Explanation

The financial statements for the franchisor, MIF, L.L.C. (MIF), a subsidiary of Marriott International, Inc. (MII), show profitability and significant assets. However, the balance sheet is dominated by a very large asset of over $443 million listed as "Due from related parties," indicating its finances are deeply integrated with and dependent on its parent company, MII. While MIF appears stable, its financial reality is almost entirely reflective of the broader Marriott corporate structure, not as a standalone entity.

Potential Mitigations

• An accountant should analyze the franchisor's audited financial statements, including all footnotes, to understand the significant inter-company dependencies.
• Discuss the nature of the parent company relationship and any formal support guarantees with your franchise attorney.
• A financial advisor can help assess the stability of the parent company, MII, as its health is critical to the franchisor's stability.

Explanation

The FDD discloses a relatively small and stable franchise system. In the most recent year, the system grew from 11 to 12 franchised units with one new opening and no terminations, non-renewals, or other cessations. The prior year saw one termination. While any exit is notable in a small system, the data in Item 20 does not currently indicate a pattern of high franchisee turnover that would suggest widespread dissatisfaction or systemic problems.

Potential Mitigations

• Engaging a business advisor to monitor future Item 20 disclosures for any negative trends in turnover is a prudent step.
• Speaking with current and former franchisees can provide qualitative context behind any past or future unit exits.
• Your attorney can help you understand the contractual reasons that typically lead to terminations within this franchise system.

Explanation

The Luxury Collection franchise system is small and growing slowly, with only one new franchised outlet added in the most recent year. As a part of the vast Marriott International, Inc. (MII) ecosystem, the support infrastructure is extensive and well-established. The risk of support resources being strained due to overly rapid expansion appears to be low at this time.

Potential Mitigations

• A business advisor can help you evaluate the quality and depth of the franchisor's support systems during your due diligence.
• Discuss the franchisor's capacity for providing individualized support with current franchisees.
• It is important to have your accountant review the franchisor's financial statements to confirm it has the resources to support its franchisees.

Explanation

The franchisor, MIF, has offered franchises since 2017 and is a subsidiary of Marriott International, Inc. (MII), a global hospitality company with decades of experience. The management team listed in Item 2 consists of seasoned executives from MII. The system is well-established and supported by a mature and experienced parent company, mitigating the risks typically associated with new or unproven franchise systems.

Potential Mitigations

• A business advisor can help you investigate the specific experience of the brand's leadership team within the luxury hotel sector.
• It is still valuable to discuss the quality of brand-specific support and training with existing Luxury Collection franchisees.
• Your attorney can review the franchise agreement to ensure the extensive support systems of the parent company are contractually accessible to you.

Explanation

The Luxury Collection brand operates in the high-end, full-service hotel sector, which is a mature and established market. The business model is not based on a new or fleeting trend. While consumer preferences in luxury travel evolve, the core business of providing premium lodging and services has long-term sustainability. The risk of the business being a short-lived fad is low.

Potential Mitigations

• It is still wise to commission a market feasibility study from a business advisor to confirm sustained demand for a luxury hotel in your specific location.
• Review the franchisor's plans for brand evolution and innovation in Item 11 to ensure it remains competitive.
• An accountant can help you model the financial resilience of a high-end hotel to various economic cycles.

Explanation

The management team detailed in Item 2 consists of high-level executives from Marriott International, Inc. (MII), the parent company. These individuals possess extensive experience in the global lodging industry and in managing large-scale franchise and managed hotel systems. The risk associated with inexperienced management appears to be low, as the brand is operated by a deeply experienced team.

Potential Mitigations

• A business advisor can help you research the specific track records of the key executives responsible for the Luxury Collection brand.
• Engaging with current franchisees can provide insight into the effectiveness and accessibility of the management team.
• Your attorney can help clarify the reporting structure and confirm which executives are directly responsible for franchisee support.

Explanation

This risk was not identified in the FDD package. While the franchisor is part of a large public company, Marriott International, Inc. (MII), it is not disclosed as being owned by a private equity firm. Private equity ownership can sometimes lead to a focus on short-term returns over the long-term health of the franchise system, which does not appear to be the primary ownership risk here.

Potential Mitigations

• Engaging a business advisor to research the ownership structure of any franchisor is a crucial due diligence step.
• Your attorney should review Item 1 of the FDD carefully to understand the franchisor's parent and affiliate companies.
• If a franchisor is owned by a private equity firm, it is important to investigate that firm's history with other franchise brands.

Explanation

The franchisor, MIF, is a subsidiary of Marriott International, Inc. (MII). The FDD fully discloses this relationship in Item 1. The franchisor's audited financial statements are provided in Exhibit J. While MIF's financials are deeply integrated with its parent, the disclosure itself appears compliant and does not attempt to hide the parent company relationship, mitigating this specific disclosure risk.

Potential Mitigations

• Your accountant must review the provided financial statements, including the extensive related-party transaction notes, to understand the financial interplay.
• A franchise attorney should confirm if any parent company guarantees are offered and assess their strength and enforceability.
• A business advisor can help you research the financial health of the public parent company, as it is critical to the subsidiary franchisor's stability.

Explanation

Item 1 of the FDD clearly identifies the franchisor and its history, noting its formation in 2012 as a subsidiary of Marriott International, Inc. (MII). It does not list any predecessors from which substantial assets were acquired for this specific brand in a way that would obscure a negative history. The litigation and bankruptcy history disclosed pertains to MII and its affiliates directly, not to a hidden predecessor.

Potential Mitigations

• A thorough review of Item 1 with your attorney is important to understand the franchisor's complete corporate history.
• It is good practice to ask the franchisor if the system has operated under other names or owners.
• A business advisor can assist in researching the history of the brand to uncover any unlisted predecessor entities.