Explanation

This risk was not identified. The audited financial statements for both the franchisor, Holiday Hospitality Franchising, LLC (Holiday), and its parent, Six Continents Hotels, Inc., are provided in Exhibits F1 and F2. Both entities show very strong financial health, with significant net worth and positive, growing net income over the past three years. They appear to have substantial resources to support the franchise system and meet their obligations.

Potential Mitigations

• An experienced franchise accountant should still review the complete financial statements, including all notes, to confirm financial health and understand the complex corporate structure.
• Ask your business advisor to assess the financial stability in the context of the franchisor's extensive litigation history disclosed in Item 3.
• Discuss the franchisor's financial outlook and plans for system investment with your financial advisor.

Explanation

This risk was not identified. The data in Item 20's tables shows a low rate of franchisee turnover for the last three years. For a system with 286 outlets at the end of 2024, the number of terminations (2), non-renewals (0), and cessations for other reasons (0) is minimal. This suggests a stable franchisee base, although it contrasts with the high litigation volume noted in Item 3.

Potential Mitigations

• It is still valuable to contact a diverse group of current and former franchisees from the lists in Item 20 to discuss their experiences.
• Your attorney can help you reconcile the low turnover data with the high litigation data by asking targeted questions to former franchisees.
• Ask your business advisor to analyze the growth patterns in Item 20 to ensure they appear sustainable.

Explanation

This risk was not identified. While the system is large and growing, the rate of growth shown in Item 20 (from 273 to 286 outlets over two years) is steady rather than excessively rapid. The franchisor and its parent company, IHG, are highly experienced and appear to have the infrastructure to support this level of expansion. Low franchisee turnover rates further suggest that support systems are not currently overstretched.

Potential Mitigations

• Asking current franchisees about the quality and timeliness of franchisor support is a valuable step in your due diligence.
• Your business advisor can help evaluate whether the support systems described in Item 11 seem adequate for the current system size.
• It is wise to have your accountant review the franchisor's financials in Exhibit F1 to confirm they are allocating sufficient resources to support.

Explanation

This risk was not identified. Holiday Hospitality Franchising, LLC (Holiday) and its parent entities have extensive, long-term experience in the hotel industry and in franchising, dating back to 1953. Item 2 shows a management team with deep industry experience. Item 20 indicates a large, established system of 286 hotels. Item 21 provides audited financials showing a very well-capitalized and profitable company. The system is mature and proven.

Potential Mitigations

• Engage a franchise attorney to review the FDD to ensure all disclosures for this large, complex organization are complete.
• A thorough review of the extensive litigation history in Item 3 with your attorney is crucial for a complete picture of the franchisor's history.
• You should still speak with current franchisees to get their perspective on the franchisor's management and support.

Explanation

This risk appears to be low. The Staybridge Suites brand and the broader hotel lodging industry it operates in are well-established and serve a sustained consumer demand for extended-stay accommodations for business and leisure travel. The business model is not based on a fleeting trend. The franchisor, as part of the global IHG system, demonstrates a long history of adapting to market conditions and evolving its various hotel brands.

Potential Mitigations

• A business advisor can help you analyze the long-term economic trends for the upscale extended-stay hotel sector in your specific market.
• Review the marketing programs and system development plans in Item 11 with a marketing professional to assess the brand's strategy for future relevance.
• Discuss the brand's resilience during economic downturns with long-tenured franchisees.

Explanation

This risk was not identified. Item 2 lists the principal officers for the franchisor's parent and affiliate companies. The executives listed have extensive and long-term experience within the hospitality industry and with major global brands, including IHG. Many hold senior roles and have been with the company for several years, indicating a stable and experienced management team is in place.

Potential Mitigations

• Your business advisor can help you research the public reputation and track record of the key executives listed in Item 2.
• When speaking with current franchisees, it is useful to ask about their perception of the management team's competence and strategic direction.
• Reviewing the company's annual reports or investor relations materials can provide additional insight into management's strategy; a financial advisor can assist.

Explanation

This risk was not identified. While the ultimate parent is a publicly-traded company (InterContinental Hotels Group PLC), it is not owned by a private equity firm. The corporate structure, while complex, appears to be that of a strategic, long-term operator in the hospitality industry rather than a short-term financial investor. Therefore, the specific risks associated with a typical private equity ownership model, such as a focus on short-term returns over system health, do not appear to be present.

Potential Mitigations

• It is still important for your attorney to review the assignment clauses in the Franchise Agreement to understand how a sale of the company could affect your rights.
• Discuss the franchisor's long-term strategy and commitment to the brand with your business advisor.
• Your accountant can review the detailed financial statements in Exhibit F to understand the overall corporate financial structure and priorities.

Explanation

This risk was not identified. The FDD properly discloses the complex parent structure, identifying Six Continents Hotels, Inc. (SCH) as the direct parent and InterContinental Hotels Group PLC as the ultimate parent. Crucially, the franchisor provides audited financial statements for its parent, SCH, in Exhibit F2. This provides the necessary transparency into the financial health of the entity that guarantees many of the franchisor's obligations.

Potential Mitigations

• Having your franchise accountant review the financial statements for both the franchisor (Holiday) and its parent (SCH) is crucial.
• An attorney should review the relationship between the entities and explain which entity is responsible for specific obligations under the license agreement.
• Ask your business advisor to help you understand the operational implications of this multi-layered corporate structure.

Explanation

This risk was not identified. Item 1 provides a detailed history of the franchisor, including its formation in 1989 and its previous names. It also clearly discloses its relationship with its parent companies. The history appears transparent and does not seem to omit or downplay any significant predecessor information. The primary operational entity has a long history under the IHG umbrella.

Potential Mitigations

• A review of the litigation history in Item 3 with your attorney will provide additional context on the company's historical challenges.
• It is always good practice to ask long-tenured franchisees about the company's history and any significant changes over the years.
• Your business advisor can research public records and news archives for more information on the company's past.