Explanation

The risk of high franchisee turnover was not identified as this is a new franchise system with no operating outlets disclosed in Item 20 for the past three years. The absence of an operating history is itself a significant risk. Prospective franchisees should carefully monitor future turnover data as the system develops to gauge franchisee satisfaction and system health.

Potential Mitigations

• Your business advisor can help you understand the risks of joining a new system with no operating history.
• As the system grows, it will be crucial to track Item 20 data in future FDDs with your accountant.
• A franchise attorney should be consulted to understand your rights and obligations if the system fails to grow as expected.

Explanation

This risk was not identified, as Item 20 tables show the franchisor has not yet opened any "Trend" branded franchise outlets. Rapid growth can strain a franchisor's support systems. While not a current issue, you should monitor the pace of growth if you join the system to ensure support services remain adequate.

Potential Mitigations

• Discuss the franchisor's strategic growth plan and its capacity to scale support services with a business advisor.
• It is important to have your accountant review the franchisor's financial ability to support future growth.
• Your attorney should review the franchisor's support obligations in the Franchise Agreement.

Explanation

The risk of this being a fad business appears low. The franchise operates in the hotel and lodging industry, which is a mature and established market. The concept focuses on converting existing properties, a common business model within the hospitality sector, rather than being based on a fleeting trend.

Potential Mitigations

• A business advisor can help you assess the long-term viability of this specific hotel market segment.
• Understanding the competitive landscape in your target area with a real estate professional is crucial.
• An accountant can help model the financial sustainability against economic cycles.

Explanation

This risk was not identified. Item 2 indicates that the franchisor's key executives have substantial experience in the hospitality and franchise industries, particularly through their development and management of the affiliated "My Place Hotels" franchise system. This experience may reduce risks associated with unseasoned leadership.

Potential Mitigations

• It is still valuable to interview current franchisees of the franchisor's other brand to gauge their opinion of management's competence and support.
• Your attorney can help formulate questions regarding their experience with the management team.
• A business advisor can assist in researching the public reputation of the key executives.

Explanation

The FDD does not indicate that the franchisor is owned or controlled by a private equity firm. Item 1 and the financial statement notes suggest it is a privately held limited liability company. Therefore, risks specifically associated with private equity ownership, such as a primary focus on short-term returns, may not be present.

Potential Mitigations

• Your attorney should still confirm the ownership structure and review the franchisor's assignment rights in the Franchise Agreement.
• Inquire with your business advisor about the long-term vision of the current ownership.
• An accountant can review the financial statements for any signs of debt structures common in leveraged buyouts.

Explanation

This risk was not identified in the FDD. Item 1 states that the franchisor, My Place Hotels of America, LLC (MPHOA), has no parent company. The provided financial statements in Item 21 are for the franchisor entity itself, not a subsidiary.

Potential Mitigations

• A business advisor can help you understand the role and influence of the disclosed affiliates on the franchise system.
• Your attorney should verify the corporate structure and ensure there are no undisclosed controlling entities.
• It is wise for your accountant to analyze transactions with affiliates for fairness.

Explanation

This risk was not identified. Item 1 of the FDD states that the franchisor has no predecessors. Therefore, there are no inherited historical issues, such as litigation or bankruptcy from a prior entity, that you need to be concerned about.

Potential Mitigations

• Your attorney should confirm the franchisor's corporate history to ensure no predecessor entities have been omitted.
• A business advisor can help research the business history of the key individuals mentioned in Item 2.
• Always ask existing franchisees of the franchisor's other brand about the system's history.

Explanation

Item 3 and the Washington state addendum disclose a past regulatory investigation resulting in an Assurance of Discontinuance (AOD). While this was a significant legal event, it appears to be an isolated incident that has been resolved and does not represent a pattern of franchisee-initiated litigation alleging fraud or misrepresentation. No other significant litigation patterns were identified.

Potential Mitigations

• Your attorney should carefully review the details of the disclosed AOD in the Washington addendum to understand its implications.
• It is prudent to ask the franchisor about the circumstances surrounding this past regulatory action.
• Discuss with current franchisees of the franchisor's other brand whether they have had any significant disputes with the franchisor.