Explanation

This risk was not identified. Item 20 data does not show a high rate of franchisee terminations, non-renewals, or other cessations of business. A stable or growing franchise system can be an indicator of franchisee satisfaction and a healthy brand. Prospective franchisees should still contact current and former owners listed in the FDD to understand their experiences with the system, as the data presentation for 'Ceased Operations' is unusual.

Potential Mitigations

• It is always a good practice to contact a significant number of current and former franchisees to discuss their satisfaction with the system.
• Your franchise attorney can help you formulate appropriate questions to ask former franchisees about why they left the system.
• Engaging a business advisor to compare the franchise's turnover rates with industry averages can provide valuable context.

Explanation

This risk was not identified. Item 20 data shows a pattern of slow and steady growth for the Homewood Suites brand. While there is a pipeline of future hotels, the franchisor is a large, established company with significant resources, suggesting it has the capacity to support this expansion. Rapid, unsupported growth can strain a franchisor's ability to provide adequate assistance.

Potential Mitigations

• In discussions with the franchisor, it is wise to inquire about their plans for scaling support services to match future growth.
• Your business advisor can help assess whether the franchisor's support infrastructure is adequate for both current and future franchisees.
• When speaking with newer franchisees, ask about the quality and timeliness of the support they received during their opening process.

Explanation

This risk is not present. The FDD indicates that the Homewood Suites brand has been franchising since 1988 and is part of Hilton, a very large and experienced global hospitality company. Investing in an established system with a long track record generally carries different risks than investing in a new or unproven concept, which may lack established support systems and brand recognition.

Potential Mitigations

• Even with an established brand, consulting a business advisor to understand its current market position and competitive landscape is beneficial.
• Speaking with long-time franchisees can provide insight into how the system has evolved and been managed over the years.
• Your attorney can still review the FDD for any recent changes in ownership or strategy that might affect the established system.

Explanation

This risk was not identified. Homewood Suites by Hilton operates in the extended-stay hotel market, a well-established and long-standing segment of the hospitality industry. A business model's long-term viability is a crucial consideration, as concepts tied to fleeting trends can pose a significant risk to a franchisee's long-term investment, which is bound by a multi-year contract.

Potential Mitigations

• A business advisor can help you research the long-term trends and competitive outlook for the extended-stay hotel segment in your specific market.
• During due diligence, it is wise to assess the brand's strategies for innovation and maintaining its competitive edge.
• Reviewing the franchisor's history of adapting to market changes with existing franchisees can provide valuable perspective.

Explanation

This risk is not present. Item 2 of the FDD discloses the franchisor's executive team, which consists of individuals with many years of experience within the Hilton organization and the broader hospitality industry. An experienced management team can be a significant asset, potentially offering better strategic direction, support systems, and operational guidance for franchisees.

Potential Mitigations

• Even with an experienced team, it is still a good practice to research the recent performance and reputation of the brand under its current leadership.
• A business advisor can help you evaluate the management team's strategic vision for the brand's future.
• Asking franchisees about their direct experiences and the quality of support from the corporate team provides practical insight.

Explanation

This risk, as defined, is not present. Hilton Worldwide Holdings Inc. is a publicly traded company, not a private equity-owned firm. The motivations and strategic timelines for publicly traded companies can differ from those of private equity firms, which often have a defined investment horizon. A prospective franchisee should always assess the franchisor's long-term strategy and commitment to the brand's health.

Potential Mitigations

• Your business advisor can help you analyze the strategic direction and financial priorities of the publicly traded parent company.
• Reviewing public financial reports and analyst calls for Hilton Worldwide Holdings Inc. (NYSE: HLT) can provide insight into its long-term plans.
• A discussion with your financial advisor can help you understand the risks and opportunities associated with a publicly-traded franchisor.

Explanation

This risk was not identified. The FDD clearly discloses the franchisor's parent entities in Item 1. Proper disclosure of parent companies is important for understanding the complete corporate structure, lines of authority, and potential financial interdependencies that could affect the franchisee. The parent company's financials are publicly available, providing an additional layer of transparency for due diligence.

Potential Mitigations

• It is recommended that your accountant review the publicly available financial statements of the parent company, Hilton Worldwide Holdings Inc.
• Your franchise attorney can help you understand the legal relationship and flow of obligations between the franchisor and its parent.
• A business advisor can help assess the overall strategy and health of the entire Hilton corporate family.

Explanation

This risk was not identified. The FDD discloses a complex history with several predecessor entities in Item 1, which is common for a long-standing brand that has undergone mergers and corporate restructuring. There are no apparent attempts to obscure negative history related to these predecessors in Items 3 or 4. Understanding a system's lineage is important for a complete due diligence picture.

Potential Mitigations

• Having your franchise attorney review the disclosed history of predecessors can help clarify the corporate lineage.
• During discussions with long-time franchisees, you might inquire about their experiences during previous ownership structures.
• A business advisor can assist in researching the public history of the predecessor companies for additional context.