S-1 1 d89619ds1.htm S-1 S-1
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As filed with the Securities and Exchange Commission on June 21, 2021.

 

Registration Statement No. 333-             

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Membership Collective Group Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   7011   86-3664553

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

180 Strand

London, WC2R 1EA

United Kingdom

+44 (0207) 8512300

(Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Humera Afzal

Chief Financial Officer

Membership Collective Group Inc.

515 W. 20th Street

New York, New York

10011

(212) 627-9800

(Name, Address, Including Zip Code and Telephone Number, Including Area Code, of Agent for Service)

 

 

Copies to:

 

Samir A. Gandhi, Esq.

Robert A. Ryan, Esq.

Sidley Austin LLP

787 Seventh Avenue

New York, New York 10019

Telephone: (212) 839-5900

Facsimile: (212) 839-5599

 

Richard D. Truesdell, Jr., Esq.

Marcel R. Fausten, Esq.

Dan Gibbons, Esq.

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Telephone: (212) 450-4000

Facsimile: (212) 701-5800

 

 

Approximate date of commencement of proposed sale to the public:

As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Proposed

Maximum
Aggregate

Offering Price(1)(2)

  Amount of
Registration Fee(2)

Class A Common Stock, par value $0.01 per share

  $100,000,000   $10,910

 

 

(1)

Includes aggregate offering price of Class A Common Stock that the underwriters have an option to purchase. See “Underwriting.”

(2)

Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended, based on the proposed maximum aggregate offering price.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED JUNE 21, 2021

PRELIMINARY PROSPECTUS

Class A Common Stock

 

 

LOGO

 

 

This is our initial public offering. We are offering                shares of our Class A common stock.

Prior to this offering, there has been no public market for shares of our Class A common stock. We currently expect the initial offering price to be between $                and $                per share of our Class A common stock. We intend to list our Class A common stock on the New York Stock Exchange under the ticker symbol ‘MCG’ and International Security Identification Number (‘ISIN’)                         .

We are an ‘emerging growth company’ as that term is used in the Jumpstart Our Business Startups Act of 2012 and under applicable Securities and Exchange Commission rules and have elected to take advantage of certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary—Emerging Growth Company Status.”

Following this offering, we will have two classes of authorized common stock. The holders of our Class A common stock offered hereby will be entitled to one vote per share of Class A common stock, and the holders of our Class B common stock will be entitled to ten votes per share of Class B common stock. Certain of our existing equity owners (and their affiliates) comprise the Voting Group (as described herein) that will hold all of our issued and outstanding shares of Class B common stock and will have the right pursuant to our Certificate of Incorporation to convert shares of their Class B common stock into shares of Class A common stock on a one-for-one basis. Additionally, shares of Class B common stock will automatically convert into shares of Class A common stock, on a one-for-one basis, upon transfer to any non-permitted holder of Class B common stock.

After giving effect to the sale of the shares of Class A common stock offered hereby, the Voting Group will own Class B common stock, representing    % of the combined voting power of our common stock outstanding after this offering (    % if the underwriters exercise in full their option to purchase additional shares of Class A common stock). As a result, members of the Voting Group, when voting together as a group, will be able to control any action requiring approval of our stockholders so long as the Voting Group owns a requisite percentage of our total outstanding common stock, including the election and removal of directors and the size of our Board, any amendment of our Certificate of Incorporation, and the approval of any merger or other significant corporate transaction, including a sale of all or substantially all of our assets. Accordingly, we will be a ‘controlled company’ within the meaning of the corporate governance rules of the New York Stock Exchange. See “Management—Director Independence.”

