Spark by Hilton Logo

Spark by Hilton

Hilton Franchise Holding LLC
https://www.hiltonworldwide.com
1-703-883-1000
7930 Jones Branch Drive, Suite 1100, McLean, Virginia 22102

Initial Investment Range

$3,102,531 to $5,514,193

Franchise Fee

$208,895

You will establish and operate a Spark by Hilton™ hotel under a Franchise Agreement with us.

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Spark by Hilton March 30, 2025 FDD Risk Analysis

Free FDD Library AI Analysis Date: July 16, 2025

DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.

1

Franchisor Stability Risks

Start Here
Total: 10
3
2
5

Disclosure of Franchisor's Financial Instability

Low Risk

Explanation

This risk was not identified. The audited financial statements for Hilton Franchise Holding LLC (Hilton) in Exhibit C show a strong financial position, with significant revenue, operating income, and positive member's equity. The franchisor appears to be well-capitalized and profitable, suggesting it has the resources to support its obligations and the franchise system. Financial instability does not appear to be a current risk.

Potential Mitigations

  • An accountant should still review the complete financial statements, including all footnotes, to confirm the financial health and identify any subtle trends.
  • It is wise to ask your business advisor to assess the franchisor's reliance on franchise fees versus ongoing royalties for its income stability.
  • Your attorney can help you understand any financial performance-related disclosures or risk factors mentioned elsewhere in the FDD.
Citations: Item 21, Exhibit C

High Franchisee Turnover

Medium Risk

Explanation

Item 20 data for 2024 shows that two franchised outlets 'Ceased Operations for Other Reasons' out of 91 total operating hotels. While the percentage is low, any cessations in a brand's first full year of operations can be a potential indicator of issues with the new system or its support structure. This warrants attention, especially given the brand's newness and rapid growth.

Potential Mitigations

  • With your business advisor, you should contact current franchisees, especially those who opened early, to discuss operational challenges and profitability.
  • Your attorney can help you formulate questions for the franchisor regarding the specific reasons for these cessations.
  • An accountant should help you build financial models that account for the risks inherent in joining a new and rapidly expanding system.
Citations: Item 20

Rapid System Growth

High Risk

Explanation

The franchise system is expanding at an extremely rapid pace. Item 20 data shows the number of franchised hotels grew from 8 to 91 in 2024, and projects another 140 openings in the next fiscal year. Such explosive growth, while indicating demand, may strain the franchisor's ability to provide adequate and timely site selection assistance, training, and ongoing operational support to all franchisees.

Potential Mitigations

  • A discussion with your business advisor about the franchisor's infrastructure for supporting such rapid growth is essential.
  • Question the franchisor directly on how they are scaling their support, training, and quality control teams to match this expansion.
  • Interviewing franchisees who opened recently can provide insight into the current quality of the franchisor's support systems.
Citations: Item 20

New/Unproven Franchise System

High Risk

Explanation

Hilton launched the Spark by Hilton brand in late 2022, and franchisee operations began in 2023. As a new entrant, especially a conversion-focused brand in the economy segment, its long-term market acceptance, operational model, and franchisee profitability are not yet proven over a full business cycle. Investing in a new system carries a higher risk than investing in a mature brand with a long performance history.

Potential Mitigations

  • Conducting thorough due diligence on the brand concept's competitiveness in the economy hotel segment is crucial; your business advisor can help.
  • A deep dive into the experience of the earliest franchisees is recommended to understand the real-world performance of the system.
  • An accountant's help is vital to create conservative financial projections, given the lack of historical performance data.
Citations: Item 1, Item 20

Possible Fad Business

Medium Risk

Explanation

Spark by Hilton is a new conversion brand in the economy hotel segment. While this segment itself is established, the specific brand concept, standards, and market appeal are new. There is a risk that the brand may not achieve the desired market penetration or could be a short-lived concept within Hilton's larger portfolio, potentially impacting your long-term return on investment even if the franchise agreement term is long.

