Explanation

The franchisor, Hyatt Franchising, L.L.C. (Hyatt), is a subsidiary of the publicly traded Hyatt Hotels Corporation, which provides an unconditional guarantee of performance. The audited consolidated financial statements in Exhibit A show the parent company is profitable with substantial assets and positive equity. While goodwill impairments were noted in 2024, they do not appear to suggest overall financial instability given the company's scale. Thus, this risk appears low.

Potential Mitigations

• Have your accountant review the consolidated financial statements of the parent, Hyatt Hotels Corporation, including the footnotes and the 'Critical Audit Matters' section of the auditor's report.
• It is important for your attorney to confirm the unconditional nature and enforceability of the parent company's Guarantee of Performance.
• Discuss the franchisor's financial health and ability to support the system with your financial advisor.

Explanation

While the franchise system has doubled in size over the last three years, the growth is from a very small base (3 to 6 outlets). Given that the franchisor is part of the large and experienced Hyatt Hotels Corporation, the risk that growth will outpace the ability to provide support appears low. The parent company has extensive resources to manage this expansion.

Potential Mitigations

• When speaking with current franchisees, you should ask about the quality and timeliness of the support they receive from the franchisor.
• Your business advisor can help you evaluate whether the support systems described in Item 11 are adequate for the projected growth.
• Reviewing the parent company's overall financial health in Item 21 with your accountant can provide comfort regarding their ability to support the brand.

Explanation

This risk was not identified. The franchise concept, which involves affiliating unique lifestyle and boutique hotels with a major brand, aligns with a well-established and growing segment of the hospitality industry rather than a short-term fad. This business model generally has sustained consumer demand.

Potential Mitigations

• A business advisor can help you research long-term trends in the boutique and lifestyle hotel sector to confirm market stability.
• You should discuss the brand's long-term strategy and plans for staying competitive with the franchisor.
• An accountant can assist in creating financial models that project performance over a long period to assess the business's sustainability.

Explanation

This risk was not identified. Item 2 shows that the franchisor's key executives have extensive, high-level experience in the hotel and franchising industries, many with long tenures at Hyatt or other major hospitality companies. The franchisor itself has decades of experience. This indicates a very experienced management team.

Potential Mitigations

• When speaking with the franchisor's team, it is still valuable to gauge their vision and strategy for this specific brand.
• Your business advisor can research the public track records of the key executives listed in Item 2 for additional background.
• You should confirm with current franchisees their satisfaction with the support and direction provided by the management team.

Explanation

This risk was not identified. The franchisor is an affiliate of Hyatt Hotels Corporation, a publicly traded company. While Item 16 discloses that Pritzker family business interests hold majority voting control, this represents a long-term strategic ownership structure, not a private equity fund with a defined investment horizon.

Potential Mitigations

• It is prudent to have your attorney review the ownership structure outlined in Items 1 and 16 to understand the control dynamics.
• A financial advisor can help you research the public filings of Hyatt Hotels Corporation to understand its long-term corporate strategy.
• Discussing the long-term vision for the brand with the franchisor's representatives can provide valuable insight.

Explanation

This risk was not identified. Item 1 clearly discloses that the franchisor's parent company is Hyatt Hotels Corporation. The FDD package includes the parent's audited consolidated financial statements in Exhibit A and a Guarantee of Performance in Exhibit A-1, providing appropriate transparency.

Potential Mitigations

• Your accountant should thoroughly review the parent company's financial statements provided in Exhibit A.
• It is crucial for your attorney to review the Guarantee of Performance to understand its scope and enforceability.
• You can ask a business advisor to research the public records of Hyatt Hotels Corporation for additional corporate information.

Explanation

This risk was not identified in the FDD package. Item 1 states that the franchisor, Hyatt Franchising, L.L.C., has no predecessors. The document explains the brand's history within the Hyatt system following an affiliate's acquisition of a hotel company. There is no indication of undisclosed or problematic predecessor history.

Potential Mitigations

• A review of the corporate history described in Item 1 with your attorney is always a good practice.
• You can conduct independent research with a business advisor on the history of the JdV brand prior to its acquisition by Hyatt.
• Asking long-term operators of JdV hotels (if identifiable) about the transition to Hyatt's ownership could provide useful context.

Explanation

This risk was not identified. Item 3 discloses only one recent litigation matter initiated by the franchisor against a franchisee for unpaid fees, which is a common collections action. There is no disclosed pattern of litigation by franchisees against the franchisor alleging fraud, misrepresentation, or other systemic issues. This lack of significant adverse litigation is a positive indicator.

Potential Mitigations

• Your attorney can still conduct a public records search for any litigation involving the franchisor that may not have been required to be disclosed in Item 3.
• A discussion with current and former franchisees about their experiences and any disputes can provide additional insight.
• It is wise to have your attorney review the dispute resolution clauses in Item 17 of the FDD.