CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations and expenses, business strategies and plans, trends, market sizing, competitive position, industry environment, potential growth opportunities and product capabilities, among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “aim,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “goal,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “strive,” “will,” “would,” or similar expressions and the negatives of those terms.
As used in this report, any reference to ‘Membership Collective Group,’ ‘MCG,’ ‘our company,’ ‘the company,’ ‘us,’ ‘we’ and ‘our’ refers to: (i) if prior to the exchange of equity interests by equity holders in Soho House Holdings Limited for shares of Class A Common Stock or Class B Common Stock (as applicable) in Membership Collective Group Inc. as described in this report, to Soho House Holdings Limited and its consolidated subsidiaries, and (ii) if following such exchange, to Membership Collective Group Inc., together with its consolidated subsidiaries.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
the COVID-19 pandemic, including the outbreak of new or different variants thereof, or the future outbreak of any other highly infectious or contagious diseases, has caused, and will continue to cause, disruption to our business, liquidity, financial condition and results of operation. Further, the spread of the COVID-19 outbreak has caused severe disruptions in the global economy and financial markets and could continue to create business continuity issues of an unpredictable magnitude and duration;
we have incurred net losses in each year since our inception, and we may not be able to achieve profitability;
our planned growth could put strains on our senior management, employees, information systems and internal controls which may adversely impact our business, financial condition and operations;
our success depends on the strength of our name, image and brands, and if the value of our name, image or brands diminishes, our business, financial condition and operations would be adversely affected;
our intellectual property rights are valuable, and any failure to obtain, maintain, protect, defend and enforce our intellectual property, including due to ‘brand squatting,’ could have a negative impact on the value of our brand names and adversely affect our business, financial condition and operations;
we depend on our senior management for the future success of our business, and the loss of one or more of our key personnel could have an adverse effect on our ability to manage our business, financial conditions and operations and implement our growth strategies;
changes in consumer discretionary spending and general economic factors may adversely affect our business, financial condition and results of operation including but not limited to increased global inflationary pressures;
increased use of social media could create and/or amplify the effects of negative publicity and have a material adverse effect on our business, financial condition or results of operation;
we identified material weaknesses in connection with our internal controls over financial reporting. Although we are taking steps to remediate these material weaknesses, there is no assurance we will be successful in doing so in a timely manner, or at all, and we may identify other material weaknesses;
our future performance depends in part on our ability to respond to changes in consumer tastes, preferences and perceptions;
difficult conditions in the global financial markets and the economy generally could affect our ability to obtain capital or financing and materially adversely affect our business, financial condition and results of operation;
our continued growth depends on our ability to expand our presence in new and existing markets and develop complementary properties, concepts and product lines;
foreign currency fluctuations may reduce our net income and our capital levels, adversely affecting our business, financial condition and results of operation;
Yucaipa, through its participation in the Voting Group, has significant influence over us, including control over decisions that require the approval of stockholders;
we have substantial debt, and we may incur additional indebtedness, which may negatively affect our business and financial results as well as limit our ability to pursue our growth strategy;
restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in other business activities;
the use of joint ventures or other entities, over which we may not have full control, for development projects or acquisitions could prevent us from achieving our objectives;
a cybersecurity attack, ‘data breach’ or other security incident experienced by us or our third-party service providers may result in negative publicity, claims, investigations and litigation and adversely affect our business, results of operation and financial condition;
if we fail to properly maintain the confidentiality and integrity of our data, including member and other customer credit or debit card and bank account information and other personally identifiable information ("PII"), or if we fail to comply with applicable laws, rules, regulations, industry standards and contractual obligations relating to data privacy, protection and security, it may adversely affect our reputation, business, financial condition and operations;
we could face costs, liabilities and risks associated with, or arising out of, environmental, health and safety laws and regulations;
litigation concerning food quality, health and safety, employee conduct and other issues could require us to incur additional liabilities or cause customers to avoid our businesses;
anticipated changes in effective tax rates or adverse outcomes resulting from our exposure to various tax regimes in the countries in which we operate; and
the other factors discussed under “Risk Factors” in this annual report.
Item 1. Business.
As used in this annual report, unless the context otherwise indicates, any reference to ‘Membership Collective Group,’ ‘MCG,’ ‘our company,’ ‘the company,’ ‘us,’ ‘we’ and ‘our’ refers (i) prior to the exchange of equity interests by equity holders in Soho House Holdings Limited for shares of Class A Common Stock or Class B Common Stock (as applicable) in Membership Collective Group Inc. to Soho House Holdings Limited and its consolidated subsidiaries and (ii) following such exchange, to Membership Collective Group Inc., the issuer of the Class A Common Stock being referred hereby, together with its consolidated subsidiaries.
OUR BUSINESS
The Membership Collective Group (“MCG”) is a global membership platform of physical and digital spaces that connects a vibrant, diverse group of members from across the world. These members use the MCG platform to both work and socialize, to connect, create, have fun and drive a positive change.
We began with the opening of the first Soho House in London's Soho district in 1995 and remain the only company to have scaled a private membership platform with a global presence. Over the last 26 years, we have significantly expanded our membership expertise and diversified our offerings—both physically and digitally. As of January 2, 2022, we have over 155,800 members (including over 122,800 Soho House members) who engage with MCG through our global portfolio of 33 Soho Houses, 9 Soho Works, Scorpios Beach Club in Mykonos, Soho Home, The Ned in London, in addition to our digital channels. The LINE and Saguaro hotels in North America, which we operate under a hotel management contract, also form part of MCG’s wider portfolio.
The central pillar of MCG is Soho House, which drives the majority of our membership and revenue today. Since the opening of our first House in London in 1995, we have successfully identified the demand for a premium membership offering that caters to a progressive, creative and diverse global audience. Today, we believe our membership offering, consistently high standards of service, and our global footprint remain unparalleled. A Soho House membership offers access to a network of distinctive and carefully curated Houses, across North America, the United Kingdom, Europe and Asia, which serve as the cornerstone of our member