Explanation

The franchisor, TRC Franchisor, Inc. (TRC Franchisor), is a subsidiary of Wyndham Hotels & Resorts, Inc. (WHR), which guarantees performance. Exhibit D contains WHR's audited financial statements. These statements appear strong, with consistent profitability, positive net worth, and an unqualified audit opinion. No indicators of financial instability such as a 'going concern' note were found. Therefore, this specific risk was not identified.

Potential Mitigations

• Engaging an accountant to review the guarantor's financial statements, including all footnotes, is crucial for an independent assessment of financial health.
• Your business advisor should help you evaluate the stability of the parent company and its ability to support a new luxury brand launch.
• Discuss with your attorney the strength and enforceability of the parent company's performance guarantee.

Explanation

Item 20 data shows this is a new franchise system with only one franchised outlet open as of the end of 2024. There is no history of terminations, non-renewals, or other cessations. While the lack of historical data is a risk in itself (covered under 'New/Unproven Franchise System'), the specific risk of high franchisee turnover is not present based on the provided information.

Potential Mitigations

• A business advisor can help you understand the risks associated with joining a new system with no turnover data.
• As the system grows, your attorney should advise on monitoring future Item 20 disclosures for any signs of increasing turnover.
• It is beneficial to establish contact with the first few franchisees as they join the system to share experiences and insights.

Explanation

The franchise system is new, having grown from zero to one unit in the most recent year. While there are projections for a few more openings, this does not represent the kind of rapid expansion in an established system that could strain support resources. The primary risk here is the system's newness, not its current growth rate. Therefore, this specific risk is not considered present.

Potential Mitigations

• Your business advisor can help you monitor the pace of future growth against the franchisor's expansion of its support infrastructure.
• Questioning the franchisor about their specific plans for scaling support staff and systems is a prudent step.
• Engaging with other early franchisees to gauge their experiences with support levels as the system adds units can provide valuable insight.

Explanation

This franchise operates as a luxury 'soft brand' or 'collection,' a model for unique, independent-style hotels. This is a well-established and durable concept within the hospitality industry, not a business based on a short-lived trend or fad. The long-term viability depends on execution and market conditions rather than the fleeting popularity of the concept itself. Therefore, this risk was not identified.

Potential Mitigations

• A business advisor can help you analyze the long-term demand for luxury and independent-style hotels in your specific target market.
• Evaluating the franchisor's strategy for maintaining brand relevance and competitiveness over the long term is a wise step.
• Your accountant can assist in creating financial models that account for potential shifts in travel and hospitality trends.

Explanation

Item 2 shows that the franchisor's executive team is composed of senior leaders from its parent, WHR. These individuals have extensive and long-term experience in both the hospitality industry and in managing large-scale franchise systems. The risk of dealing with an inexperienced management team is not present.

Potential Mitigations

• It is still worthwhile to research the public reputations and track records of the key executives listed in Item 2 with your business advisor.
• Seeking opportunities to interact with the leadership team can provide insights into their vision and strategy for this new brand.
• Having your attorney confirm that key personnel are subject to employment agreements may provide some assurance of leadership stability.

Explanation

Item 1 of the FDD clearly states that the ultimate parent company, WHR, is a publicly traded corporation on the New York Stock Exchange. The franchisor is not owned by a private equity firm. Therefore, the specific risks associated with a private equity ownership model, such as a focus on short-term returns or a predetermined exit strategy, are not present here.

Potential Mitigations

• An accountant's review of the parent company's public filings (10-K, 10-Q) can confirm the ownership structure and identify major shareholders.
• A business advisor can help you understand the strategic priorities typically associated with a publicly traded parent company versus a private equity owner.
• Your attorney should still review assignment clauses in the franchise agreement to understand how a future sale of the company could affect you.

Explanation

The FDD provides clear and transparent disclosure of its corporate structure in Item 1, identifying TRC Franchisor, Inc.'s relationship to its parent, Wyndham Hotel Group, LLC, and its ultimate parent and guarantor, WHR. Furthermore, Item 21 appropriately directs to the full, audited financial statements of the guarantor, WHR, in Exhibit D. This risk is not present.

Potential Mitigations

• An accountant should always confirm that the provided financial statements are for the correct entity, in this case the guarantor WHR.
• Your attorney should verify that the performance guaranty provided by the parent company is properly executed and legally binding.
• A business advisor can help you understand the operational relationship between the franchisor and its parent company.

Explanation

Item 1 of the FDD indicates that TRC Franchisor, Inc. has no predecessor business in the context of offering hotel franchises under this system. It is a new entity for this purpose. Therefore, there is no predecessor history to analyze for potential issues like past litigation, bankruptcy, or franchisee failures. This specific risk is not applicable.

Potential Mitigations

• A business advisor can help investigate the history of the 'Registry Collection' brand name in its previous context as a fractional exchange program for any reputational insights.
• Even without a direct predecessor, your attorney should review the litigation and bankruptcy history of the parent company, WHR, in Items 3 and 4.
• Speaking with your accountant can help assess the risks of a new entity versus one with a long, transparent history.