Up to     % of the shares of our Class A common stock to be sold in this offering are being offered directly from us, at the initial public offering price, to eligible employees (‘UK Eligible Employees’) and eligible members of Soho House (‘UK Eligible Members’ and, together with UK Eligible Employees, ‘UK Eligible Participants’), in each case who are located in the United Kingdom, which sales will be made only pursuant to a prospectus prepared in accordance with the prospectus regulation rules of the Financial Conduct Authority (the ‘FCA’) and made under section 73A of the Financial Services and Markets Act 2000 by a UK-based platform through a directed share program (the ‘UK Community Offer’) The underwriters will not receive any underwriting discounts or commissions from our sale of shares of our Class A common stock to such UK Eligible Participants. In addition, at our request, the underwriters have reserved up to     % of the shares of our Class A common stock to be sold in this offering for sale to eligible employees who are located outside the United Kingdom and eligible members of Soho House who are located in the United States of America (‘Non-UK Eligible Participants’ and, collectively with UK Eligible Participants, ‘Eligible Participants’), which sales will be made by Morgan Stanley & Co. LLC, an underwriter in this offering, through a directed share program (the ‘US Community Offer’ and, together with the UK Community Offer, the ‘Community Offers’, or the ‘Directed Share Program’). Subject to the following sentence, each Eligible Participant will be able to purchase 100 shares (but no other number) of our Class A common stock (or for UK Eligible Participants, as near 100 shares as possible based on foreign currency conversions) in this offering through the Directed Share Program. In the event the demand for shares of our Class A common stock in the Community Offers exceeds the number of shares of our Class A common stock reserved for sale in the Community Offers, we reserve the right to allocate shares in our sole discretion, which may result in each Eligible Participant receiving (and being obligated to pay for) fewer than 100 shares of our Class A common stock. We do not know if these parties will choose to purchase all or any portion of these offered shares, but any purchases these parties do make will reduce the number of shares of our Class A common stock available to the general public in this offering. Any portion of the shares of Class A common stock being offered pursuant to the US Community Offer which are not purchased by Non-UK Eligible Participants will be offered by the underwriters to the general public on the same terms as the other shares of our Class A common stock, and any portion of the shares of our Class A common stock being offered pursuant to the UK Community Offer which are not purchased by UK Eligible Participants will not be resold and will remain unissued. Shares sold through the Community Offers will not be subject to lockup restrictions. See the section titled “Underwriting—Community Offers” for additional information.

 

 

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks that we have described in “Risk Factors” beginning on page 33 of this prospectus, and under similar headings in any amendments or supplements to this prospectus, before making a decision to invest in our Class A common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This prospectus has not been approved by the FCA and does not constitute an offer to UK Eligible Participants or the general public in the United Kingdom. Any offer to UK Eligible Participants will be made only by means of a prospectus that has been approved by the FCA for use in the United Kingdom.

 

     Per Share      Total  

Public offering price

   $                    $                

Underwriting discounts and commissions(1)

   $        $    

Proceeds, before expenses

   $        $    

 

(1)

We have agreed to reimburse the underwriters for certain FINRA-related expenses. See “Underwriting” for a detailed description of the compensation payable to the underwriters. The underwriters will not receive any underwriting discounts or commissions from our sale of shares directly to UK Eligible Participants.

 

    

We have granted the underwriters an option to purchase, within 30 days of the date of this prospectus, up to an additional                  shares of Class A common stock from us, at the public offering price, less the underwriting discount, as described in “Underwriting.”

The underwriters expect to deliver the Class A common stock against payment in New York, New York on or about                , 2021.

Joint Book-Running Managers

 

 

 

J.P. Morgan   Morgan Stanley

 

Goldman Sachs & Co. LLC   BofA Securities   HSBC

Co-Managers

Citigroup                    William Blair

The date of this prospectus is                 , 2021.


Table of Contents

TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS

     i  

GLOSSARY

     ii  

BASIS OF PRESENTATION

     iv  

NON-GAAP FINANCIAL MEASURES

     vi  

ADDITIONAL FINANCIAL MEASURES AND OTHER DATA

     viii  

LETTER FROM OUR FOUNDER AND CHIEF EXECUTIVE OFFICER

     ix  

PROSPECTUS SUMMARY

     1  

RISK FACTORS

     33  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA

     71  

USE OF PROCEEDS

     72  

DIVIDEND POLICY

     73  

CAPITALIZATION

     74  

DILUTION

     75  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA

     77  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     84  

BUSINESS

     140  

MANAGEMENT

     179  

EXECUTIVE AND DIRECTOR COMPENSATION

     188  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     195  

DESCRIPTION OF CAPITAL STOCK

     201  

DESCRIPTION OF CERTAIN INDEBTEDNESS AND PREFERRED EQUITY

     210  

PRINCIPAL STOCKHOLDERS

     217  

SHARES ELIGIBLE FOR FUTURE SALE

     220  

MATERIAL FEDERAL INCOME TAX CONSEQUENCES TO NON-US HOLDERS OF OUR CLASS A COMMON STOCK

     222  

UNDERWRITING

     226  

LEGAL MATTERS

     237  

EXPERTS

     237  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     237  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     F-1  


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ABOUT THIS PROSPECTUS

As used in this prospectus, 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. as described in this prospectus under “Prospectus Summary—Our Structure,” 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 offered hereby, together with its consolidated subsidiaries.

