Explanation

This risk was not identified in the FDD package. The data in Item 20 indicates the franchise system is currently shrinking, not undergoing rapid growth that could strain its support resources. However, it is always important to ensure a franchisor has the infrastructure to support its franchisees, regardless of growth pace.

Potential Mitigations

• Your business advisor can help you assess whether the franchisor's current support staff and systems seem adequate for the existing number of franchisees.
• Engage with your accountant to review the franchisor's financial statements to confirm they are allocating sufficient resources to franchisee support.
• Discuss the franchisor's future growth plans and how they intend to scale support infrastructure with your attorney.

Explanation

This risk was not identified in the FDD package. GrandStay Hospitality, LLC (GrandStay) was formed in 2000 and began offering franchises the same year. With over two decades of operating history, it is an established system, not a new or unproven one. This longevity can suggest a more stable and developed operational model.

Potential Mitigations

• A business advisor can still help you research the franchisor's reputation and history within the hotel industry.
• Speaking with long-term franchisees can provide insight into how the system has evolved over time.
• Your attorney should verify that the business history presented in Item 1 is consistent with other information in the FDD.

Explanation

This risk was not identified in the FDD package. The franchised business is in the hotel and extended-stay lodging industry. This is a well-established, long-standing business sector with consistent consumer demand, not a concept based on a short-term trend or fad. This suggests a lower risk of the entire market disappearing.

Potential Mitigations

• It is still wise to have a business advisor help you research the specific market segment's long-term outlook and competitive landscape.
• An accountant can help you model the financial performance of the business under various economic conditions.
• Your real estate professional should assess the long-term viability of your specific proposed location for a hotel.

Explanation

This risk was not identified in the FDD package. The executive biographies in Item 2 show a management team with significant experience. For example, the President, Jon D. Kennedy, has been with the company since 2009 and has over 40 years of experience in the hotel industry. This level of experience can be beneficial for system management and franchisee support.

Potential Mitigations

• A business advisor can help you further research the professional reputation of the key executives listed.
• When speaking with current franchisees, inquire about their direct experiences with the management team's competence and support.
• Your attorney should confirm that the experience listed aligns with the support obligations outlined in the Franchise Agreement.

Explanation

This risk was not identified in the FDD package. Item 1 does not indicate that the franchisor is owned or controlled by a private equity firm. The ownership structure appears to be a standard limited liability company. Therefore, risks associated with short-term PE exit strategies may not be present.

Potential Mitigations

• Your attorney should still review the transfer and assignment clauses in the Franchise Agreement to understand what happens if the franchisor is sold in the future.
• A business advisor can help you research the ownership history of the company for any past private equity involvement.
• Discussing the franchisor's long-term vision with management can provide insight into their commitment to the brand.

Explanation

This risk was not identified in the FDD package. Item 1 clearly states, "We do not have a parent entity." The franchisor entity, GrandStay, appears to be the top-level company in the structure, and its financial statements are provided. This provides direct transparency into the finances of the entity you would be contracting with.

Potential Mitigations

• Your accountant should still perform a thorough review of the provided financial statements for the franchisor entity.
• It is good practice for your attorney to confirm the corporate structure and ensure there are no undisclosed affiliated entities that could impact your business.
• A business advisor can help research any informal relationships or sister companies that might not be disclosed as a formal parent.

Explanation

This risk was not identified in the FDD package. Item 1 of the FDD states, "We have no predecessors or affiliates required to be disclosed in Item 1." This suggests that the current company is the original operator of the franchise system, and you do not need to be concerned about inherited issues from a prior owner.

Potential Mitigations

• It is still prudent to ask long-term franchisees about the history of the company to ensure their understanding aligns with the disclosure.
• Your attorney can perform a public records search to verify the corporate history presented in the FDD.
• A review of the company's financial history with your accountant can also provide insights into its historical stability.