the executive team of the parent company, Marriott International, Inc. The individuals listed possess extensive and long-term backgrounds in the hotel and franchising industries, having held senior roles at major global corporations. Inexperienced management would pose a significant risk to the quality of support and strategic direction of the system, which does not appear to be a concern here.

Potential Mitigations

• As a part of due diligence, it is still valuable to research the public track records and reputations of the key executives listed.
• When speaking with franchisees, you can inquire about their direct experiences with the leadership team's strategic decisions and support.
• Your business advisor can provide an independent assessment of the management team's collective experience and its relevance to your investment.

Explanation

This risk was not identified in the FDD. The franchisor's parent company, Marriott International, Inc., is a publicly traded corporation, not a private equity firm. This distinction is important because private equity ownership can sometimes lead to a focus on short-term financial returns over the long-term health of the brand and its franchisees. This may involve increased fees, reduced franchisee support, or a rapid sale of the franchise system.

Potential Mitigations

• Your business advisor should confirm the ownership structure of the franchisor as part of the due diligence process.
• It is still wise to ask your attorney to review the assignment clause in the Franchise Agreement to understand who can acquire the franchise system in the future.
• Monitoring the franchisor's ownership status for any changes throughout your franchise term is a prudent step for any franchisee.

Explanation

This specific risk is not present. The FDD clearly identifies Marriott International, Inc. as the parent company in Item 1. Furthermore, the franchisor entity, MIF, is not a thinly capitalized subsidiary; its own audited financial statements in Item 21 demonstrate substantial financial strength. Therefore, the parent's financials are not required for disclosure to assess viability, and there is no apparent attempt to obscure the corporate structure.

Potential Mitigations

• Have your franchise attorney review the corporate structure described in Item 1 to confirm the relationship between the franchisor and its parent.
• Your accountant should verify that the provided franchisor financials are audited and meet all disclosure requirements.
• It is still a good practice to understand any guarantees or support provided by the parent company, which your attorney can help clarify.

Explanation

This risk was not identified. Item 1 of the FDD does not list any predecessors for the franchisor, MIF, L.L.C., which was formed in 2012. This means the franchisor did not acquire the business from another company. Disclosure of predecessors is important because it can reveal inherited issues, such as a history of litigation, bankruptcy, or franchisee failure under prior ownership, which could impact the system's health and reputation.

Potential Mitigations

• Your attorney should confirm the information in Item 1 regarding the franchisor's formation and history.
• When speaking with long-term franchisees, it is still useful to inquire about the history of the brand and any significant past changes in ownership or management.
• Your business advisor can help research the history of the Autograph Collection brand itself within the broader Marriott portfolio.