Explanation

This risk was not identified. The audited financial statements for the franchisor, MIF, L.L.C. (MIF), do not indicate financial instability. While heavily integrated with its parent company, Marriott International, Inc. (MII), MIF shows significant positive net income and member's equity. Financial instability is a critical risk because a weak franchisor may be unable to provide support, invest in the brand, or even remain in business, jeopardizing your entire investment.

Potential Mitigations

• An experienced franchise accountant should review the franchisor's financial statements, including all footnotes and the auditor's report, to form an independent opinion.
• It is important for your business advisor to assess the level of inter-dependence between the franchisor and its parent company, MII.
• Ask your attorney to confirm if any financial performance guarantees are offered by the parent company.

Explanation

This risk was not identified. As Postcard Cabins is a new franchise system, Item 20 reports no operating franchised outlets for the last three years, and therefore no history of franchisee turnover. Generally, high turnover can be a major red flag, potentially indicating systemic problems such as a lack of profitability, poor franchisor support, or an unsustainable business model. The absence of this data here means this specific risk cannot be assessed.

Potential Mitigations

• Since there is no turnover data, consulting a significant number of franchisees from other Marriott brands, especially newer concepts, can provide insight into the franchisor's general practices.
• Your business advisor should help you monitor the system's health and turnover rates closely in the first few years of operation.
• An attorney can help you understand the termination and non-renewal provisions in the franchise agreement, which drive future turnover statistics.

Explanation

This risk was not identified. The executive team and board of directors of the parent company, Marriott International, Inc., as detailed in Item 2, consist of individuals with extensive and long-term experience in the lodging, hospitality, and franchising industries. Inexperienced management can be a major risk, as it may lead to poor strategic decisions and inadequate support for franchisees. This does not appear to be a concern in this case.

Potential Mitigations

• It is still prudent to ask the franchisor about the specific team members who will be directly responsible for supporting the Postcard Cabins brand.
• A business advisor can help you research the public track record and reputation of the key executives listed.
• When speaking with franchisees of other Marriott brands, asking about their perception of management's competence and support is a useful step.

Explanation

This risk was not identified. The franchisor, MIF, L.L.C., is a subsidiary of Marriott International, Inc., which is a publicly-traded corporation, not a private equity firm. Private equity ownership can sometimes introduce risks related to short-term profit motives over the long-term health of a franchise system. That specific risk factor does not appear to be present here.

Potential Mitigations

• Confirming the ownership structure detailed in Item 1 is a key due diligence step your attorney should perform.
• Your business advisor can help you understand the implications of being part of a large, publicly-traded company's brand portfolio.
• It is always wise to ask other franchisees about any recent changes in ownership or management philosophy.

Explanation

This risk was not identified. The FDD clearly discloses in Item 1 that the franchisor is a subsidiary of Marriott International, Inc. While the parent company's financial statements are not included in the FDD, the franchisor entity itself is not thinly capitalized and its financials are provided. A failure to disclose a parent company can obscure the true financial backing and stability of a franchisor, but that does not appear to be the case here.

Potential Mitigations

• Your attorney should confirm the corporate structure and the relationship between the franchisor and its parent company.
• An accountant can review the provided franchisor financials to assess its stand-alone viability and the nature of its inter-company transactions.
• As the parent is a public company, your financial advisor can easily access its public financial filings for additional context on overall stability.