Explanation

The franchisor, G6 Hospitality Franchising LLC (G6), appears financially stable based on its audited financial statements. For fiscal year 2024, it reported over $72 million in revenue and $47 million in net income, with a strong balance sheet showing positive members' capital of over $30 million. No indicators of financial instability like a going concern note were found. However, G6 makes very large annual cash distributions to its parent company.

Potential Mitigations

• An accountant should review the complete financial statements, including footnotes and the history of large cash distributions to the parent company.
• It is important for your business advisor to assess the long-term strategy of the parent company, OYO Hotels, and its potential impact on G6.
• Discuss with your attorney any potential risks associated with the franchisor being operated as a cash source for its parent entity.

Explanation

The risk of a system growing too quickly to be properly supported was not identified. Item 20 tables show a mature system with over 1,100 franchised outlets. The net change in the number of franchised units has been negative in the last two years, indicating the system is not undergoing dangerously rapid expansion. The franchisor appears to have long-established support structures in place for its large system.

Potential Mitigations

• Engage a business advisor to review the franchisor's support structure in relation to its large system size.
• Speaking with both new and established franchisees can provide insight into the consistency and quality of support.
• Your accountant can confirm that the franchisor's financial statements reflect adequate investment in franchisee support systems.

Explanation

This risk is not present. Motel 6 is a well-established brand that has been in operation since 1962, and the franchisor has been offering franchises since 2005. The system is mature, with over 1,100 franchised locations and experienced management, as detailed in Items 1 and 2. The financial statements in Item 21 show a long history of profitable operations, indicating a proven and stable business model.

Potential Mitigations

• It is still valuable for your business advisor to research the brand's competitive position within the current economy lodging market.
• Discuss the brand's long-term strategic direction and plans for staying competitive with your financial advisor.
• An attorney can help verify that the long history of the brand is backed by consistent intellectual property protection.

Explanation

This risk is not identified. The Motel 6 brand operates in the economy lodging segment, a long-established and enduring part of the travel industry. The business model, which focuses on providing basic, affordable accommodations, is not based on a fleeting trend. The brand has demonstrated long-term consumer demand and has been operating continuously since 1962, indicating it is not a fad business.

Potential Mitigations

• Your business advisor can help you assess the current and future strength of the economy lodging sector.
• Evaluating the brand's marketing and technology strategies with a professional can provide insight into its plans for continued relevance.
• An accountant can help you model the business's resilience to various economic cycles.

Explanation

The management team detailed in Item 2 appears to have extensive experience in the hospitality industry. Many executives hold or have held senior positions within G6 Hospitality, its parent OYO, or other relevant companies. This suggests the leadership team has experience in both franchising and hotel operations. The franchisor itself, G6, has been franchising since 2005, indicating a long history of managing a franchise system.

Potential Mitigations

• A business advisor can help you research the specific track records of the key executives listed in Item 2.
• Speaking with current franchisees about the quality of management's operational support and strategic direction is still a valuable step.
• Your attorney can review any recent management changes and assess their potential impact on the franchise relationship.

Explanation

This risk was not identified. Item 1 clearly discloses the franchisor's parent companies, up to OYO Hotels Inc. and its ultimate parent, Oravel Stays Limited. Item 21 includes the franchisor's audited financial statements. Because the franchisor is an established entity with significant assets and a long operating history, and it is not guaranteeing obligations of its parent, the parent company's financials are not required to be disclosed under franchise law.

Potential Mitigations

• An attorney can confirm that the ownership structure is fully disclosed and compliant with franchise regulations.
• It's valuable for an accountant to review the provided financials to ensure they stand on their own without needing parent support.
• A business advisor can research the public information available on the parent companies for additional context.

Explanation

This risk was not identified. Item 1 discloses the franchisor's history, including its name change from Accor Franchising North America, LLC in 2012 and its acquisition by OYO Hotels Inc. in 2024. The FDD appears to properly incorporate the relevant history of these entities. There are no indications of undisclosed predecessors or attempts to obscure past issues related to them. Litigation and bankruptcy history for the current entity and its parents are disclosed.

Potential Mitigations

• Your attorney should confirm that the predecessor disclosures in Items 1, 3, and 4 comply with all franchise law requirements.
• It is prudent to ask long-tenured franchisees about their experience under previous ownership structures.
• A business advisor can help research the history of the brand under its prior owners for a more complete picture.