Explanation

This risk was not identified. Cobblestone LLC began franchising in 2013 and its management team has significant experience in the lodging industry dating back to 2007. The system has over 100 operating units, as shown in Item 20. Therefore, it does not appear to be a new or unproven franchise system. An established system provides a track record that you can evaluate, which is generally a positive factor for prospective franchisees.

Potential Mitigations

• Even with an established system, it is wise to have your business advisor help you research the brand's current market position and reputation.
• A conversation with franchisees who have been with the system for many years can offer valuable historical perspective.
• Your accountant should still review the financial statements in Item 21 to confirm the long-term health and stability of the franchisor.

Explanation

This risk was not identified. The business model, which focuses on providing upper-midscale lodging in underserved and suburban markets, is a well-established concept in the hospitality industry. It does not appear to be based on a temporary trend or fad. A stable, proven business concept is generally less risky than one tied to a fleeting consumer interest, as it suggests more predictable and sustainable demand over the long term.

Potential Mitigations

• A business advisor can help you conduct independent market research to confirm long-term demand for this type of lodging facility in your target area.
• Asking the franchisor about their plans for future innovation and brand development can provide insight into their long-term vision.
• Reviewing the performance of the hotel industry through economic cycles with a financial advisor can help gauge the model's resilience.

Explanation

This risk was not identified in the FDD. Item 2 discloses that the key executives have substantial and long-term experience within the lodging industry and with the Cobblestone brand and its affiliates, with careers dating back to 2007. Experienced management is a positive indicator, as it suggests a deeper understanding of the industry, operational challenges, and franchisee needs, which can translate into better support and strategic direction for the system.

Potential Mitigations

• It is still valuable to interview a range of franchisees to confirm that the management team's experience translates into effective support and leadership.
• Engaging a business advisor to research the professional reputation of the key executives within the franchise and lodging industries can provide additional insight.
• Verifying the specific franchising experience, in addition to industry experience, of the management team is a recommended due diligence step.

Explanation

This risk was not identified. Item 1 of the FDD does not indicate that Cobblestone LLC is owned by a private equity firm. The principal owners appear to be the key executives listed in Item 2. This can be a positive factor, as management's interests may be more aligned with the long-term health of the franchise system rather than the shorter-term exit strategies sometimes associated with private equity ownership.

Potential Mitigations

• Your attorney should still verify the franchisor's corporate ownership structure to confirm the absence of undisclosed controlling entities.
• It is good practice to ask the franchisor about any long-term plans for selling the company or taking on major investors.
• A business advisor can help research the background of the owners to understand their business philosophy and history.

Explanation

This risk was not identified. Item 1 discusses the franchisor's history and the acquisition of other brands, but it does not mention any predecessors in the sense of an entity from which Cobblestone LLC acquired the core Cobblestone brand itself. Generally, a clear lineage without a history of failed predecessor companies can be a positive sign. It avoids the potential for inheriting unresolved issues from a prior operator.

Potential Mitigations

• A thorough review of Item 1 with your attorney is still recommended to understand the full history of the company and its affiliated brands.
• Discussing the company's history with long-tenured franchisees can provide valuable context beyond the FDD's disclosures.
• A business advisor can help you research public records or news archives for information about the company's formation and history.

Explanation

This risk was not identified. Item 3 of the FDD states, "No litigation is required to be disclosed in this Item." The absence of significant litigation, particularly lawsuits from franchisees alleging fraud, misrepresentation, or breach of contract, is a positive indicator. It may suggest a healthier relationship between the franchisor and its franchisees and a lower likelihood of systemic problems that lead to legal disputes.

Potential Mitigations

• Your attorney can still conduct independent searches for litigation involving the franchisor or its principals as part of comprehensive due diligence.
• It is always prudent to ask current and former franchisees about their experiences with disputes, even if they did not result in litigation.
• Continue to monitor for any litigation that may arise between the FDD issuance date and your signing.