Explanation

Financial statements for both the franchisor, Holiday Hospitality Franchising, LLC (HHFL), and its parent guarantor are provided in Item 21. These audited statements show significant profitability and positive net worth for the past three years. While the complex corporate structure involves multiple entities, the financials appear strong, which may suggest a stable partner with resources to support the system.

Potential Mitigations

• An accountant should review the provided financial statements, including footnotes, to independently verify the franchisor's financial health.
• Discuss the complex parent and affiliate corporate structure with your franchise attorney to understand where liabilities and obligations ultimately reside.
• Engage a business advisor to assess if the franchisor's financial strength is sufficient to support its large, multi-brand system.

Explanation

This risk was not identified. The data in Item 20 shows very low franchisee turnover for the InterContinental brand over the past three years, with no terminations or non-renewals reported. Low turnover can be an indicator of a healthy franchise system and franchisee satisfaction. However, you should still conduct your own due diligence.

Potential Mitigations

• Speaking with a number of current and former franchisees from the lists in Item 20 is essential to confirm their satisfaction levels.
• A franchise attorney can help you formulate specific questions for former franchisees about their reasons for leaving the system.
• Your business advisor should help you compare the system's growth and stability with other brands in the luxury hotel sector.

Explanation

This risk was not identified. Item 20 data shows very slow, measured growth for the InterContinental brand over the last three years, adding only two net franchised units. This suggests the franchisor is not growing faster than its ability to provide support. In general, a franchisor expanding too quickly can strain its ability to provide adequate site selection, training, and operational support.

Potential Mitigations

• A business advisor can help you assess whether the franchisor's support infrastructure is adequate for its current size and modest growth.
• Ask current franchisees about their satisfaction with the level and quality of support they currently receive from the franchisor.
• Have your accountant review the franchisor's financials in Item 21 to ensure they are allocating sufficient resources to franchisee support.

Explanation

This risk was not identified. Holiday Hospitality Franchising, LLC and its parent companies have been licensing this and other hotel brands for many decades, as disclosed in Item 1. The system is well-established and has a long operational history. An unproven system would present a higher risk of failure due to untested business models or inexperienced management.

Potential Mitigations

• It is still wise to consult with a business advisor to understand the brand's current market position relative to its competitors.
• Your attorney should review the entire FDD for any signs that recent ownership or management changes could affect the established system.
• Interviewing existing franchisees about the system's evolution and current support structure is a recommended due diligence step.

Explanation

This risk is not present. The InterContinental Hotels & Resorts brand, as described in Item 1, is a long-established participant in the global luxury hotel industry. The risk of the business being a short-term fad is extremely low, given its decades of operational history and strong brand recognition. A fad business would present a much higher risk of long-term failure.

Potential Mitigations

• A business advisor can help you analyze the brand's long-term competitive strategy within the luxury hotel segment.
• Reviewing the franchisor's plans for marketing and system development in Item 11 can provide insight into their long-term vision.
• Consulting with your financial advisor about the stability of the high-end travel market is a prudent step.

Explanation

This risk was not identified. The executives listed in Item 2 have extensive, long-term experience in the hotel and hospitality industry, with many holding senior roles within the franchisor's parent company, IHG, for several years. The management team appears to be highly experienced in both the specific industry and in managing a large, global franchise system.

Potential Mitigations

• Your business advisor can still help you research the public reputation and track record of the key executives listed in Item 2.
• When speaking with current franchisees, it is useful to ask about their perception of the management team's competence and vision.
• An attorney can review the FDD for any recent, significant changes in key management that might signal a shift in strategy or stability.

Explanation

This risk is not present. The franchisor, Holiday Hospitality Franchising, LLC, is a long-standing part of a publicly-traded parent company, InterContinental Hotels Group PLC. It is not owned by a private equity firm. This structure may suggest a focus on long-term brand health rather than short-term financial returns, which can sometimes be a concern with private equity ownership.

Potential Mitigations

• A business advisor can help you research the history and strategic priorities of the parent company, InterContinental Hotels Group PLC.
• Your attorney should still review the assignment clauses in the License Agreement to understand your rights if the system is sold in the future.
• Have your accountant analyze the financial statements in Item 21 to understand the financial priorities of the current ownership structure.

Explanation

This risk was not identified. Item 1 clearly discloses the parent companies, and Item 21 includes audited financial statements for the direct parent and guarantor, Six Continents Hotels, Inc. The franchisor is providing the necessary disclosures regarding its parent entities. A failure to disclose a parent company or its financials, when required, would be a significant red flag about the system's transparency and stability.

Potential Mitigations

• It is wise for your franchise attorney to review the parent company guarantee to ensure it is robust and legally sound.
• An accountant should analyze the financial statements of both the franchisor and the parent to get a complete picture of the system's financial health.
• Consult a business advisor to understand the operational relationship between the franchisor and its various parent and affiliate companies.

Explanation

This risk was not identified. Item 1 states that Holiday Hospitality Franchising, LLC has had no predecessor in the ten-year period before the FDD's issuance date. The document provides a clear corporate history of name changes and conversions. The absence of a recent predecessor means there is no hidden history of litigation or franchisee failure to uncover from a prior entity.

Potential Mitigations

• Your attorney can verify the corporate history provided in Item 1 through public records if there are any concerns.
• A business advisor can help you research the long-term history of the brand itself, even without a formal predecessor entity.
• Asking long-term franchisees about the brand's history can provide valuable institutional knowledge.