Neither we nor any of the underwriters have authorized anyone to provide you with any information other than the information contained in this prospectus or in any free writing prospectus that we authorize to be delivered to you. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the Class A common stock offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. You should assume the information contained in this prospectus and any free writing prospectus we authorize to be delivered to you is accurate only as of their respective dates or the date or dates specified in those documents. Our business, financial condition, liquidity, results of operations or prospects may have changed since those dates.

For investors outside the United States (including UK Eligible Participants), with respect to this prospectus and other than as indicated below in respect of UK Community Offer, neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus or the offer and sale of the Class A common stock in any jurisdiction where action with respect to this prospectus for that purpose is required, other than in the United States. Persons outside the United States (including UK Eligible Participants) who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the Class A common stock and the distribution of this prospectus outside the United States.

For UK Eligible Participants: This prospectus has not been approved by the FCA and does not constitute an offer to UK Eligible Participants or the general public in the United Kingdom. We have prepared a prospectus in accordance with the prospectus regulation rules of the FCA in connection with the offer and sale of the Class A common stock to UK Eligible Participants, made under section 73A of the Financial Services and Markets Act 2000. Any offer to UK Eligible Participants will be made only by means of the prospectus that has been approved by the FCA for use in the United Kingdom.

Unless otherwise indicated, all references in this prospectus to the number and percentages of shares outstanding following the completion of this offering:

 

   

Reflects the initial public offering price of $                 per share of Class A common stock, which is the mid-point of the price range set forth on the cover of this prospectus;

 

   

Assumes the exchange or conversion of all outstanding senior convertible preference shares of Soho House Holdings Limited into an aggregate of                  shares of Class A common stock of Membership Collective Group Inc. (the ‘Converted Preference Shares’) immediately upon the closing of this offering, based on the assumed initial public offering price of $             per share, which is the midpoint of the estimated initial offering price range set forth on the cover page of this prospectus.

 

   

Assumes no exercise of the underwriters’ option to purchase up to an additional                shares of Class A common stock from us; and

 

   

Reflects the exchange immediately prior to the consummation of this offering of equity interests in Soho House Holdings Limited for all of the issued and outstanding Class A common stock or Class B common stock of Membership Collective Group Inc. (before giving effect to the issuance of shares of Class A common stock comprising the Converted Preference Shares as described above), as described more fully under “Prospectus Summary—Our Structure”.

 

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GLOSSARY

As used in this prospectus, unless the context otherwise requires:

 

   

‘Adult Paying Members’ refers to all Soho House members excluding child members and complimentary members.

 

   

‘Cities Without Houses’ is a type of membership for people who live in cities where we do not have a physical House. Cities Without Houses members are able to access our existing Houses whenever they travel.

 

   

‘Every House’ is a type of membership that entitles a member to access each of our Houses globally, provided that access to Little Beach House Malibu requires a membership supplement from existing Every House members.

 

   

‘Frozen Members’ refers to Soho House members who have elected to suspend their membership payments on a six, nine or twelve month basis, during which period the member is not able to gain access to a Soho House site as a member, access our membership Apps, or book bedrooms or Cowshed treatments or products at discounted member rates.

 

   

‘House’ refers to a physical Soho House location, where each club is based, that we own, lease or manage. We operate and own a non-controlling interest in several of our Houses with one or more unaffiliated partners, and in the cases of Soho House Istanbul and Soho House Mumbai, we have no ownership interest but manage the House through a management contract. When we refer to a ‘House’ in this prospectus, we refer to any House in operation, irrespective of whether our interest in that House is (i) controlling, (ii) operated through a non-controlling interest in a joint venture or (iii) operated through a management contract.

 

   

‘Local House’ is a type of membership that entitles a member to access a single House in a particular city.

 

   

‘Members’ refers to those members who pay their annual membership fees as well as members who were provided and retain complimentary memberships, which were primarily granted in the earlier years of our growth typically in exchange for services to us.

 

   

‘Soho House Digital Membership’ is a paid digital-only membership that we plan to launch in late 2021, which will enable our Soho House members to connect, communicate and collaborate anywhere in the world.

 

   

‘Soho Friends’ is a type of paid membership that offers access to certain physical spaces, including Soho House bedrooms and Soho Studios, and benefits at our restaurants and online retail brands, but does not offer full access to our Houses.

 

   

‘SOHO HOME+’ is a type of paid membership that offers price discounts, free delivery and design advice in connection with our Soho Home retail brand.

