Explanation

The audited financial statements for the franchisor, MIF, L.L.C. (MIF), do not indicate financial instability. The balance sheets and income statements for 2022, 2023, and 2024 show consistent profitability and a strong financial position, with total assets significantly exceeding total liabilities. No adverse audit opinions or going concern notices were identified. This suggests MIF has the financial ability to support the system. However, its financial performance is highly dependent on its parent, Marriott International, Inc.

Potential Mitigations

• An accountant should review the provided financial statements, including all footnotes and the relationship with the parent company, to confirm financial health.
• Discuss the franchisor's capitalization and sources of income (royalties vs. initial fees) with your financial advisor to assess long-term stability.
• Ask your attorney to review any financial performance guarantees or support obligations from the parent entity.

Explanation

This specific risk was not identified. The data in Item 20, Table 3, which outlines the status of franchised outlets over the past three years, shows a very low rate of turnover. From 2022 to 2024, there was only one termination and no non-renewals or cessations of operation for other reasons reported across the entire U.S. system. This indicates a high level of stability among existing franchisees, despite harsh contractual renewal terms.

Potential Mitigations

• It is still advisable to contact current and former franchisees listed in Item 20 to discuss their satisfaction and experiences with the system.
• Your attorney should still review the termination and renewal clauses in the franchise agreement to understand your contractual risks, regardless of historical data.
• A business advisor can help you create contingency plans for various scenarios, including potential future changes in system stability.

Explanation

The risk of excessively rapid growth straining franchisor resources appears low. Item 20 tables show steady but not explosive growth in the number of franchised outlets, increasing from 71 at the start of 2022 to 87 at the end of 2024. This measured pace suggests that the support systems of the parent company, Marriott International, Inc., are likely adequate to handle the expansion.

Potential Mitigations

• Engage a business advisor to evaluate the franchisor's support infrastructure in relation to its growth rate.
• When speaking with franchisees, it is a good practice to ask about the quality and responsiveness of the support they receive.
• Your accountant can review the franchisor's financial statements in Item 21 to assess its capacity for continued investment in support services.

Explanation

This risk was not identified. The franchisor, MIF, L.L.C. (MIF), and its parent, Marriott International, Inc., have extensive, long-term experience in the hotel industry and in franchising numerous hotel brands worldwide. Item 1 indicates the Element brand has been franchising since 2006, and Item 20 shows a stable and growing system. The brand is well-established within a very mature and experienced hospitality organization.

Potential Mitigations

• Your business advisor can still help you evaluate the brand's specific market position and performance within the larger Marriott portfolio.
• Consult with your attorney to understand the specific obligations of the franchising entity, MIF, L.L.C., versus its parent company.
• Discussions with existing franchisees can provide insight into the real-world performance of this specific brand.

Explanation

This risk appears low. The Element by Westin brand is positioned as an extended-stay hotel focused on wellness and sustainability. This segment of the lodging industry has demonstrated consistent consumer demand that is not solely reliant on fleeting trends. As part of the Marriott portfolio, the brand benefits from a long-term strategic approach to the hospitality market rather than a focus on a short-term fad.

Potential Mitigations

• A business advisor can help you research the long-term outlook for the extended-stay and wellness-focused lodging segments.
• Discuss the brand’s evolution and the franchisor’s plans for keeping it competitive with existing franchisees.
• Your attorney can review the agreement for any unusual long-term commitments that might be risky if market trends were to change.

Explanation

This risk was not identified. Item 2 lists the directors and principal officers of the parent company, Marriott International, Inc. (MII). The executive team possesses extensive and long-standing experience in the hospitality industry, franchising, and managing large, global corporate enterprises. The breadth and depth of experience detailed for key personnel suggest a highly experienced and stable management team is overseeing the franchise system.

Potential Mitigations

• It is always prudent to have your business advisor research the public reputation and track record of the key executives listed in Item 2.
• When speaking with franchisees, asking about their perception of and interactions with the corporate management team can provide valuable insight.
• Your attorney can help you understand the corporate structure and the roles of the individuals responsible for the franchise program.

Explanation

This risk was not identified in the FDD. Item 1 discloses that the franchisor's ultimate parent company, Marriott International, Inc., is a publicly-traded corporation, not one owned by a private equity firm. While public companies are beholden to shareholders, their operational incentives and timelines can differ from those of a typical private equity fund, which often has a more defined and potentially shorter-term investment horizon.

Potential Mitigations

• Your financial advisor should still analyze the parent company's public financial reports and investor calls to understand its strategic priorities and financial health.
• When speaking with franchisees, it is useful to ask about any recent changes in franchisor priorities or fee structures.
• An attorney can review the assignment clauses in the franchise agreement to determine the implications of any future sale of the company.

Explanation

This risk was not identified. Item 1 clearly discloses that the franchisor, MIF, L.L.C., is a subsidiary of Marriott International, Inc. (MII). Item 21 provides the audited financial statements for MIF, L.L.C. While MII does not provide its own separate financials within this FDD (directing readers to its public SEC filings), the financials for the direct franchising entity are present and audited, which is the primary requirement for disclosure.

Potential Mitigations

• Having your accountant review the provided financial statements for the franchisor entity is a critical step.
• Your financial advisor can locate and analyze the public SEC filings for the parent, Marriott International, Inc., to get a complete picture of overall corporate health.
• Your attorney can advise on the legal relationship and obligations between the subsidiary franchisor and the parent company.

Explanation

This risk appears low. Item 1 discloses the franchisor's history and notes that subsidiaries of the parent, Marriott International, Inc., offered franchises for the Element brand from 2006 to 2017. The franchisor entity itself, MIF, L.L.C., began offering these franchises in March 2017. The document provides a clear lineage within the Marriott corporate family and does not appear to obscure any relevant predecessor history.

Potential Mitigations

• Consulting with your attorney to understand the corporate history and the transition of franchising responsibilities between Marriott entities is still a good practice.
• Speaking with long-term franchisees can provide perspective on their experience under any previous franchising entities within the Marriott system.
• A business advisor can help you assess if the change in franchising entity had any practical impact on system support or operations.