Explanation

The franchisor, Hyatt Franchising, L.L.C. (Hyatt LLC), is a subsidiary of Hyatt Hotels Corporation, a large, publicly traded company. The parent company's audited financial statements in Exhibit A-1 show significant revenue and profitability. Furthermore, the parent company provides an absolute and unconditional Guarantee of Performance for the franchisor's obligations. This strong financial backing significantly reduces the risk of franchisor instability, making this a point of strength for the system.

Potential Mitigations

• An accountant should review the parent company's audited financial statements and the accompanying Guarantee of Performance to confirm the system's financial strength.
• It is beneficial to have your attorney verify the terms and enforceability of the parent's Guarantee of Performance.
• Discuss the franchisor's financial health and its practical impact on support and brand investment with your business advisor.

Explanation

Item 20 data for the past three years (2022-2024) shows zero franchised outlets were terminated, non-renewed, or ceased operations for other reasons. The franchisor also did not reacquire any franchised outlets. This exceptionally low turnover is a strong positive indicator of franchisee satisfaction and system stability.

Potential Mitigations

• Your business advisor should confirm this positive trend by speaking with a representative sample of current franchisees listed in Item 20.
• An accountant can help you compare this low turnover rate against any available industry benchmarks for hotel franchises.
• It is still prudent for your attorney to review the termination and renewal clauses in the Franchise Agreement to understand your future rights.

Explanation

This risk was not identified in the FDD package. Item 20 data shows steady and manageable growth of two net franchised hotels per year, which is not indicative of overly rapid expansion. Given the franchisor's extensive resources, as shown in Item 21, the current growth rate does not appear to pose a risk of outstripping the franchisor's support capabilities.

Potential Mitigations

• A business advisor can help you assess whether the franchisor's support infrastructure, as described in Item 11, is adequate for its growth plans.
• In discussions with current franchisees, it is useful to ask about their perception of the quality and timeliness of franchisor support.
• Your accountant should review the franchisor's financial statements to confirm it has the resources to sustain its current growth trajectory.

Explanation

This risk was not identified. Although the Unbound Collection brand was established more recently (2016), the franchisor is part of the Hyatt Hotels Corporation, which has operated in the hotel industry since 1957. The management team has extensive industry experience, and the parent company provides strong financial backing and a performance guarantee. This is not a new or unproven startup.

Potential Mitigations

• Your business advisor can help you evaluate the track record of this specific brand collection within the larger Hyatt portfolio.
• It is wise to speak with existing Unbound Collection franchisees to understand the maturity of the brand-specific systems and support.
• An attorney should review how the 'soft brand' nature of this system differs from more established, traditional franchise models.

Explanation

This risk was not identified in the FDD. The 'soft brand' or 'collection' hotel concept is a well-established segment within the upscale hospitality industry, appealing to travelers seeking unique, non-standardized experiences. It is not considered a temporary fad but rather a durable market category. Hyatt's involvement suggests a commitment to this long-term industry trend.

Potential Mitigations

• A business advisor with hospitality industry experience can provide an independent assessment of the long-term viability of the 'collection brand' hotel model.
• Asking the franchisor about their long-term strategy and plans for innovation for this brand can provide additional insight.
• Discussing market trends and consumer demand for unique hotel experiences with a hospitality consultant could be beneficial.

Explanation

This risk was not identified. The business experience of the franchisor's key management personnel is detailed in Item 2. The executive team is comprised of individuals with many years, and often decades, of experience within Hyatt and other major hospitality corporations. There is no indication of a lack of relevant experience in either the hotel industry or in managing large-scale franchise and lodging operations.

Potential Mitigations

• A business advisor can help you review the backgrounds of the key executives listed in Item 2 to confirm their extensive experience.
• Asking current franchisees about their interactions with and perception of the franchisor's management team can provide valuable context.
• Investigating the public profiles and industry reputation of the management team can offer further assurance.

Explanation

This risk was not identified. Item 1 indicates the franchisor is a subsidiary of Hyatt Hotels Corporation, a publicly traded company. There is no disclosure of ownership by a private equity firm. The system is characterized by long-term ownership and management continuity, which typically suggests a focus on long-term brand health rather than short-term investment returns.

Potential Mitigations

• Your attorney can confirm the corporate ownership structure disclosed in Item 1 and Item 21.
• A review of public filings for Hyatt Hotels Corporation with your financial advisor can provide further insight into its ownership and strategic priorities.
• Understanding the difference between public company and private equity ownership models with a business advisor can be helpful for general knowledge.

Explanation

This risk was not identified. Item 1 clearly discloses that Hyatt Franchising, L.L.C. is the franchisor and its parent is Hyatt Hotels Corporation. The FDD includes audited financial statements for the parent company as well as an unconditional Guarantee of Performance from the parent. This level of disclosure provides a clear picture of the financial backing and ultimate responsibility for the franchisor's obligations.

Potential Mitigations

• Your accountant should review the parent company's financial statements to understand the overall financial health of the enterprise.
• It is prudent for your attorney to examine the language of the Guarantee of Performance to confirm its strength and applicability.
• A business advisor can help you understand the relationship and flow of support between the parent company and the franchisor subsidiary.

Explanation

This risk was not identified in the FDD package. Item 1 does not disclose any predecessors for Hyatt Franchising, L.L.C. in relation to this brand. Items 3 and 4, covering litigation and bankruptcy, also do not indicate any relevant negative history associated with predecessor entities. The franchise system for this brand appears to have been developed and managed within the current Hyatt corporate structure.

Potential Mitigations

• Your attorney should confirm the absence of any disclosed predecessors in Item 1 of the FDD.
• A business advisor can help research the history of The Unbound Collection brand within Hyatt's portfolio for additional context.
• In due diligence calls, you can ask long-tenured franchisees about the history and evolution of the brand.

Explanation

This risk was not identified. Item 3 discloses only one litigation matter in the last fiscal year, which was a claim brought by the franchisor against a franchisee for unpaid royalty fees. The FDD does not disclose a pattern of lawsuits brought by franchisees alleging fraud, misrepresentation, or other systemic issues. This lack of franchisee-initiated litigation is a positive indicator for the health of the franchisor-franchisee relationship.

Potential Mitigations

• An attorney should review the specifics of any litigation disclosed in Item 3 to understand its nature and implications.
• It is useful to ask current franchisees about the franchisor's general approach to dispute resolution and contract enforcement.
• A business advisor can help you assess whether the disclosed litigation points to any underlying operational or financial issues in the system.