 

   

‘Soho House Design’ refers to our business segment that provides the design and, where applicable, build-out of our Houses and other units.

 

   

‘Under-27’ refers to a membership for our Soho House members who are aged 27 years or younger with a membership rate that is applicable through to their 30th birthday.

 

   

‘Voting Group’ refers collectively to our founder and Chief Executive Officer, Mr. Nick Jones, one of our directors, Mr. Richard Caring, and certain affiliates of our sponsor, The Yucaipa Companies, LLC, and its founder and our executive chairman and a director, Ron Burkle (and, in each case, certain affiliates and family members), acting together as a group pursuant to the provisions of a Stockholders’ Agreement between us and each member of the Voting Group, so long as the Voting Group owns a requisite percentage of our total outstanding common stock. Immediately following the consummation of this offering, the

 

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Voting Group will hold all of our issued and outstanding Class B common stock, and as a result, when voting together as a group, will be able to control any action requiring the approval of our stockholders in the circumstances described herein under “Certain Relationships and Related Party Transactions—Stockholders’ Agreement.”

 

   

‘Wait list’ refers to our waiting list of applicants who have not been admitted to membership and that have applied since January 1, 2016.

 

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BASIS OF PRESENTATION

FISCAL PERIOD

We operate on a fiscal year calendar consisting of a 52- or 53-week period ending (in the case of a 52-week period) on the last Sunday in December of that calendar year or (in the case of a 53-week period) the first Sunday in January of the next calendar year. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. Our 2016 fiscal year ended on January 1, 2017 (‘fiscal 2016’) and our 2017 fiscal year ended on December 31, 2017 (‘fiscal 2017’). Our 2018 fiscal year ended on December 30, 2018 (‘fiscal 2018’), our 2019 fiscal year ended on December 29, 2019 (‘fiscal 2019’) and our 2020 fiscal year ended on January 3, 2021 (‘fiscal 2020’). Fiscal 2019, fiscal 2018, fiscal 2017 and fiscal 2016 were each a 52-week year. Fiscal 2020 was a 53-week year. A 53-week year may cause our fiscal 2020 revenue, expenses and other results of operations to be higher in that fiscal period compared to 52-week fiscal periods due to an additional week of operations. Our 2021 fiscal year will end on January 2, 2022 (‘fiscal 2021’). Our 2021 first quarter ended on April 4, 2021 (‘first quarter 2021’) and our 2020 first quarter ended on March 29, 2020 (‘first quarter 2020’).

PREDECESSOR

Soho House Holdings Limited, a private limited company incorporated under the laws of Jersey, Channel Islands on December 15, 2017, is the predecessor holding company of our group. Prior to this offering, we formed Membership Collective Group Inc., a Delaware corporation and the issuer of the Class A common stock offered hereby. Immediately prior to the consummation of this offering, (a) certain existing stockholders of Soho House Holdings Limited consisting of the Voting Group members will exchange their equity interests in Soho House Holdings Limited for a number of shares of Class B common stock of Membership Collective Group Inc. having an equivalent value and (b) certain other existing stockholders of Soho House Holdings Limited who are not members of the Voting Group will exchange their equity interests for a number of shares of Class A common stock, of Membership Collective Group Inc. having an equivalent value. Membership Collective Group Inc. is a holding company with nominal assets and no liabilities, contingencies, or commitments, which will not have conducted any operations prior to the consummation of this offering other than acquiring 100% of the equity interests of Soho House Holdings Limited. Following these exchanges, Soho House Holdings Limited will be a wholly-owned subsidiary of Membership Collective Group Inc.

These transactions will be accounted for as a reorganization of entities under common control. As a result, the consolidated financial statements of Membership Collective Group Inc. will recognize the assets and liabilities received in the exchanges at their historical carrying amounts, as reflected in the historical financial statements of Soho House Holdings Limited. Following the reorganization, Membership Collective Group Inc. will consolidate Soho House Holdings Limited on its consolidated financial statements. The consolidated financial statements of Soho House Holdings Limited are accordingly included elsewhere in this prospectus on the basis that it will be the predecessor to, and following the exchange of equity interests described above, a wholly owned subsidiary of, Membership Collective Group Inc.

