Explanation

The franchisor, Wingate Inns International, Inc. (Wingate), is a subsidiary of Wyndham Hotels & Resorts, Inc. (WHR), which guarantees its performance. The audited financial statements for WHR are provided and do not indicate financial instability. They show consistent profitability and a positive net worth. Therefore, this specific risk was not identified. Financial stability is important as it suggests the franchisor can support the brand and its franchisees long-term.

Potential Mitigations

• An experienced franchise accountant should review the parent company's financial statements, including all footnotes and the auditor's opinion, to confirm its financial health.
• It is wise to discuss the strength and enforceability of the parent company's performance guaranty with your franchise attorney.
• A business advisor can help you assess whether the franchisor's resources are sufficient to support its stated growth and operational plans.

Explanation

The system shows stable growth rather than explosive, unsupported expansion. Item 20 indicates a net gain of 9 units in 2023 and zero net change in 2024, suggesting a mature and controlled growth pace. The parent company's financials in Item 21 appear robust enough to support the current system size and modest growth. Therefore, this specific risk was not identified.

Potential Mitigations

• With your business advisor, you should still question the franchisor about their capacity and plans for scaling support infrastructure to match future growth.
• Interviewing a range of existing franchisees about the current quality and responsiveness of franchisor support is a valuable due diligence step.
• Your accountant can review the franchisor's financials to confirm they have the resources to support their existing system adequately.

Explanation

The franchisor and its parent, Wyndham Hotels & Resorts, Inc., are well-established entities in the hospitality industry with extensive operating history, as disclosed in Items 1 and 2. Item 20 shows a large, mature system with 189 franchised outlets at the end of 2024. This is not a new or unproven franchise system, so this risk was not identified.

Potential Mitigations

• Even with an established system, a business advisor should help you evaluate the brand's current market position and competitive advantages.
• It is still prudent to have your accountant review the franchisor's financial statements in Item 21 for any signs of recent performance decline.
• Your attorney can help you understand the long-term history of the brand by reviewing the predecessor and litigation history in the FDD.

Explanation

The Wingate by Wyndham brand operates in the established and competitive midscale hotel segment. The business model is not based on a new or fleeting trend. While the hospitality industry is subject to economic cycles, the core offering of lodging services is a long-standing business model, not a fad. Therefore, this specific risk was not identified in the FDD package.

Potential Mitigations

• A business advisor can help you assess the long-term market demand for midscale hotels in your specific geographic area.
• It is wise to evaluate the franchisor's plans for innovation and brand adaptation to stay competitive, as disclosed in Item 11.
• With your financial advisor, consider the brand's resilience to economic downturns compared to other brands in the same segment.

Explanation

Item 2 discloses that the executive team of the franchisor and its parent, Wyndham Hotels & Resorts, Inc., possesses extensive experience in the hospitality and franchising industries. Many executives have long tenures with the company and its affiliates. This indicates a deep level of industry and franchising expertise, so the risk of inexperienced management was not identified.

Potential Mitigations

• Even with an experienced team, it is beneficial to research the recent performance and reputation of the key executives with your business advisor.
• Speaking with existing franchisees about their direct experiences with the management team's support and strategic direction is recommended.
• Your attorney can help review the litigation history in Item 3 for any claims that might reflect on management's conduct.

Explanation

The franchisor's ultimate parent, Wyndham Hotels & Resorts, Inc. (WHR), is a publicly traded company, not one owned by a private equity firm. While public companies also focus on shareholder returns, the specific risks associated with a typical private equity ownership model, such as a defined exit timeline and potential for rapid, disruptive changes to extract value, do not directly apply here.

Potential Mitigations

• Your accountant should still review the parent company's financial statements (Item 21) to understand its financial priorities and health.
• It is important to ask your attorney to review the franchisor's rights to sell or assign the franchise system, as this can happen under any ownership structure.
• A business advisor can help you research the company's long-term strategic plans and reputation within the franchise community.

Explanation

The FDD clearly discloses the parent company, Wyndham Hotels & Resorts, Inc. (WHR), in Item 1. Furthermore, Item 21 includes the audited financial statements of WHR and Exhibit D provides a Guaranty of Performance from WHR. This level of disclosure provides transparency into the financial health and structure of the entity backing the franchisor's obligations. Therefore, this specific risk was not identified.

Potential Mitigations

• It is still prudent for your franchise accountant to conduct a thorough review of the parent company's financial statements.
• Your attorney should analyze the specific terms of the parent guaranty to understand the extent and any limitations of the protection it offers.
• Discussing the relationship between the franchisor and its parent with your business advisor can provide additional context.

Explanation

Item 1 identifies the franchisor's history and notes that it is a subsidiary of Wyndham Hotel Group, LLC. It does not list any predecessors from which substantial assets were acquired in a way that would obscure a negative history. Items 3 and 4 disclose litigation and bankruptcy history for the franchisor and its affiliates without indicating any attempt to hide information through complex corporate structures. Therefore, this specific risk was not identified.

Potential Mitigations

• Your attorney should still carefully review the corporate history described in Item 1 for any ambiguities.
• It remains a good practice to research the history of the brand and its parent companies to ensure a full understanding of its lineage.
• A business advisor can assist in searching for news articles or public records related to the franchisor's past business dealings.