Explanation

This risk was not identified. The audited financial statements for the franchisor, MIF, L.L.C. (MIF), show it to be in strong financial health, with significant net income and positive member's equity for the past three fiscal years. While a large portion of its assets are receivables from its parent, Marriott International, Inc., there are no indicators of financial instability such as a going concern note or operating losses.

Potential Mitigations

• Your accountant should still review the financials in Exhibit J, noting the significant related-party transactions and dependencies on the parent company.
• It is wise for a financial advisor to independently review the public financial statements of the parent, Marriott International, Inc. (ticker: MAR), for a complete picture of the overall enterprise's health.
• Discuss the franchisor's financial structure and its implications with your franchise attorney.

Explanation

This risk was not identified. The data in Item 20, Tables 1-3, shows a very stable system with minimal turnover for the Le Méridien brand. Over the past three years, the total number of franchised outlets remained steady at 24, with only one termination recorded each year. This low rate of churn (approximately 4%) does not suggest systemic issues or franchisee dissatisfaction.

Potential Mitigations

• Even with low turnover, it is valuable to have your business advisor contact several current franchisees from the list in Exhibit M to discuss their operational experience and relationship with the franchisor.
• Asking your attorney to review the definitions of 'Termination' and 'Transfer' in the FDD can provide clarity on how these events are categorized.
• An accountant can help you compare the provided turnover rates with available lodging industry benchmarks for context.

Explanation

This risk was not identified. The data presented in Item 20 indicates that the Le Méridien franchise system has experienced very slow and stable growth, increasing by only one net unit over the past three years. This pace does not suggest that the franchisor's support resources are at risk of being strained by overly rapid expansion.

Potential Mitigations

• A business advisor can help you analyze the projected growth shown in Item 20, Table 5 to understand the franchisor's future expansion plans.
• It is still prudent to discuss the current quality and responsiveness of franchisor support with existing franchisees.
• Reviewing the franchisor's financial capacity in Item 21 with an accountant can confirm they have the resources for planned growth.

Explanation

This risk was not identified. Although the direct franchisor entity, MIF, was formed in 2012, it is a subsidiary of Marriott International, Inc., a global hospitality leader. Item 1 indicates that affiliates have operated and franchised Le Méridien hotels since 2005. The brand and the franchising system are well-established and supported by a very experienced corporate parent, so this is not considered an unproven system.

Potential Mitigations

• Your attorney should review the corporate structure outlined in Item 1 to fully understand the relationship between MIF and its parent company, Marriott International, Inc.
• A discussion with your business advisor regarding the history of the Le Méridien brand within the Marriott portfolio can provide valuable context.
• It is always a good practice to speak with current franchisees about the maturity and effectiveness of the operating systems and support.

Explanation

This risk was not identified. The franchise is for the operation of a full-service hotel under the Le Méridien brand, a globally recognized name in the upscale lodging industry. The hotel business model is well-established and not based on a short-term trend or fad, indicating a lower risk of demand disappearing due to shifting consumer interests.

Potential Mitigations

• Your business advisor should still help you conduct independent market research to assess long-term demand for upscale hotels in your specific proposed location.
• Reviewing the franchisor's history of brand innovation and adaptation across its portfolio in Item 1 provides insight into their long-term strategic planning.
• Consult a financial advisor to model the business's resilience to various economic cycles.

Explanation

This risk was not identified. FDD Item 2 details the business experience of the directors and principal officers of the parent company, Marriott International, Inc. The management team is composed of highly seasoned executives with extensive careers in the hospitality industry and at other major corporations. This level of experience suggests a strong and capable leadership team is overseeing the franchise system.

Potential Mitigations

• A business advisor can help you review the backgrounds of the key executives listed in Item 2 to appreciate the depth of their industry and franchising experience.
• It remains valuable to ask current franchisees about their direct experiences and perceptions of the management team's competence and strategic direction.
• Your attorney can explain the management structure, noting that while the direct franchisor has no officers, it is controlled by the experienced parent company.

Explanation

This risk was not identified. The FDD discloses in Item 1 that the ultimate parent company, Marriott International, Inc., is a publicly-traded corporation listed on the NASDAQ stock market. It is not owned or controlled by a private equity firm, which mitigates risks associated with short-term investment horizons that can sometimes conflict with the long-term health of a franchise system.

Potential Mitigations

• Your attorney can confirm the corporate ownership structure as disclosed in Item 1.
• A financial advisor can provide information on the performance and governance of the publicly-traded parent company.
• Understanding the implications of public ownership versus private equity ownership can be a useful topic of discussion with your business advisor.

Explanation

This risk was not identified. FDD Item 1 clearly discloses that the franchisor is a subsidiary of Marriott International, Inc. ("MII"). While the FDD provides financial statements for the franchisor entity only, not the parent, this is permissible because MII does not guarantee the franchisor's obligations. Given that MII is a public company and the direct franchisor's financials are strong, the disclosure appears adequate.

Potential Mitigations

• Your accountant should review the provided financials and note the dependency on the parent company through related-party transactions.
• A financial advisor can easily obtain and review the public financial filings of Marriott International, Inc. for a comprehensive view of the entire enterprise.
• Your attorney can confirm that the disclosure meets the requirements of the FTC Franchise Rule.

Explanation

This risk was not identified. FDD Item 1 mentions that prior to March 2017, another Marriott subsidiary acted as the franchisor for certain Le Méridien hotels, effectively a predecessor. However, the litigation and bankruptcy history disclosed in Items 3 and 4 do not indicate any inherited problems or negative history specific to the actions of a predecessor entity that would pose a unique risk to a new franchisee.

Potential Mitigations

• Your attorney should review the information about predecessors and related entities in Item 1 to understand the brand's history.
• When speaking with long-term franchisees, asking about their experience under any prior ownership or franchisor entity can provide useful context.
• A business advisor can help you research the history of the Le Méridien brand's integration into the Marriott system.