FUNCTIONAL CURRENCY AND FOREIGN EXCHANGE

Our functional currency is the British pound sterling (‘GBP’) and our consolidated financial statements are presented in United States dollar (‘USD’). The functional currency is the currency of the primary economic environment in which an entity’s operations are conducted. The functional currency of our subsidiaries is generally the same as the local currency. We translate the financial statements of our subsidiaries into the functional currency using exchange rates in effect on the balance sheet date for assets and liabilities and average exchange rates for the period for statement of operations accounts, with the difference recognized in accumulated other comprehensive income. We translate our consolidated financial statements into the presentation currency (USD) using exchange rates in effect on the relevant balance sheet date for assets and liabilities and average exchange rates for the period for statement of operations accounts, with the difference recognized as a separate component of stockholders’ equity.

 

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The following exchange rates were used to translate our consolidated financial statements and other financial and operational data shown in constant currency:

 

     April 4,
2021
     March 29,
2020
     January 3,
2021
     December 29,
2019
     December 30,
2018
 

Great Britain pound sterling

   $ 1.38      $ 1.24      $ 1.37      $ 1.31      $ 1.27  

Canadian dollar

     0.80        0.71        0.78        0.77        0.73  

Euro

     1.18        1.11        1.22        1.12        1.14  

Hong Kong dollar

     0.13        0.13        0.13        0.13        0.13  

Israeli new shekel

     0.30        0.28        0.31        0.29        —    

 

     Average for the 13-Weeks
Ended
     Average for the Fiscal Year
Ended
 
     April 4,
2021
     March 29,
2020
     January 3,
2021
     December 29,
2019
     December 30,
2018
 

Great Britain pound sterling

   $ 1.38      $ 1.28      $ 1.28      $ 1.28      $ 1.34  

Canadian dollar

     0.79        0.74        0.74        0.75        0.77  

Euro

     1.20        1.10        1.14        1.12        1.18  

Hong Kong dollar

     0.13        0.13        0.13        0.13        0.13  

Israeli new shekel

     0.30        0.29        0.29        0.28        —    

JOINT VENTURES AND VARIABLE INTEREST ENTITIES

We operate and own a non-controlling interest in several of our Houses with one or more partners. Specifically, Soho House Toronto, Soho House Barcelona, Little Beach House Barcelona, and the hotel rooms and restaurant at 56-60 Redchurch Street and Redchurch Townhouse, London, are owned through joint ventures and are not consolidated for purposes of the preparation of our consolidated financial statements. Accordingly, our share of the revenues for these Houses does not appear within our consolidated Total Revenues in our consolidated statement of operations for the financial periods shown in this prospectus. For purposes of calculating Adjusted EBITDA, however, our share of Adjusted EBITDA from these Houses in which we operate and own a non-controlling interest has been included. See “Non-GAAP Financial Measures” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

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NON-GAAP FINANCIAL MEASURES

This prospectus contains certain financial measures, including Adjusted EBITDA, House-Level Contribution and Margin, Other Contribution and Margin and certain financial measures presented on a Constant Currency basis that are not required by, or presented in accordance with, accounting principles generally accepted in the United States of America (‘GAAP’). We refer to these measures as ‘non-GAAP financial measures.’ We use these non-GAAP financial measures when planning, monitoring and evaluating our performance. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures, tax position, depreciation, and amortization that we believe are not representative of our core business. We use these non-GAAP financial measures as operating metrics for business planning purposes and in measuring our performance.

The non-GAAP financial measures we use herein are defined by us as follows:

ADJUSTED EBITDA. Adjusted EBITDA is a supplemental measure of our performance. Adjusted EBITDA is defined as net income (loss) before depreciation and amortization, interest expense, net, provision (benefit) for income taxes, adjusted to take account of the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These other items include, but are not limited to, loss (gain) on sale of property and other, net, share of loss (profit) from equity method investments, foreign exchange, share of equity method investments adjusted EBITDA and share-based compensation expense (See “Summary Historical Consolidated Financial and Operating Data” included elsewhere in this prospectus for further information). We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses (income) that do not relate to ongoing business performance.

HOUSE-LEVEL CONTRIBUTION AND MARGIN. House-Level Contribution is defined as House Revenues less In-House Operating Expenses, which includes expense items such as food and beverage costs, labor costs, variable overheads and fixed costs, such as rent. It does not reflect the impact of depreciation, amortization, impairment, gain or loss on sale of property, or general and administrative expenses. House-Level Contribution Margin is defined as House-Level Contribution as a percentage of our House Revenues and is a key determinant of our performance and profitability and our return on the investment we make in each of our Houses. Given that all costs associated with providing our members with the Soho House experience, including the costs associated with maintaining our Houses and providing services to members while in Houses, are included in In-House Operating Expenses, we use House Revenues (inclusive of House Membership Revenues) in calculating House-Level Contribution and House-Level Contribution Margin to assess the overall profitability of our Houses. Accordingly, our management considers House-Level Contribution and House-Level Contribution Margin to be an important management measure to evaluate the performance of each House, and growth in aggregate House-Level Contribution allows us to leverage our general and administrative costs and improve overall profitability.

