Explanation

This risk was not identified. The franchisor's obligations are guaranteed by its ultimate parent, Dolce International Holdings, Inc. (Dolce Intl.), a large, publicly-traded company. The provided audited financial statements in Exhibit D indicate the parent guarantor is financially stable. A strong guarantor can provide resources for support, marketing, and system development, which is a positive factor for prospective franchisees.

Potential Mitigations

• Even with a strong guarantor, having your accountant review the consolidated financial statements, including footnotes and the auditor’s report, remains a prudent step.
• Your attorney should confirm the terms and enforceability of the parent company's performance guaranty.
• Engage with your business advisor to understand the corporate structure and the relationship between the franchisor and its parent company.

Explanation

This risk was not identified, as Item 20 data shows the franchise system is very small and not experiencing rapid growth. While slow growth can mean lower brand recognition, it can also suggest a more controlled expansion. In franchising, excessively rapid growth can sometimes strain a franchisor's ability to provide adequate support, so the current pace does not present this particular risk.

Potential Mitigations

• Discuss the franchisor's growth strategy and targets with them to understand their long-term vision; your business advisor can help evaluate their plans.
• Your attorney should review any development agreements to understand growth obligations or incentives.
• Inquire with existing franchisees about their perception of the system's growth and its impact on brand value.

Explanation

This risk was not identified. The franchise operates in the well-established upper upscale hotel industry. This is not a business model based on a fleeting trend. However, it's always important for franchisees to assess long-term consumer demand and the brand's competitive position within its specific market segment.

Potential Mitigations

• A business advisor can help you evaluate the long-term viability and competitive positioning of this hotel brand in your target market.
• Researching hospitality industry trends with your financial advisor can provide insight into the brand's potential for sustained demand.
• Your attorney can review the franchise agreement for any clauses that might provide flexibility if market conditions change dramatically.

Explanation

This risk was not identified. Item 2 shows that the franchisor's management team consists of senior executives from the parent company, Wyndham Hotels & Resorts, Inc. This team has extensive experience in the hotel industry and in franchising multiple successful brands. Experienced management can provide better support, strategic direction, and operational systems for franchisees.

Potential Mitigations

• Even with an experienced corporate team, it's wise to discuss with your business advisor how that experience translates to the specific needs of this brand.
• When speaking with current franchisees, inquire about their direct interactions and the quality of support from the brand-specific management team.
• Your attorney can help you understand the management structure and accountability outlined in the franchise agreement.

Explanation

This specific risk was not identified, as Item 1 indicates the ultimate parent company is publicly traded, not owned by a private equity firm. While public companies also focus on shareholder returns, they typically have different operating horizons and governance structures than PE firms, which often have defined investment timelines that can sometimes create pressure for short-term results.

Potential Mitigations

• Understanding the ownership structure and its potential influence on franchisor strategy is always important; your business advisor can help with this analysis.
• Your accountant can review the public filings of the parent company to assess its financial health and strategic priorities.
• Your attorney should review clauses related to the franchisor's right to assign the agreement, regardless of ownership type.

Explanation

This risk was not identified. Item 1 clearly discloses the full corporate structure, including the franchisor, its direct parent, and the ultimate parent company, Wyndham Hotels & Resorts, Inc. Furthermore, the FDD includes the financial statements and a performance guaranty from the ultimate parent, providing transparency into the financial backing of the system.

Potential Mitigations

• It is still beneficial for your attorney to review the corporate structure and the terms of any parent guaranty.
• Your accountant should analyze the parent company's financials to understand the overall health of the enterprise supporting your franchise.
• Discuss the relationship and support flow between the parent and the specific franchise brand with your business advisor.

Explanation

This risk was not identified in the FDD. Item 1 outlines the franchisor's history, including its acquisition by Wyndham Hotel Group in 2015, but does not indicate any predecessors in the technical sense of a prior franchise system being acquired. A clear and transparent history is preferable, as a history of litigation or bankruptcy with a predecessor could signal inherited problems for the current system.

Potential Mitigations

• Your attorney should always confirm the corporate history provided in Item 1 and cross-reference it with Items 3 and 4 for any past litigation or bankruptcy.
• Independent research on the brand's history prior to its acquisition can provide additional context; a business advisor may assist.
• Speaking with long-term employees or contacts in the industry can sometimes reveal historical insights not captured in the FDD.