Explanation

The franchisor entity, Hyatt Place Franchising, L.L.C. (Hyatt Place), is guaranteed by its parent, Hyatt Hotels Corporation, a large, publicly-traded company. The parent's audited financial statements show significant profitability and a strong balance sheet. While the parent did recognize goodwill impairment charges in 2024, its overall financial position appears robust, suggesting it has the capacity to support the franchise system. This strong parent guarantee significantly reduces the risk of franchisor instability.

Potential Mitigations

• An accountant should review the parent company's consolidated financial statements, including all footnotes, to confirm its financial health and ability to support the system.
• Your attorney should be consulted to confirm the enforceability and scope of the parent company's Guarantee of Performance.
• It is wise to monitor the parent company's ongoing public financial reporting with your business advisor for awareness of its performance.

Explanation

Item 20 data shows steady, but not excessively rapid, growth in the number of franchised outlets over the past three years. The system added 8 net new franchised units in 2023 and 1 in 2024. The parent company's financial statements in Item 21 appear sufficiently robust to support this controlled growth. Therefore, the risk that the franchisor is expanding too quickly and straining its support resources appears to be low.

Potential Mitigations

• It is beneficial to ask current franchisees about the quality and timeliness of the support they receive from the franchisor.
• A business advisor can help you assess whether the franchisor's support infrastructure seems adequate for its current size and growth rate.
• Your accountant should review the franchisor's financials to confirm it has the resources to maintain support quality during expansion.

Explanation

This specific risk was not identified in the FDD Package. Hyatt Place is a large, established brand that has been franchising since 2005 with hundreds of operating hotels. The franchisor and its parent company, Hyatt Hotels Corporation, have extensive experience in the hotel industry. This is not a new or unproven franchise system, which generally reduces the risks associated with an emerging brand's viability and support systems.

Potential Mitigations

• Although the system is mature, you should still have your attorney review the FDD to understand all legal obligations.
• A conversation with your accountant can help you assess if the established fee structure aligns with your financial model.
• Speaking with a business advisor can provide insight into the brand's current competitive position within the mature hotel market.

Explanation

This specific risk was not identified in the FDD Package. The Hyatt Place brand and the hotel industry in general are well-established and not typically considered to be based on a fad. The business model caters to a consistent demand for select-service lodging from both business and leisure travelers. The risk that the entire concept's consumer demand will suddenly evaporate is low for this established market segment.

Potential Mitigations

• A business advisor can help you analyze the long-term stability and competitive landscape of the select-service hotel market.
• It is still prudent to have your accountant develop financial projections based on sustained, not peak, market demand.
• Your attorney should review the franchise agreement for term length to ensure it aligns with your long-term business goals.

Explanation

This specific risk was not identified in the FDD Package. FDD Item 2 details the business experience of the franchisor's principal officers. The executive team possesses extensive, multi-year experience within the Hyatt organization and the broader hospitality industry. This depth of relevant management experience generally reduces the risks associated with poor strategic decisions or inadequate operational support that can arise from an inexperienced leadership team.

Potential Mitigations

• A business advisor can help you research the public reputation and track record of the key executives listed in Item 2.
• Even with an experienced team, it is valuable to speak with current franchisees about their direct experiences with the management's support and direction.
• Your attorney should still review the franchise agreement, as even experienced management will utilize a contract that is favorable to the franchisor.

Explanation

This risk was not identified as being present in a negative way. The franchisor's parent is Hyatt Hotels Corporation, a publicly-traded company, not a private equity firm. While public companies also focus on shareholder returns, they typically operate on a longer-term horizon than a PE fund with a defined exit strategy. The risk of rapid, short-term-focused changes often associated with PE ownership is therefore not a primary concern here.

Potential Mitigations

• Having your business advisor help you understand the strategic priorities of the public parent company can provide valuable context.
• Your accountant should still review the parent company's public financial statements to assess its health and investment priorities.
• It is wise to have your attorney review the assignment clause in the franchise agreement to understand what happens if the system is sold.

Explanation

This specific risk was not identified in the FDD Package. While the franchisor is an LLC, its obligations are absolutely and unconditionally guaranteed by the parent company, Hyatt Hotels Corporation. The FDD includes the parent's audited financial statements in Item 21 and the Guarantee of Performance as an exhibit. This level of disclosure provides the necessary financial information to assess the stability of the entity ultimately backing your franchise agreement.

Potential Mitigations

• Your accountant should review the parent company financials provided in Item 21 to assess the strength of the guarantor.
• It is important for your attorney to confirm the unconditional nature and enforceability of the parent's Guarantee of Performance.
• A discussion with a business advisor can help you understand the relationship between the franchisor LLC and its publicly-traded parent.

Explanation

This specific risk was not identified in the FDD Package. Item 1 states clearly, "We have no predecessors and no business activities that are not described here." This indicates that the current franchisor entity is the original and only entity to offer these franchises, which simplifies due diligence as there is no hidden history of prior company failures, bankruptcies, or litigation to investigate.

Potential Mitigations

• Your attorney should confirm the statements made in Item 1 regarding the lack of predecessors.
• It is still a good practice to ask long-term franchisees about the history of the company to ensure there have been no unstated organizational changes.
• A business advisor can help you research the history of the Hyatt Place brand itself for a complete picture.

Explanation

This specific risk was not identified in the FDD Package. Item 3 states, "No litigation is required to be disclosed in this Item." The absence of disclosed lawsuits initiated by franchisees alleging fraud, misrepresentation, or significant contract breaches is a positive indicator. It suggests a franchise system with a lower level of litigious conflict between the franchisor and its franchisees compared to many other systems.

Potential Mitigations

• Have your attorney confirm the clean litigation history disclosed in Item 3.
• It's still important to ask current and former franchisees about any disputes they may have had, even if they didn't result in litigation.
• A business advisor can help you perform independent online searches for any news or informal complaints related to the franchisor.