Explanation

The franchisor, MIF, L.L.C. (MIF), appears financially stable according to its audited financial statements, showing significant net worth and profitability. It is a subsidiary of Marriott International, Inc., a major, publicly-traded corporation. Therefore, the risk of the franchisor lacking financial ability to meet its obligations appears low. However, its assets are primarily composed of loans to its parent company, indicating its role is largely as an internal financing and licensing entity within the larger Marriott structure.

Potential Mitigations

• An accountant should review the provided financial statements, including all footnotes, to confirm the entity's financial health and its relationship with the parent company.
• It is prudent to discuss the franchisor's financial stability and its ability to support a new brand with your business advisor.
• Your attorney can help you understand the legal structure and any financial guarantees, if any, provided by the parent company.

Explanation

This specific risk was not identified in the FDD Package. The FDD Item 20 tables show that since the brand is new to the U.S. and Canada, there were no franchised outlets that terminated, ceased operations, or were not renewed in the last three years. While this means no negative turnover data exists, it also highlights that the system is unproven in this market, which presents its own set of risks related to system stability and franchisee success.

Potential Mitigations

• As the system matures, it is important to annually review the FDD's Item 20 tables with your business advisor to monitor franchisee turnover rates.
• Engaging with a franchise attorney to understand your rights and obligations regarding termination and non-renewal is a crucial step.
• A discussion with your accountant can help in creating financial models that account for the risks of an unproven system.

Explanation

This specific risk was not identified in the FDD Package. The franchise operates in the mid-scale hotel sector, which is a well-established and mainstream segment of the lodging industry, not a temporary fad. The business model is based on providing budget-friendly accommodations, a consistent consumer demand. While the brand is new to the U.S., the underlying business concept is not dependent on a fleeting trend.

Potential Mitigations

• A business advisor can help you research the long-term stability and competitive landscape of the mid-scale hotel market in your specific area.
• It is wise to review the franchisor's plans for brand evolution and adaptation in Item 11 with your business advisor.
• Your financial advisor can assist in assessing the business model's resilience to various economic conditions.

Explanation

This specific risk was not identified in the FDD Package. The franchisor's parent company, Marriott International, Inc., is a publicly-traded corporation, not a private equity firm. Therefore, the risks typically associated with a private equity ownership model, such as a primary focus on short-term returns or a planned exit strategy that could disrupt the system, do not appear to be present here. The focus is more likely on long-term brand development within a large corporate structure.

Potential Mitigations

• Your attorney should confirm the ownership structure of the franchisor and its parent company as disclosed in Item 1.
• A financial advisor can help you understand the implications of being part of a large, publicly-traded franchise system.
• Engaging with a business advisor to review the history and strategic direction of the parent company could provide additional context.

Explanation

This specific risk was not identified in the FDD Package. The franchisor, MIF, clearly discloses its relationship with its parent company, Marriott International, Inc. (MII), in Item 1. Although the FDD only contains the financial statements for MIF and not the parent, MIF itself shows significant assets and profitability. A prospective franchisee can access MII's public financial filings for additional information. There does not appear to be an attempt to obscure the parent's identity or financial standing.

Potential Mitigations

• Your accountant should review the provided MIF financials and can also access the public financial statements of the parent, MII, for a complete picture.
• An attorney can help clarify the legal and financial relationship between the franchisor and its parent company.
• It is wise to discuss with your business advisor how the parent company's overall health and strategy might impact your franchise.

Explanation

This specific risk was not identified in the FDD Package. Item 1 indicates that the franchisor, MIF, is the first entity to offer City Express by Marriott franchises in the United States and Canada. While the brand itself was acquired from a foreign company, there is no predecessor franchisor in this market with a history that would need to be disclosed. Therefore, there are no predecessor-related issues concerning litigation, bankruptcy, or franchisee turnover to report.

Potential Mitigations

• An attorney should confirm the corporate history outlined in Item 1 to ensure there are no undisclosed predecessors.
• A business advisor can help you research the brand's history in its original market (Mexico) for additional context, though it may not be directly relevant.
• Speaking with the franchisor about how they are adapting the previously acquired system for the U.S. market can provide useful insights.