Explanation

The FDD includes audited consolidated financial statements for the parent company, Hyatt Hotels Corporation, which also provides an unconditional guarantee of performance. The financials show significant revenue and profitability. However, the franchising entity itself, Hyatt Franchising, L.L.C., has an unaudited balance sheet. While the parent guarantee is a strong positive factor, the reliance on a separate entity's financials introduces a layer of complexity. An accountant's review is essential.

Potential Mitigations

• Your accountant should carefully analyze the parent company's audited financial statements, including all footnotes and the auditor's report, to assess its long-term stability.
• A franchise attorney should review the wording of the parent performance guarantee to confirm it is unconditional and covers all of the franchisor's obligations to you.
• Discuss the franchisor's financial health and the strength of the parent guarantee with your financial advisor to understand the support structure.

Explanation

This specific risk was not identified in the FDD Package. Item 20 tables show zero franchised or company-owned outlets for The StandardX brand operating in the last three years. This is because, as stated elsewhere, it is a new franchise system launched in June 2025. While this means there is no history of high turnover, it also means there is no performance history to evaluate, which is a different and significant risk.

Potential Mitigations

• Given the lack of operating history, engaging a business advisor to research the long-term viability of this new hotel concept is critical.
• Your attorney should help you conduct in-depth interviews with the franchisor's management about their strategy and support plans for this new brand.
• An accountant can help you model various financial scenarios to account for the higher risks associated with an unproven system.

Explanation

This specific risk was not identified, as the system is new with no existing outlets and therefore cannot be experiencing rapid growth. However, as a new system under the large Hyatt umbrella, there is a potential for rapid expansion once sales begin. You should assess if the franchisor's support infrastructure is prepared for scaling quickly to meet the needs of many new franchisees simultaneously, which can strain resources and dilute support quality.

Potential Mitigations

• In your discussions with the franchisor, inquire specifically about their plans and budget for scaling support staff and resources as the system grows.
• Your business advisor can help you assess the franchisor's capacity to provide adequate support during a potential rapid growth phase.
• An accountant should review the franchisor's financials to determine if sufficient capital is allocated for supporting system expansion.

Explanation

This risk was not identified in the FDD package. The business is upscale, select-service hotels, a well-established industry segment. The franchisor, Hyatt LLC, is part of a large, experienced global hospitality company. While the specific “The StandardX” brand is new and its market acceptance is unproven, the underlying business concept is not tied to a fleeting trend and appears to have a basis in a durable market sector.

Potential Mitigations

• It is still prudent to have a business advisor help you conduct independent market research to validate long-term consumer demand for this specific hotel concept in your target area.
• Discuss the franchisor's long-term vision and plans for keeping the brand competitive and relevant with your attorney.
• An accountant can help you evaluate the business model's resilience to economic cycles and shifts in travel trends.

Explanation

This risk was not identified. Item 2 shows that the key executives of the franchisor and its parent, Hyatt Hotels Corporation, have extensive, long-term experience in the hotel and hospitality industry, including senior roles within Hyatt and other major international hotel companies. While the specific franchise system is new, the management team appears to be highly experienced in the relevant industry.

Potential Mitigations

• Engaging a business advisor to review the backgrounds of the operational support team, not just senior executives, can provide additional insight.
• During your due diligence calls, you should still ask about the team's specific experience in launching and supporting a new franchise brand from the ground up.
• Your attorney can help you frame questions to management regarding their strategy for applying their experience to this new venture.

Explanation

This risk was not identified. The franchisor's ultimate parent company, Hyatt Hotels Corporation, is a publicly-traded company, not one owned by a private equity firm. Its financial statements are publicly available, and its strategic decisions are typically driven by long-term public shareholder value rather than the shorter-term exit strategies often associated with private equity ownership.

Potential Mitigations

• Your financial advisor can help you review the parent company's public filings (like 10-K reports) to understand its strategic priorities and long-term plans.
• It is still wise to have your attorney review the assignment clause in the Franchise Agreement to understand your rights if the system is sold in the future.
• An accountant can analyze the parent company's financial structure for any signs of significant debt or other pressures that could influence its strategy.

Explanation

This risk was not identified. The FDD clearly discloses that the franchisor, Hyatt Franchising, L.L.C., is a subsidiary of Hyatt Hotels Corporation. Furthermore, the parent company's audited financial statements are included in Item 21, and a specific, unconditional Guarantee of Performance from the parent company is provided as part of Exhibit A-1. This represents a strong and transparent disclosure practice.

Potential Mitigations

• A franchise attorney should still review the performance guarantee to ensure it is unconditional and covers all material obligations of the franchisor.
• Have your accountant review the parent company's financials to confirm its ability to back the guarantee.
• Understanding the relationship between the parent and the franchising entity is still a key discussion to have with your business advisor.

Explanation

This risk is not present. Item 1 states clearly that the franchisor, Hyatt Franchising, L.L.C., has no predecessors. The document outlines the franchisor's corporate history and its relationship with its parent, Hyatt Hotels Corporation, but there is no indication that it acquired the business system from a prior, separate entity. Therefore, there is no hidden history of predecessor issues to assess.

Potential Mitigations

• A business advisor can help you research the history of the parent company, Hyatt Hotels Corporation, and its track record with other brands it operates.
• It is still wise to ask your attorney to confirm the corporate structure and history through public record searches.
• Your accountant can review the financial history of the parent company for any insights into its operational track record.

Explanation

This risk was not identified as a significant pattern. Item 3 discloses one litigation case brought by the franchisor against a franchisee for unpaid royalty fees. This appears to be a standard collection action rather than a pattern of franchisee-initiated lawsuits alleging fraud, misrepresentation, or other systemic problems. The FDD does not disclose a history of troubled legal disputes with franchisees.

Potential Mitigations

• Your attorney should still review the details of the single disclosed case to understand the context.
• A business advisor can help you research public records for any other litigation involving the franchisor or its parent that may not have required disclosure.
• When speaking with franchisees of other Hyatt brands, you should inquire about their general experience with the franchisor's dispute resolution approach.