Explanation

This risk was not identified. The franchisor, MIF, L.L.C. (MIF), provided audited financial statements in Exhibit J which appear strong, showing significant profitability and positive member's equity. Financial instability is a critical risk as it could affect the franchisor's ability to support you and maintain the brand. However, the provided financials for MIF do not indicate such issues.

Potential Mitigations

• An accountant should still review the financial statements, including all footnotes and the large related-party transactions, to confirm financial health.
• Engaging a financial advisor to research the financial performance and stability of the ultimate parent company, Marriott International, Inc., is recommended.
• Your attorney can help you understand any financial performance guarantees or support obligations from the parent company.

Explanation

High franchisee turnover was not identified in the data presented in Item 20. The tables show system growth and do not report any terminations, non-renewals, or franchisor reacquisitions in the last three years. While this data appears positive, high turnover rates can signal systemic problems, so this area warrants careful due diligence by speaking directly with franchisees.

Potential Mitigations

• It is crucial to contact a significant number of current and former franchisees listed in Exhibits M and N to verify their experiences and reasons for leaving.
• Your attorney should help you ask specific questions about operational challenges, profitability, and satisfaction with the franchisor relationship.
• A business advisor can help you analyze feedback from franchisees to gauge the overall health of the system.

Explanation

The system is expanding rapidly, with the number of franchised hotels growing by over 65% in three years and many more in the pipeline, as shown in Item 20. Such fast growth could potentially strain the franchisor's support systems. However, given that the franchisor is a subsidiary of Marriott International, Inc. (MII), a large, experienced global company, the risk of inadequate support infrastructure may be lower than for a smaller franchisor.

Potential Mitigations

• A business advisor can help you assess whether the franchisor's support staff and systems are scaling appropriately with its growth.
• Question current franchisees, especially recent openings, about the quality and timeliness of the support they received during their launch.
• Your attorney should review the support obligations outlined in Item 11 to understand the specific commitments the franchisor must provide.

Explanation

This risk was not identified. The franchisor has been offering Moxy franchises for over ten years and the system has dozens of operating units, as disclosed in Items 1 and 20. An unproven system presents higher risks, including the potential for an unrefined business model and underdeveloped support, but this does not appear to be the case here.

Potential Mitigations

• Speaking with a range of franchisees who opened at different times can provide insight into how the system has evolved.
• A business advisor can help you evaluate the brand's track record and market position.
• Reviewing the business experience of the management team in Item 2 with your attorney can provide further confidence in their leadership.

Explanation

While Moxy Hotels has a trendy, modern concept, it is part of the Marriott International, Inc. (MII) portfolio. This backing by a major, established lodging company suggests a long-term strategic commitment rather than a short-lived fad. A fad business carries the risk of declining consumer interest, but Moxy appears to be a strategically positioned brand within a larger, stable ecosystem.

Potential Mitigations

• A business advisor can help you research lodging industry trends to assess the long-term viability of the select-service lifestyle hotel concept.
• Discuss with current franchisees their customer demographics and repeat business to gauge sustained demand.
• Reviewing the franchisor's marketing strategies in Item 11 can provide insight into how they plan to maintain brand relevance.

Explanation

This risk was not identified. The management team of the parent company, Marriott International, Inc. (MII), as detailed in Item 2, consists of highly experienced executives from within Marriott and other major global corporations. Inexperienced leadership can pose a significant risk to a franchise system's stability and support quality, but the leadership team here appears to be very well-established and knowledgeable.

Potential Mitigations

• Your business advisor can help you research the public track records of the key executives listed in Item 2.
• When speaking with current franchisees, inquire about their perception of the leadership team's competence and strategic direction.
• A review of the company's performance under its current leadership with your financial advisor may provide additional comfort.

Explanation

This risk is not present. The franchisor is a subsidiary of Marriott International, Inc. (MII), which is a publicly-traded company, not a private equity firm, as stated in Item 1. Private equity ownership can sometimes introduce risks related to short-term investment horizons or cost-cutting, but that is not the ownership structure here.

Potential Mitigations

• As a public company, the parent's financial reports and strategic plans are publicly available for review with your financial advisor.
• Your attorney can review Item 17 of the FDD to understand the conditions under which the franchise system could be sold.
• A business advisor can help you understand the strategic priorities of a large, publicly-traded hospitality company.

Explanation

This risk was not identified. The franchisor, MIF, L.L.C. (MIF), clearly discloses its relationship with its parent company, Marriott International, Inc. (MII), in Item 1. Since MIF's own audited financial statements in Item 21 demonstrate significant financial strength, the parent company's financials are not required to be included. Withholding necessary parent company information would be a major disclosure issue.

Potential Mitigations

• Your accountant can confirm that the franchisor's standalone financials are sufficiently strong to not require parent financials under franchise law.
• It is still advisable for your financial advisor to review the publicly available financial statements of the parent company for a complete picture.
• Your attorney can review the FDD to confirm the absence of any parent company guarantee that would trigger additional disclosure requirements.

Explanation

This risk was not identified in the FDD. Item 1 does not disclose any predecessors for MIF, L.L.C. The franchisor was formed in 2012 and appears to be the original entity for this specific franchise offering. Failing to disclose a predecessor's history, especially a negative one, can hide systemic issues from a prospective franchisee.

Potential Mitigations

• An attorney should confirm the corporate history outlined in Item 1 and verify there are no undisclosed predecessors.
• A business advisor can research the brand's history to see if it operated under a different corporate name in the past.
• Franchisee interviews can be helpful to uncover any historical issues not apparent in the FDD.