Explanation

This specific risk was not identified. The franchisor, Holiday Hospitality Franchising, LLC (Holiday), and its parent guarantor, Six Continents Hotels, Inc., appear financially stable according to their audited financial statements. A franchisor's financial weakness could jeopardize its ability to support its franchisees, fund marketing, or invest in brand development. This franchisor's financial health seems adequate to support its obligations.

Potential Mitigations

• Engage an accountant to conduct an in-depth review of the provided financial statements, including all footnotes, for both the franchisor and any parent guarantors.
• Discuss the franchisor's financial stability and its dependency on parent company support with your financial advisor.
• Your attorney can help you understand the strength and enforceability of any parent company guarantees.

Explanation

This risk was not identified in the FDD. Item 20 data shows the system has been shrinking, not growing rapidly. While growth is often positive, very rapid expansion can strain a franchisor's ability to provide adequate support, training, and quality control. This can lead to operational problems for franchisees if the support infrastructure does not keep pace with the number of new outlets.

Potential Mitigations

• A business advisor can help you assess if a franchisor's growth plans are sustainable and supported by adequate infrastructure.
• In any franchise, it is wise to ask existing franchisees about the quality and timeliness of the support they currently receive.
• Your accountant can review a franchisor's financial statements to determine if they are investing sufficiently in support systems to manage growth.

Explanation

This risk is not present. The franchisor and its parent, InterContinental Hotels Group (IHG), are large, long-established leaders in the global hospitality industry with decades of experience. An unproven system or inexperienced management team would pose a higher risk of failure, inadequate support, and undeveloped operational standards. This FDD describes a very mature and established franchise system.

Potential Mitigations

• When evaluating any franchise, it is prudent to have a business advisor help you research the history and track record of the brand and its leadership.
• Consulting with an experienced franchise attorney can help you understand the risks associated with investing in a newer, less established system.
• An accountant can help you assess whether a new franchisor has sufficient capital and resources to support its franchisees.

Explanation

This risk is not present. The Crowne Plaza brand and the broader hotel industry are well-established and are not based on a temporary trend or fad. A business concept tied to a fleeting trend carries the risk that consumer interest will decline, potentially leaving you with a failing business and long-term contractual obligations. This franchise operates in a mature market with historically consistent, though cyclical, demand.

Potential Mitigations

• For any business concept, it's wise to conduct independent market research with a business advisor to assess long-term consumer demand.
• Evaluating a brand's history of innovation and adaptation can provide insight into its long-term viability; your business advisor can help with this assessment.
• A financial advisor can help you model the potential impact of market trends on a business's sustainability.

Explanation

This risk was not identified. FDD Item 2 indicates that the franchisor's management team consists of executives with extensive, long-term experience in the global hospitality and franchising industries. Inexperienced leadership can pose a significant risk, as it may lead to poor strategic decisions, weak operational systems, and inadequate franchisee support. The management team for this franchise appears to be highly experienced.

Potential Mitigations

• When evaluating any franchise, a business advisor can help you vet the backgrounds of the key executives listed in Item 2.
• It is always a good practice to speak with current franchisees to get their perspective on the quality and competence of the management team.
• Your attorney can help you understand the implications if a franchisor's leadership team lacks direct franchising experience.

Explanation

This specific risk was not identified in the FDD. Holiday Hospitality Franchising, LLC is part of InterContinental Hotels Group PLC, a publicly-traded company, not one owned by a private equity firm. Private equity ownership can sometimes introduce risks related to short-term profit motives, which may not always align with the long-term health of franchisees. This may include cost-cutting on support or pressure to use affiliated vendors.

Potential Mitigations

• It's prudent to have your attorney and business advisor research the ownership structure of any franchisor you consider.
• If a franchisor is owned by a private equity firm, investigating the firm's history with other franchise brands is a key due diligence step.
• Talking to franchisees who have experienced a change in ownership can provide valuable insight into its impact on the system.

Explanation

The FDD properly discloses that Holiday is a subsidiary of Six Continents Hotels, Inc. (SCH), and both entities' audited financials are provided. Holiday itself appears to be a licensing and fee-processing entity, with its financial stability entirely dependent on its parent, SCH. While disclosure is present, you must understand that your ultimate counterparty risk lies with the parent entity, not the subsidiary you are contracting with directly.

Potential Mitigations

• An accountant should analyze the financial statements of both the direct franchisor and any parent guarantor to understand their inter-relationship.
• It is important to have your attorney review the terms of any parent guarantee to confirm its strength and what obligations it covers.
• A business advisor can help you assess the operational implications of a complex parent-subsidiary structure.

Explanation

This specific risk was not identified. FDD Item 1 clearly outlines the corporate history, including the conversion from a corporation to an LLC and name changes. A franchisor's failure to disclose its predecessor history could hide past problems, such as bankruptcies or high franchisee failure rates under previous ownership. This franchisor appears to have a consistent operational history under the same ultimate parent company, IHG.

Potential Mitigations

• Always have your attorney carefully review the predecessor and affiliate information disclosed in Item 1 of the FDD.
• If a brand was recently acquired from a different company, a business advisor can help you conduct independent research on that predecessor's history.
• Inquiring with long-term franchisees about their experience under any previous ownership can provide valuable context.