Explanation

This risk was not identified. The FDD provides audited financial statements for the parent company, CruiseShipCenters USA Inc. (Expedia Cruises)'s parent, Expedia Group, Inc., which also provides a full guarantee of the franchisor's obligations. This robust financial backing from a major public corporation significantly reduces concerns about the franchisor's ability to provide support and fulfill its commitments, which is a crucial factor for your long-term security.

Potential Mitigations

• It is still valuable for your accountant to review the parent company's financial statements to understand its overall health and strategic direction.
• Your attorney should examine the specific language of the parent company's guarantee to confirm its scope and enforceability.
• Discussing the practical implications of the parent-subsidiary relationship with existing franchisees can provide useful insights.

Explanation

This risk was not identified. Item 20 data does not show excessively rapid growth that might strain the franchisor's support systems. A stable growth pace can be positive, suggesting the franchisor can adequately support its existing franchisees. However, it is always important to ensure the franchisor has the infrastructure to support both current and future franchisees effectively.

Potential Mitigations

• A business advisor can help you assess if the franchisor's support staff and infrastructure, as described in Item 2 and Item 11, are appropriate for the current system size.
• In discussions with current franchisees, asking about the quality and timeliness of franchisor support is always a prudent step.
• Your attorney should review the support obligations outlined in the Franchise Agreement to understand what is contractually guaranteed.

Explanation

This risk was not identified, as the franchisor and its Canadian affiliate have a long history of franchising, dating back to 2008 and 1988 respectively. An established system often has refined operational procedures, stronger brand recognition, and more experienced support staff. This maturity can reduce many of the uncertainties and challenges associated with investing in a new, unproven franchise concept.

Potential Mitigations

• Even with an established system, asking your business advisor to help evaluate its current market position and competitive advantages is wise.
• Discussing the system's evolution and recent changes with long-term franchisees can provide valuable historical context.
• An accountant should still review the recent financial trends of the parent company to ensure continued stability.

Explanation

This risk does not appear to be present. The business model is focused on the travel and cruise industries, which are well-established markets with a long history of consumer demand, rather than being based on a short-term trend or fad. The stability of the underlying industry is a key factor to consider for the long-term viability of any franchise investment.

Potential Mitigations

• A business advisor can help you research the current health and future outlook of the cruise and leisure travel industries.
• Consider the business's resilience to economic downturns or events like a pandemic with your financial advisor.
• Asking current franchisees about customer demand in their local markets provides practical insight.

Explanation

This risk was not identified. Item 2 indicates that the management team has significant and long-term experience within the company, its affiliates, and the broader travel industry. An experienced leadership team is often better equipped to navigate industry challenges, provide effective support, and make sound strategic decisions, which can be a significant benefit for you.

Potential Mitigations

• It is still useful to research the recent performance and reputation of the key executives mentioned in Item 2 with your business advisor.
• When speaking with franchisees, ask about their direct experiences and the quality of their interactions with the leadership team.
• Your attorney can help you understand the management structure and how it might impact decision-making for the franchise system.

Explanation

This risk was not identified. Item 1 indicates the franchisor is owned by Expedia Group, Inc., a publicly traded operating company in the travel industry, not a private equity firm. This can be viewed positively, as an operating company's strategic goals are often more aligned with the long-term health and growth of the brand, rather than a PE firm's potentially shorter investment horizon.

Potential Mitigations

• A financial advisor can help you analyze the parent company's public filings (e.g., 10-K reports) to understand its strategic priorities and financial health.
• Discuss with existing franchisees any changes they have observed in the system related to the parent company's influence.
• Your attorney should review any clauses related to the sale or assignment of the franchise system.

Explanation

This risk was not identified. The FDD clearly discloses the parent company, Expedia Group, Inc., in Item 1 and provides its audited financial statements and a performance guarantee in Item 21 and Exhibit G. This level of transparency is compliant with disclosure requirements and allows you and your advisors to properly assess the financial strength backing the franchise system.

Potential Mitigations

• Ensuring your accountant thoroughly reviews the provided parent company financials is a crucial due diligence step.
• Your attorney should confirm the scope and legal enforceability of the parent company's Guarantee of Performance.
• A business advisor can help you understand the relationship and potential influence of the parent company on franchise operations.

Explanation

This specific risk is not applicable as the franchisor states in Item 1 that it has no predecessors. This simplifies due diligence, as the operational and legal history to review is confined to the current franchising entity. However, you should still carefully review the history of the franchisor itself and its affiliates.

Potential Mitigations

• Your attorney should still carefully review the history of the franchisor and its affiliates as detailed in Items 1, 3, and 4.
• When speaking with long-term franchisees, asking about the history of the company can still provide valuable context.
• A business advisor can help research the company's background and reputation in the industry.