Explanation

This risk was not identified. The audited financial statements in Exhibit J for MIF, L.L.C. (Marriott) show a strong financial position with significant positive member's equity and consistent net income. The auditor's report is clean, with no warnings or 'going concern' qualifications. This financial stability is a positive factor, suggesting the franchisor has the resources to support the system and its franchisees. Your accountant should still perform a detailed review.

Potential Mitigations

• A thorough review of the franchisor's audited financial statements, including all footnotes, with your accountant is essential.
• Engaging a business advisor to assess the overall health and stability of the franchise system can provide valuable context.
• It is wise to ask your attorney about any state-mandated financial assurances, such as bonds or escrow accounts, if financial weakness were a concern.

Explanation

This risk was not identified. Item 20 data shows that the number of Four Points hotels has slightly decreased over the past three years, not grown rapidly. While this avoids the risks associated with an overstretched support system, you should consider the reasons for the lack of growth when evaluating the brand's overall market position and future prospects with your business advisor.

Potential Mitigations

• A business advisor can help you research the brand’s market position and growth trends relative to its direct competitors.
• When speaking with existing franchisees, asking about their perception of the brand's growth and market strength is a valuable exercise.
• Consult with your financial advisor to model different growth scenarios for your own business plan.

Explanation

This risk was not identified. The FDD indicates that the Four Points by Sheraton brand is part of the Marriott International portfolio and has an operating history dating back to 1995. With a large number of franchised hotels, the system is mature and well-established, not a new or unproven concept. This long history suggests a developed operational system and significant brand recognition.

Potential Mitigations

• A business advisor can still help you evaluate the brand's current market position, even for an established system.
• Reviewing the franchisor's litigation history in Item 3 with your attorney is always a prudent step.
• Discussing the brand's evolution and recent system changes with current franchisees provides valuable insight.

Explanation

This risk was not identified. The Four Points by Sheraton brand operates within the mainstream hotel and lodging industry, which is a mature market and not a fad. The business model is based on providing traditional select-service accommodations to business and leisure travelers, representing a market with a long history of sustained, though cyclical, consumer demand. This provides more stability than a business based on a new or fleeting trend.

Potential Mitigations

• A business advisor can help you assess long-term consumer demand and competitive trends in the specific hotel segment.
• Engaging with your financial advisor to model the business's resilience to economic cycles is a key planning step.
• Reviewing the franchisor's plans for innovation and brand updates in Item 11 can offer insight into long-term strategy.

Explanation

This risk was not identified. Item 2 of the FDD lists the directors and principal officers of the franchisor's parent, Marriott International, Inc. The executive team possesses extensive, long-term experience in the global hospitality and franchising industries. This depth of experience at the leadership level is a significant factor, as it suggests a sophisticated understanding of hotel operations, brand management, and franchise system support.

Potential Mitigations

• Your business advisor can still help you research the specific individuals who will be your primary contacts for support and operations.
• It is always recommended to speak with current franchisees about the quality and effectiveness of the management and support teams.
• Asking your attorney to review the management team's litigation and bankruptcy history in Items 3 and 4 is a standard part of due diligence.

Explanation

This specific risk was not identified. Item 1 of the FDD states the franchisor is a subsidiary of Marriott International, Inc., a publicly-traded corporation, not a private equity firm. This distinction is important because the motivations and investment timelines can differ. Public companies often have a longer-term focus on brand health, though they face their own pressures from the stock market for quarterly performance.

Potential Mitigations

• Your financial advisor can help you analyze the performance and strategic direction of the publicly-traded parent company.
• Reviewing any significant shareholder information with your business advisor can provide insight into the company's ownership structure.
• It is prudent for your attorney to review the franchisor's rights to sell or assign the franchise system.

Explanation

This risk was not identified. The FDD clearly discloses in Item 1 that the franchisor, MIF, L.L.C., is a subsidiary of Marriott International, Inc. and provides audited financial statements for the franchising entity in Item 21. Because the franchising entity itself demonstrates significant financial strength, financials for the parent company are not required or provided, and there is no parent guarantee. This level of transparency is consistent with disclosure requirements.

Potential Mitigations

• Your attorney should always confirm that the disclosures align with federal and state franchise law requirements.
• An accountant's review of the provided financials is critical to confirm the franchisor's ability to meet its obligations.
• A business advisor can help research the relationship between the franchisor and its parent to identify potential dependencies.

Explanation

This risk was not identified. Item 1 of the FDD provides a clear history of the brand, noting that other subsidiaries of the parent company offered franchises for the brand prior to the current franchising entity taking over in 2017. The FDD does not indicate any undisclosed or problematic history associated with these predecessors in the litigation or bankruptcy disclosures (Items 3 and 4).

Potential Mitigations

• Your attorney should always review the franchisor, parent, and predecessor history disclosed in Items 1, 3, and 4.
• When speaking with long-term franchisees, asking about their experience under any prior ownership or franchising structure is a good practice.
• A business advisor can help research public information about any named predecessor companies for additional context.