Explanation

This risk was not identified in the FDD package. The data in Item 20 shows a net decrease in the total number of franchised outlets over the past three years, not rapid growth. Rapid growth can sometimes strain a franchisor's ability to provide adequate support to all units. Evaluating the pace of system expansion helps gauge if support resources are likely to keep up, ensuring you receive the assistance you need as a new franchisee.

Potential Mitigations

• During due diligence, it's wise to ask the franchisor about their future growth plans and how they intend to scale support systems.
• Your business advisor can help you assess whether a franchisor's growth trajectory, whether fast or slow, aligns with your investment goals.
• A franchise attorney can review the franchisor's support commitments in the agreement to ensure they are clearly defined, regardless of system size.

Explanation

This risk was not identified. Ramada Worldwide Inc. (RWI) states in Item 1 that it has been offering franchises since December 1989. This indicates a long-established and mature franchise system. Investing in a new or unproven system carries higher risks because the business model, brand recognition, and support infrastructure may not be fully developed or tested in the marketplace, potentially leading to a higher failure rate for early franchisees.

Potential Mitigations

• When evaluating any franchise, your business advisor can help you research the franchisor’s history and the length of time they have been supporting franchisees.
• Consulting with an accountant to review the financial statements of any franchisor can provide insight into their operational maturity and stability.
• Your attorney should verify that the business experience claimed in Item 1 is consistent with other information in the FDD.

Explanation

This risk was not identified in the FDD package. The Ramada brand is a globally recognized, legacy brand in the mid-market hotel industry and is not based on a recent or fleeting trend. A fad business model presents a significant risk because consumer demand may disappear before you have had a chance to recoup your investment, leaving you with long-term contractual obligations for a business that is no longer viable.

Potential Mitigations

• A business advisor can help you assess the long-term market demand for any franchise's core products or services.
• In your due diligence, it is important to question how the franchisor plans to innovate and adapt to changing consumer preferences.
• Your financial advisor can help you analyze if a business concept has a history of sustained performance through various economic cycles.

Explanation

This risk was not identified in the FDD package. Item 2 provides detailed biographies of the executive team of the franchisor and its parent company, Wyndham Hotels & Resorts, Inc. The executives listed have extensive and long-term experience within the hospitality and franchising industries, many with Wyndham itself or other major hotel corporations. Inexperienced management can be a significant risk, as it may lead to poor strategic decisions and inadequate support for franchisees.

Potential Mitigations

• As part of due diligence for any franchise, your attorney should review the management experience detailed in Item 2.
• It is beneficial to ask existing franchisees about their direct experiences with the management team's competence and support.
• A business advisor can help you research the public track record of key executives.

Explanation

This risk was not identified. Item 1 indicates that the ultimate parent company, Wyndham Hotels & Resorts, Inc., is a publicly traded corporation (NYSE: WH), not a private equity firm. Private equity ownership can sometimes introduce risks related to short-term profit motives, which may not always align with the long-term health of the franchise system or the individual success of franchisees.

Potential Mitigations

• Your attorney should always verify the ownership structure of the franchisor as disclosed in Item 1.
• Researching the ownership entity, whether public or private, can provide insights into their business practices and history with other brands.
• Speaking with franchisees about their experiences under the current ownership provides valuable real-world perspective.

Explanation

This risk was not identified in the FDD. Item 1 clearly discloses the parent companies, Wyndham Hotel Group, LLC, and Wyndham Hotels & Resorts, Inc. Furthermore, Item 21 provides the audited financial statements for the ultimate parent and guarantor, WHR. Failing to disclose a parent company or its financials when required can obscure the true financial backing and stability of the franchise system, hiding significant risks from a potential franchisee.

Potential Mitigations

• Your attorney should always confirm that the corporate structure disclosed in Item 1 is clear and that financials for the appropriate entities are provided in Item 21.
• An accountant should review any parent performance guarantees to assess their substance and the financial strength of the guarantor.
• If a franchisor is a small subsidiary, it is critical to understand the financial health of the parent company that supports it.

Explanation

This risk was not identified in the FDD package. Item 1 describes the franchisor's history, including its origin from a spin-off of Wyndham Worldwide Corporation, but does not indicate any other predecessors for the Ramada system itself. A franchisor's predecessor history is important because it can reveal inherited issues, past litigation, or historical turnover rates that might still affect the system's health and culture today.

Potential Mitigations

• When analyzing any franchise, your attorney should carefully review the predecessor information in Items 1, 3, and 4 of the FDD.
• A business advisor can assist in researching a predecessor's public reputation or history if significant concerns arise.
• Asking long-term franchisees about their experiences under any previous ownership can provide valuable context.