HOUSE MEMBERSHIP REVENUES. House Membership Revenues are comprised primarily of annual membership fees and one-time registration fees from Soho House members which are amortized over 20 years.

IN-HOUSE REVENUES. In-House Revenues include all revenues realized within our Houses, including food and beverage, accommodation and spa products and treatments.

HOUSE REVENUES. House Revenues is defined as House Membership Revenues plus In-House Revenues, less Non-House Membership Revenues. Our management views House Membership Revenues and In-House Revenues as interrelated and their aggregation as important in tracking House performance. Although there is no minimum spend for any member on In-House offerings, nevertheless in practice most members consume food and beverage, accommodations and other offerings at our Houses. The pricing of our In-House offerings is reflective of the fact that the significant majority of In-House offerings that generate In-House revenues are consumed by members who also pay a membership fee in relation to that House, with pricing of such In-House offerings being identical for both members and non-members.

 

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OTHER CONTRIBUTION AND MARGIN. Other Contribution is defined as Other Revenues plus Non-House Membership Revenues less Other Operating Expenses, which includes expense items not related to the operation of Houses, such as labor costs, variable overheads and fixed costs, such as rent. It does not reflect the impact of depreciation, amortization, impairment, gain or loss on sale of property, or general and administrative expenses. Other Contribution Margin defined as Other Contribution as a percentage of our Other Revenues and is a key determinant of our performance and profitability and our return on the investment in our non-House business. Our management considers Other Contribution and Contribution Margin to be an important management measure.

CONSTANT CURRENCY. Some of our financial and operational data that we disclose in this prospectus is presented on a ‘constant currency’ basis to isolate the effect of currency changes during the period. Where we refer to a measure being calculated in ‘constant currency,’ we are calculating the dollar change and the percentage change as if the exchange rate that is being used in the current period was in effect for all prior periods presented except where we discuss a comparison of our results comparing fiscal 2019 to fiscal 2018, in which case we calculate constant currency for fiscal 2018, using exchange rates in effect in 2019. We believe that this calculation provides a more meaningful indication of actual year over year performance and eliminates any fluctuations from currency exchange rates.

While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for revenues or net income (loss), in each case as recognized in accordance with GAAP. In addition, other companies may calculate one or more of these measures differently, which reduces the usefulness of any such measure as a comparative measure. For more information regarding these non-GAAP financial measures and a reconciliation of such measures to the most directly comparable GAAP financial measures, see our consolidated financial statements and notes thereto included elsewhere in this prospectus and “Management’s Discussion and Analysis of Financial Condition—Key Performance and Operating Metrics Evaluated by Management.”

 

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ADDITIONAL FINANCIAL MEASURES

AND OTHER DATA

Other financial measures and operating data that we use herein are defined by us as follows:

 

   

Active App Users.’ Our digital platforms are an important driver of the expansion of our brands. We define Active App Users as unique users who have logged into any of our membership Apps, which currently includes our Soho House App (‘SH.APP’) and our Soho Friends App, within the last three months.

 

   

‘Number of Houses and New House Openings.’ The number of Houses reflects the total number of Houses in operation and the number of new House openings in a given period, irrespective of whether our interest in the House is (i) controlling, (ii) operated through a non-controlling interest in a joint venture or (iii) operated through a management contract. Management reviews the number of members from all Houses to assess new member growth, total House Revenues and House-Level Contribution.

 

   

‘Number of Members and Membership Growth.’ Our membership model is an integral part of our business and has a significant impact on our profitability and financial performance. Typically members hold an Every House membership or a Local House membership. Member count is the primary driver of Membership Revenues and is also a critical factor in In-House Revenues as members utilize the hospitality and service offerings that are provided within the Houses. The extent to which we achieve growth in our membership base, retain existing members and periodically increase our membership fee rates will impact our profitability. We have historically enjoyed strong member loyalty, reflected by very high retention rates, achieving an average annual Soho House Member Retention rate of 94% between fiscal 2016 and 2020, and robust demand for our memberships, as evidenced by the considerable wait lists for most of our Houses. The year-over-year increase in our total number of members is driven by a combination of increases in membership at existing Houses and members from new Houses.

