Explanation

As a new franchisor that began offering franchises in July 2023, LivAway has no franchised outlets that have transferred, terminated, or ceased operations. Therefore, no historical franchisee turnover data exists to analyze. While this means no negative trend is present, it also means there is no track record to evaluate system satisfaction or franchisee success rates, which is a risk inherent in joining a new system.

Potential Mitigations

• A discussion with your business advisor is important to weigh the risks and potential rewards of being an early adopter in an unproven system.
• Your attorney can help you formulate questions for the franchisor regarding their long-term franchisee retention and support strategies.
• Careful financial modeling with your accountant is critical, as there is no franchisee performance or turnover history to rely on for your projections.

Explanation

This risk was not identified in the FDD package. Rapid growth can strain a franchisor's ability to provide quality support. LivAway is a new system and Item 20 shows it is not currently experiencing rapid growth in franchised outlets, with five company-owned units projected for the next fiscal year and no franchised units. The primary risk is its newness, not its growth rate.

Potential Mitigations

• Your business advisor can help you evaluate the franchisor's growth plans and assess if their support infrastructure is designed to scale effectively.
• Asking the franchisor about their controlled growth strategy can provide insight into their long-term vision.
• Your attorney should review the franchisor's contractual obligations for support to ensure they are clearly defined.

Explanation

This risk was not identified in the FDD package. The business model, an upper economy extended-stay hotel, operates in a well-established and growing segment of the lodging industry. While subject to trends, it does not appear to be based on a fad. The risk is less about the concept being a fad and more about whether this specific new brand can successfully compete in a crowded market.

Potential Mitigations

• Engaging a business advisor to research the long-term sustainability and competitive landscape of the extended-stay hotel market is recommended.
• It is wise to assess the brand's specific differentiators and value proposition compared to established competitors.
• Your accountant can help model financial performance based on conservative, long-term market assumptions rather than short-term trends.

Explanation

This risk was not identified in the FDD package. Item 1 and the financial statements in Item 21 do not indicate that the franchisor is owned by a private equity firm. The members appear to be individuals and a holding company related to the management team. Therefore, the specific risks associated with a PE firm's typical investment horizon and operating philosophy do not appear to be present.

Potential Mitigations

• Understanding the franchisor's ownership structure and long-term goals is always important; this can be discussed with your business advisor.
• Your attorney should review the Franchise Agreement for any clauses that would allow for an easy sale or transfer of the entire franchise system.
• It is good practice to ask existing franchisees in any system about their experiences with ownership and management changes.

Explanation

This risk was not identified in the FDD package. According to Item 1, LivAway Suites, LLC does not have any predecessors. It is a new entity established in 2022. Therefore, there are no predecessor-related issues, such as a hidden history of litigation or bankruptcy, to consider. The risks associated with this franchise stem from its newness, not from a prior entity's history.

Potential Mitigations

• While there is no predecessor history, a thorough review of the business experience of the key individuals in Item 2 with your business advisor is crucial.
• Your attorney should still perform due diligence on the affiliate companies mentioned to ensure there are no undisclosed issues.
• Focusing your due diligence on the current entity's financial health and operating plan is paramount, and your accountant can assist.

Explanation

This risk was not identified in the FDD package. Item 3 states, "No litigation is required to be disclosed in this Item." As a very new franchisor with no operating franchisees, it is not surprising that there is no history of litigation with franchisees. However, the lack of litigation history provides no insight into how the franchisor will handle disputes in the future.

Potential Mitigations

• Your attorney should review the dispute resolution clauses in the Franchise Agreement to understand the process for handling future conflicts.
• While there is no litigation history to check, speaking with the franchisor's management can provide some insight into their philosophy on franchisee relations.
• It is wise to have a business advisor help you assess the overall fairness of the franchise relationship as outlined in the legal documents.