Explanation

This risk was not identified. The audited financial statements for the franchisor, MIF, L.L.C. (MIF), show it is profitable, with growing revenue and significant member's equity. While a large portion of its assets is a receivable from its parent, Marriott International, Inc., the overall financial position appears stable. An independent auditor provided an unqualified opinion with no 'going concern' note, indicating a low risk of financial instability.

Potential Mitigations

• An accountant should review the provided financial statements, including all footnotes and the auditor's report, to form an independent opinion of the franchisor's financial health.
• Discuss the franchisor's reliance on its parent company and any associated risks with your financial advisor.
• Your attorney can help you understand any financial performance covenants or conditions mentioned in the franchise agreement.

Explanation

This risk was not identified. The data in Item 20 for the years 2022 through 2024 shows a very low rate of franchisee turnover. The number of terminations was minimal, and there were no non-renewals, re-acquisitions, or other cessations of business reported in the most recent two years. This generally indicates a stable and growing franchise system, as outlets have consistently remained within the Tribute Portfolio brand.

Potential Mitigations

• It is still valuable to contact a diverse sample of current franchisees listed in Item 20 to discuss their satisfaction and operational experience, which your business advisor can help facilitate.
• Ask the franchisor about the circumstances surrounding the few terminations that did occur in prior years.
• Your accountant can help you compare the system's growth trajectory in Item 20 with its financial capacity to support that growth shown in Item 21.

Explanation

This risk was not identified. The franchisor operates in the hotel industry, specifically with full-service, independent-style hotels. This is a long-established market segment, not a temporary trend. The business model, which relies on converting existing hotels or new builds into unique properties under a major reservation system, has demonstrated long-term consumer demand and is not considered a fad.

Potential Mitigations

• A business advisor can still help you analyze the long-term viability and competitive landscape for boutique or collection-style hotels in your specific market.
• Discussing the brand's adaptability and plans for future innovation with the franchisor can provide additional confidence.
• Researching travel and lodging industry trends with a financial advisor will help confirm the stability of this market segment.

Explanation

This risk was not identified. Item 1 states the franchisor, MIF, is a subsidiary of Marriott International, Inc. (MII). Item 2 lists the directors and principal officers for MII, which includes individuals with extensive, long-term careers and executive-level experience in the global lodging and franchise industries. The management team's deep experience in operating and franchising hotels suggests a very low risk in this area.

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, you can inquire about their direct experiences with the franchisor's management team and their leadership.
• An attorney can confirm that the management structure described is stable and that key roles are filled by experienced individuals.

Explanation

This risk was not identified. Item 1 clearly states that the franchisor's parent company is Marriott International, Inc., which is a publicly-traded corporation (NASDAQ: MAR) and not a private equity firm. Therefore, the specific risks associated with a typical private equity ownership model, such as a focus on short-term returns or a quick exit strategy, do not apply here.

Potential Mitigations

• Understanding the structure of a publicly-traded parent company and its implications for a franchise system can be discussed with your business advisor.
• An accountant can help you review public filings for Marriott International, Inc. to gain a deeper understanding of its overall business strategy and financial health.
• Your attorney can explain the differences in how a public versus a private equity-owned franchisor might operate.

Explanation

This risk was not identified. Item 1 clearly discloses that the franchisor, MIF, is a subsidiary of Marriott International, Inc. (MII). The FDD includes MIF's own audited financial statements in Exhibit J as required. There is no indication that a guarantee from the parent is necessary to ensure performance, so the absence of MII's financials in this FDD does not constitute a disclosure issue.

Potential Mitigations

• Your attorney should confirm that the disclosures regarding the parent and affiliate relationships in Item 1 are clear and complete.
• It is prudent to have an accountant review the provided financials to ensure they meet all accounting and audit standards.
• Discussing the nature of the relationship between the franchisor subsidiary and its parent company with a business advisor can provide additional context.

Explanation

This risk was not identified. Item 1 of the FDD does not list any predecessors for the franchisor, MIF, L.L.C. While its parent, Marriott International, Inc., has a history of acquiring other hotel companies, the FDD for this specific franchising entity does not indicate any inherited issues from a direct predecessor that would pose a risk to you.

Potential Mitigations

• Your attorney can review Item 1 to confirm the absence of any disclosed predecessors and explain the legal implications.
• Engaging a business advisor to research the history of the Tribute Portfolio brand within the larger Marriott structure could provide useful background.
• When speaking with long-term franchisees, you can ask about their experience during any major corporate transitions.