Potential Mitigations

  • Assess the long-term consumer demand for this specific type of conversion-focused economy hotel with your business advisor.
  • It would be beneficial to evaluate Hilton's stated long-term strategy and commitment to growing this specific brand.
  • Consider the brand's resilience to economic downturns and changing travel trends with your financial advisor.
Citations: Item 1

Inexperienced Management

Low Risk

Explanation

This risk was not identified. The executive team listed in Item 2 consists of seasoned professionals from Hilton and the broader hospitality industry, such as Christopher J. Nassetta and Kevin J. Jacobs. They possess extensive experience in managing large-scale hotel operations and franchise systems. Management inexperience does not appear to be a risk with this franchise.

Potential Mitigations

  • It is still prudent to conduct your own independent research into the reputations of the key executives listed.
  • During discussions with existing franchisees, you could inquire about their direct experiences with the management team's leadership and strategic direction.
  • A business advisor can help you review the management team's historical performance with other brands within the franchisor's portfolio.
Citations: Item 2

Private Equity Ownership

Low Risk

Explanation

This risk was not identified. Hilton Worldwide Holdings Inc., the ultimate parent company, is a publicly traded corporation (NYSE: HLT). While Blackstone was a prior owner, the FDD indicates it is no longer the controlling entity. The risks typically associated with a private equity firm's short-term investment horizon do not appear to be present here.

Potential Mitigations

  • Your financial advisor can confirm the current ownership structure and review public filings for information on major shareholders.
  • Understanding the company's long-term strategy as a public entity should be part of your due diligence.
  • Reviewing investor relations materials with your accountant can offer insights into the company's financial priorities.
Citations: Item 1, Item 2

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified. The FDD clearly discloses the parent companies, Hilton Domestic Operating Company Inc. and Hilton Worldwide Holdings Inc. Furthermore, the franchisor entity, Hilton Franchise Holding LLC, has provided its own audited financial statements in Exhibit C, which appear robust. There is no indication of an undisclosed parent or reliance on a parent for financial viability.

Potential Mitigations

  • Your attorney should confirm that all relevant entities in the corporate structure have been properly disclosed.
  • An accountant's review of the provided financials is still recommended to ensure they are complete and presented according to GAAP.
  • Verify that any guarantees mentioned in the agreement are from the entity whose financial information you have had a chance to review.
Citations: Item 1, Item 21, Exhibit C

Predecessor History Issues

Low Risk

Explanation

This risk was not identified. Spark by Hilton is a new brand, and the FDD indicates it has no predecessors. Item 1 details the history of other Hilton brands and their predecessors, but none are applicable to this specific franchise offering. Therefore, there is no hidden negative history from a predecessor to consider.

Potential Mitigations

  • Your attorney can confirm the newness of the brand and the absence of any predecessor entities for this specific system.
  • In discussions with the franchisor, you might inquire about lessons learned from the history of their other brands.
  • A business advisor can help you assess the risks inherent in a new system that lacks a long operational history, even without a predecessor.
Citations: Item 1

Pattern of Litigation

High Risk

Explanation

Item 3 discloses that Hilton Worldwide is a defendant in several pending class-action lawsuits alleging antitrust violations related to the setting of hotel room rates. These suits claim Hilton and other hotel companies improperly shared data through third-party software vendors. A pattern of significant, systemic litigation, even if denied, presents a material risk regarding the franchisor's business practices, potential financial liabilities, and reputation.

Potential Mitigations

  • A thorough review of the details of these antitrust lawsuits with your attorney is critical to understanding the potential implications.
  • You should discuss with the franchisor how they are addressing these allegations and the potential impact on the revenue management systems you must use.
  • A business advisor can help assess the potential reputational damage to the Hilton family of brands if the outcomes are unfavorable.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
2
2
11

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

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3

Financial & Fee Risks

Total: 10
7
2
1

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

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4

Legal & Contract Risks

Total: 16
6
3
7

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

5

Territory & Competition Risks

Total: 5
3
1
1

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

6

Regulatory & Compliance Risks

Total: 10
4
3
3

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

7

Franchisor Support Risks

Total: 4
2
2
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

8

Operational Control Risks

Total: 12
5
4
3

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

9

Term & Exit Risks

Total: 18
10
2
6

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

10

Miscellaneous Risks

Total: 2
1
1
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.