 

   

‘Soho House Member Retention.’ Soho House Member Retention is defined as the number of Adult Paying Members at the beginning of a period less the number of Adult Paying Members who cancelled their membership during that same period (without giving any effect to Adult Paying Members who froze their memberships during such period), as a proportion of total Adult Paying Members at the beginning of such period.

 

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LETTER FROM OUR FOUNDER AND CHIEF EXECUTIVE OFFICER

A letter from Nick Jones,

Founder and CEO

Members are at the heart of everything we do

Since founding Soho House in 1995, I’ve been obsessed with making sure that our members are always at the heart of everything we do – we are nothing without them. This approach has continued to be our guiding principle over the last 25 years, from when we started as one small club in London, through our global expansion, to now becoming the Membership Collective Group.

All I’ve ever wanted to do is to continually make membership better and everything we have done has been led by our members. We opened Babington House, our second club in Somerset, UK after members kept saying ‘wouldn’t it be great to have a version of Soho House in the countryside?’ Next it was, ‘Well, how about one in New York, or one in west London?’ Soho Home, our retail business, was born out of the frequent enquiries from our members and guests about where we sourced our mattresses, furniture, glassware and linens.

Much of the success of Soho House has been down to our ability to respond and adapt to shifting lifestyle trends as well as to the needs of our progressive and forward-thinking membership base. Over the years, the growth of our membership has reassured me that as we have expanded, we have also continued to add value to the member experience. It’s hugely satisfying for me when people who have been members since the very beginning tell me their children are applying for membership. Aside from making me feel a little old, it speaks to our ability to stay relevant, and remain an ever-evolving part of the global cultural landscape.

My personal mantra, which I’m sure every member of my team has heard me say so often they repeat it in their sleep, is ‘under promise, over deliver’. By this I mean I have never wanted to make grand statements, or shout from the rooftops that what we do is the best. Rather, Soho House has been built steadily on the strong foundations of warmth, quality, comfort and familiarity – and I firmly believe that it is these principles which have garnered such loyalty, support and a deep-rooted connection with our members.

The Membership Collective Group

After 25 years, we now find ourselves in the position of being a global platform for our memberships. I’m incredibly proud of how we’ve grown memberships for social, work, and retail under Soho House, and have evolved our platforms to create new opportunities for our existing members, as well as potential new members. Now, as MCG, we can leverage the expertise and infrastructure we have built, add new membership concepts such as The Ned and Scorpios, and enable our members to connect and flourish all over the world.

We will continue to open physical Houses – expanding our footprint across Europe, the Americas, Asia and Africa – and launch new types of membership that can be scaled globally. As well as guiding our decision-making on future House locations, the appetite for Cities Without Houses membership has also given us proof of concept for a digital membership, not tied to a physical space.

Offering a new digital-only option will make our membership truly global and diverse, enabling the best creatives from all over the world to make meaningful connections with each other: from an established producer in Ghana to a 22-year old scriptwriter in West Hollywood, or the founder of an emerging tech start-up in Jakarta to a digital designer in Beirut.

My vision for the Soho House app (SH.APP) has always been for it to be like having a House in your pocket. It’s our central destination for members to make bookings and payments, to connect with each other and access video content and podcasts – made for our members by our members. With this digital infrastructure in place, and a membership that thrives within a virtual space, there is scope for highly scalable connection, all over the world.

 

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The next 25 years

As the business has ‘grown up’, our culture has evolved whilst still retaining the unique energy that’s been integral in getting us to where we are today. We’ve strengthened our leadership team with new talent that complements the passion, experience and vision of our multiple long-standing employees who have grown up with the business themselves.

We’ve also put a renewed focus on our company values, and launched our social responsibility and sustainability program, House Foundations – which covers the important work we have started on diversity and inclusion, sustainability and mentorship. We are committed to reflecting a rich cross-section of people and experiences, from the members who sit on our committees to our employees around the world, and making a positive difference in the communities that we operate in. Creating opportunities for emerging talent from a diverse range of backgrounds to learn new skills, take the next step in their careers, or get a new project off the ground means a great deal to me personally and programs like Soho Chance and Soho Apprenticeship will enable us to make more progress in these areas.

Whilst we’ve expanded globally, we have been single-minded in retaining a local sensibility. Every new space or project receives the same dedicated focus and passion as our original House opening on Greek Street, Soho. We never take anything for granted, we’re grateful for every one of our members’ support, we’re always learning, listening and trying to improve.

