Explanation

The audited financial statements in Exhibit J show the franchisor, MIF, L.L.C. (MIF), is profitable and backed by its parent, Marriott International, Inc., a large public company. While the financials reveal complex inter-company loans and transactions, they do not indicate financial instability, operating losses, or negative net worth. Therefore, the risk of the franchisor lacking financial ability to support the system appears low.

Potential Mitigations

• Have your accountant review the audited financial statements in Exhibit J, paying close attention to the footnotes and the significant 'due from related parties' balance.
• A business advisor can help you research the financial health and strategic direction of the parent company, Marriott International, Inc.
• Engaging legal counsel to understand the relationship between the franchisor entity and its parent is a prudent step.

Explanation

This specific risk was not identified. The data in Item 20 does not show a high rate of terminations, non-renewals, or other cessations of operation. Low turnover can be an indicator of a healthy franchise system and franchisee satisfaction. However, you should still investigate the reasons for the outlets that did leave the system.

Potential Mitigations

• It is advisable to consult with current and former franchisees from the lists provided in the FDD to understand their satisfaction levels.
• Your business advisor can help you analyze the Item 20 data in the context of the overall hotel industry.
• Asking your attorney to help formulate questions for former franchisees about why they left the system can provide valuable insights.

Explanation

The franchise system is projected to continue its steady growth, as shown in Item 20. While rapid expansion can sometimes strain a franchisor's support systems, the franchisor here is part of Marriott International, Inc. This large, experienced parent company likely has the infrastructure and resources to manage this growth effectively. Therefore, the risk of support quality degrading due to rapid expansion appears low.

Potential Mitigations

• When speaking with franchisees, ask newer owners about the quality and timeliness of the support they received during their opening process.
• Your business advisor can help assess if the franchisor's disclosed support staff and resources in Item 11 seem adequate for the projected growth.
• Inquire with the franchisor about their specific plans to scale support services to accommodate new hotels.

Explanation

This risk was not identified. The FDD indicates in Items 1 and 20 that TownePlace Suites is a large, established brand with a long history of franchising since 1996 and hundreds of operating hotels. A mature system often presents lower risk than a new or unproven one because the business model, brand recognition, and support systems are well-developed.

Potential Mitigations

• Even with an established brand, it is wise to speak with a range of franchisees to gauge their current satisfaction and profitability.
• Your business advisor can help you research the brand's current market position and competitive landscape.
• Confirm with your accountant that the franchisor's financials in Item 21 reflect a stable, mature business.

Explanation

This risk was not identified. The extended-stay hotel concept is a well-established and durable segment within the lodging industry, not a temporary fad. The franchisor, as part of Marriott International, operates in a mature market with a long history, suggesting long-term consumer demand.

Potential Mitigations

• Your business advisor can help you research the long-term trends and competitive outlook for the extended-stay hotel market.
• Consult a real estate professional to assess the demand for this type of lodging in your specific proposed location.
• Review industry reports on travel and lodging trends to confirm the stability of the business model.

Explanation

This risk was not identified. Item 2 details the extensive experience of the franchisor's management team. The directors and officers have long and distinguished careers at Marriott and other major corporations, indicating a deep level of experience in both the lodging industry and in managing large-scale franchise operations.

Potential Mitigations

• While the top management is experienced, it can be useful to research the specific brand support team you will be interacting with.
• A business advisor can help you evaluate the professional backgrounds of the key personnel listed in Item 2.
• Engaging with current franchisees can provide insight into the practical effectiveness and accessibility of the management team.

Explanation

This specific risk was not identified as the franchisor is a subsidiary of a publicly-traded company, Marriott International, Inc., not a private equity firm. However, as a franchisee of a public company, you may still be subject to decisions driven by shareholder value and quarterly earnings reports, which can sometimes conflict with long-term franchisee interests.

Potential Mitigations

• Your financial advisor can help you research Marriott International's public filings (e.g., 10-K, 10-Q) to understand its financial health and strategic priorities.
• Discuss with your attorney the implications of the franchisor's right to sell or assign the franchise system.
• When speaking with other franchisees, inquire about how the parent company's public status affects system-wide decisions and support.

Explanation

This risk was not identified. The FDD clearly discloses in Item 1 that the franchisor is a subsidiary of Marriott International, Inc. and provides the necessary financial statements for the franchisor entity in Item 21. As the parent is a public company, its own detailed financial information is readily available for review.

Potential Mitigations

• Have your accountant review both the franchisor's financials (Item 21) and the publicly available financials of the parent company.
• Your attorney can help clarify the legal and financial relationship between the subsidiary franchisor and the parent corporation.
• Your business advisor can help analyze the parent company's overall strategy and its commitment to the TownePlace Suites brand.

Explanation

This risk was not identified. Item 1 indicates a long and continuous history of the brand within the Marriott family of companies since 1996. There is no disclosure of recent acquisitions from outside, troubled predecessors that would suggest inherited systemic problems.

Potential Mitigations

• A review of the litigation and bankruptcy history in Items 3 and 4 with your attorney is always prudent for any franchise.
• Speaking with long-tenured franchisees can provide historical context about the brand's evolution and stability.
• Your business advisor can research the brand's history within the Marriott portfolio to confirm a stable lineage.