Explanation

The franchisor, Wyndham Franchisor, LLC (WDF), is a subsidiary of a large, publicly traded parent company, Wyndham Hotels & Resorts, Inc. (WHR). WHR provides a full guaranty of WDF's performance. The parent company's audited financial statements in Exhibit D show significant revenue and assets, which suggests it has the financial capacity to support the franchise system. This strong parent backing substantially reduces the risk of franchisor financial instability.

Potential Mitigations

• Your accountant should review the parent company's audited financial statements and the terms of the performance guaranty in Exhibit D.
• It is advisable to have your attorney confirm the enforceability of the parent guaranty of WDF's obligations.
• Ask a financial advisor to monitor the parent company's public financial reporting (as WHR) for any future signs of distress.

Explanation

This risk was not identified in the FDD package. Rapid growth can strain a franchisor's ability to provide adequate support. While this system has grown from a small base in recent years, the overall number of units remains small, and the parent company appears to have substantial resources to manage this growth. Ongoing monitoring of support quality would still be prudent.

Potential Mitigations

• With your business advisor, you should ask current franchisees about the quality and timeliness of the support they receive from the franchisor.
• A discussion with your accountant about the franchisor's allocation of resources to franchisee support versus new sales could be insightful.
• Your attorney can help you understand the specific support obligations outlined in the Franchise Agreement.

Explanation

This risk was not identified in the FDD package. The Wyndham Grand brand operates in the established upper-upscale, full-service hotel industry. This is a mature market segment, not a business model based on a new or fleeting trend. Therefore, the risk of the business concept being a short-term fad appears to be low.

Potential Mitigations

• Your business advisor can provide research on the long-term trends and health of the upscale hotel market.
• It is wise to have your accountant help you develop financial projections that account for normal economic cycles.
• Consult with a real estate professional to evaluate the long-term viability of a hotel at your proposed location.

Explanation

This risk was not identified in the FDD package. Item 2 shows that the key executives and management personnel of WDF have extensive and long-term experience within the hospitality industry and with the parent company, Wyndham Hotels & Resorts, Inc. The leadership team appears to be well-versed in both hotel operations and franchising on a large scale.

Potential Mitigations

• You should still verify the franchisor's support structure and the specific team that will support your hotel.
• A business advisor can help you research the reputation of the parent company's management within the hotel industry.
• Discussing the quality of management support with current franchisees is a practical due diligence step.

Explanation

This risk was not identified in the FDD package. WDF is part of a publicly traded company, Wyndham Hotels & Resorts, Inc., not a private equity firm. Decisions are more likely to be driven by long-term public shareholder value and brand health rather than the short-term exit strategies often associated with private equity ownership. The risk of sudden, drastic changes due to a PE firm's timeline is low here.

Potential Mitigations

• A review of the parent company's public statements and investor calls with a financial advisor can offer insight into its long-term strategy.
• Your attorney should still review the assignment clauses in the Franchise Agreement to understand your rights if the system is ever sold.
• Discussing any observed changes in franchisor philosophy with long-term franchisees can provide valuable context.

Explanation

This risk was not identified in the FDD package. Item 1 clearly discloses the parent companies, up to the ultimate public parent, Wyndham Hotels & Resorts, Inc. (WHR). Furthermore, the FDD includes the audited consolidated financial statements and a performance guaranty from WHR in Exhibit D, providing the necessary financial transparency for a full risk assessment.

Potential Mitigations

• Have your accountant review the provided parent company financials and guaranty for adequacy and any potential concerns.
• It is prudent for your attorney to confirm that the provided guaranty is properly executed and legally binding.
• Understanding the corporate structure with your business advisor can help clarify where ultimate decision-making power resides.

Explanation

This risk was not identified in the FDD package. Item 1 discloses that the predecessor was Wyndham Hotels and Resorts, LLC (formerly Wyndham Franchise Systems, LLC), which is now the direct parent company. The FDD appears to properly integrate the history, including litigation from Item 3, from this predecessor into the current disclosure, providing a continuous history for the brand's franchising operations.

Potential Mitigations

• Your attorney should still review the information in Items 1, 3, and 4 to confirm the predecessor history is clear and consistent.
• When speaking with long-term franchisees, asking about their experiences under the predecessor entity can provide useful context.
• A business advisor can help you research the public history of the predecessor and parent companies for a more complete picture.