Explanation

This risk was not identified. The audited financial statements provided for Best Western International, Inc. (BWI) show a financially healthy and stable organization. For the fiscal year ending in 2024, BWI reported over $816 million in total assets and $299 million in net assets. It remains highly profitable, with over $65 million in excess revenues over expenses. There are no indicators of financial instability, such as a 'going concern' note from the auditors.

Potential Mitigations

• An experienced franchise accountant should still review the complete financial statements, including all footnotes, to provide a comprehensive assessment.
• Discussing the franchisor's financial health and their plans for future investment in the brand with your business advisor is a recommended step.
• It is wise to have your attorney verify that the provided financial statements comply with all federal and state disclosure requirements.

Explanation

This risk appears low. While BWI only began offering these specific soft brand licenses in 2020, the brands themselves have been operational since 2015 (Premier) and 2017 (Signature). Furthermore, BWI as a parent organization has operated since 1946 and possesses extensive experience in the hotel industry. This history suggests the underlying operational model is not new or unproven, even if the specific licensing structure for these brands is more recent.

Potential Mitigations

• Asking the franchisor to explain the history and evolution of these specific soft brands would be beneficial.
• It is still prudent to have your business advisor evaluate the specific support systems in place for these licensed brands versus BWI's core membership brands.
• A discussion with early adopters of this licensing model, identifiable from Item 20, can provide valuable firsthand accounts.

Explanation

This risk was not identified. The franchise is for the operation of an upscale or upper-midscale hotel, which is part of a well-established and mature industry. The business model does not appear to be based on a fleeting trend or novelty, suggesting a lower risk of failure due to waning consumer interest.

Potential Mitigations

• A business advisor can help you conduct an independent market analysis to confirm long-term demand for this type of hotel in your specific location.
• Even in established industries, it's wise to have your accountant help you develop financial projections that account for potential economic cycles.
• Reviewing the franchisor's plans for brand evolution and adaptation with your attorney can provide insight into their long-term strategy.

Explanation

This risk was not identified. Item 2 of the FDD details the backgrounds of the directors and principal officers of Best Western International, Inc. (BWI). The executive team demonstrates extensive and long-standing experience within both BWI and the broader hospitality industry, with many individuals holding senior roles for several years. There is no indication of inexperienced management.

Potential Mitigations

• When speaking with current hotel owners, it is still a good practice to inquire about their direct experiences with the management team's competence and support.
• A business advisor can help you research the public reputation and track record of the key executives listed in Item 2.
• Your attorney can confirm that the experience listed meets all regulatory disclosure standards.

Explanation

This risk was not identified. Item 1 indicates that Best Western International, Inc. is a nonprofit corporation structured as a membership association. There is no disclosure of ownership by a private equity firm. The business model appears focused on member services rather than short-term investor returns.

Potential Mitigations

• It is still beneficial to have your attorney verify the corporate structure and confirm the absence of any undisclosed controlling entities.
• Understanding the nonprofit and membership structure's impact on governance and franchisee rights is a key topic to discuss with your business advisor.
• Asking the franchisor about their long-term strategic plan can provide insights into their operational focus.

Explanation

This risk was not identified. Item 1 clearly identifies Best Western International, Inc. (BWI) as the licensor and discloses its affiliates. Item 21 provides audited consolidated financial statements for BWI and its subsidiaries, giving a full picture of the entire organization's financial health. There is no indication of an undisclosed parent company whose financials are necessary for a complete risk assessment.

Potential Mitigations

• Your accountant should confirm that the consolidated financial statements properly include all relevant affiliated entities mentioned in Item 1.
• It is good practice for your attorney to review the corporate structure to ensure all controlling parties have been properly disclosed.
• Discussing the roles and relationships between BWI and its various affiliates with the franchisor can provide additional clarity.

Explanation

This risk was not identified in the FDD. Item 1 explicitly states, "We have no predecessors." This indicates that the current franchisor, Best Western International, Inc., did not acquire the system from a prior entity, and there is no predecessor history to analyze for potential inherited issues.

Potential Mitigations

• It is still worthwhile for your attorney to perform a public records search to confirm the corporate history provided in Item 1.
• In discussions with long-standing franchisees, you can inquire about the history of the brand to verify the 'no predecessors' statement.
• Your business advisor can help research the brand's origin to ensure no informal brand transfers occurred that might not be disclosed.