As we ready ourselves to take the step of becoming a public company, our commitment to putting members at the heart of everything we do remains steadfast. This move will enable us to accelerate our investment in improving our member’s physical and digital experiences, always taking a long-term view on what is right for them and their membership.

As we grow, the value of our membership grows as members access new spaces, new communities, new connections, new content and new experiences. There is so much opportunity for growth, and this IPO means we can share this journey with our members, our teams and our new investors.

Best wishes,

 

LOGO

Nick Jones

Founder and CEO

 

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before making a decision to invest in our Class A common stock. You should carefully read this prospectus in its entirety before making an investment decision. In particular, you should read “Risk Factors” beginning on page 33, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 84 and the consolidated financial statements and notes thereto and other financial information included elsewhere in this prospectus.

In this prospectus, we make certain forward-looking statements, including expectations relating to our future performance. These expectations reflect our management’s view of our prospects and are subject to the risks described under “Risk Factors” and “Special Note Regarding Forward-Looking Statements and Market Data.” Our expectations of our future performance may change after the date of this prospectus and there is no guarantee that such expectations will prove to be accurate.

MEMBERSHIP COLLECTIVE GROUP (‘MCG’)

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 1995 and remain the only company to have scaled a private membership platform with a global presence. Over the last 25 years, we have expanded our membership expertise and diversified our offerings — both physically and digitally. As of April 4, 2021, we have over 119,000 members (including over 111,300 Soho House members) who engage with MCG through our global portfolio of 28 Soho Houses, nine Soho Works, The Ned in London, Scorpios Beach Club in Mykonos, Soho Home, our interiors and lifestyle retail brand, and our digital channels.



 

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LOGO

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 the Soho district of 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. As of April 4, 2021, Soho House is a membership of more than 111,300 creative and loyal individuals. 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 experience. We enhance our member experience through our digital channels, including our app (the ‘SH.APP’) and our website. Our vision for the SH.APP has always been for it to be like having a House in your pocket. It’s our central destination for members to make bookings and payments, to connect with each other and access video content and podcasts — made for our members, by our members. Annually, we host thousands of physical and digital member events worldwide, spanning film,



 

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fashion, art, food and drink, well-being, work and music — and help our members forge connections to bring them closer together.

Our membership expertise, honed through the growth of Soho House, has led to our evolution into the Membership Collective Group, a home to numerous memberships including Cities Without Houses, Soho Works, Soho Friends, Soho House Digital Membership (which we plan to launch in late 2021), SOHO HOME+ and Ned’s Club. By designing, curating and growing our membership offering, our membership platform can quickly and easily respond to shifting lifestyle trends and the evolution of our members’ needs. Our memberships work together, allowing us to reach new audiences with a set of interconnected offerings.

 

LOGO

Everything we do across these memberships begins and ends with our members. The foundation of our member experience has been crafted over our 25-year history and is built on the following pillars:

Membership: We are in the business of forging connections and bringing people together. Our diverse global membership is the soul of our company. It is the people that define our culture and shape the experience — in turn attracting new members.

Physical and digital spaces: We create and operate interconnected spaces. Each of our physical locations is designed to reflect our members and the local community that they serve. Our digital platforms extend our connection with members beyond our physical spaces, in turn significantly enhancing the member experience.

Design: Our design DNA is instantly recognizable across all of our membership models, whether in our Houses, Soho Works, The Ned, Scorpios Beach Club or Soho Home. While each House is unique, they each have a consistency in their architectural and interior style that has come to define the Soho House experience. In each new House or site that we develop for our other brands, this style is interpreted for local tastes and preferences, reflecting the culture of the respective city.



 

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Services, products and experiences: Our member-obsessed culture drives us to relentlessly improve the quality of the services, products and experiences we offer to our members. We do not cut corners or compromise on quality, taking the long-term view that there is no substitute for the highest quality services, products and experiences when it comes to fostering loyalty from our members.

Innovation: We have always strived to adapt and evolve by anticipating our members’ needs and wants. Innovation has always been part of our culture and approach, and we have used that mindset to create new memberships to serve a wider audience of people who desire personal connection via new channels.

House Foundations: We are committed to integrating the pillars of our social responsibility and sustainability program, House Foundations, into everything we do.

Sitting at the heart of MCG, Soho House has a highly loyal membership base, with annual Soho House Member Retention rates averaging 94% between fiscal 2016 and 2020. Our membership has remained resilient through multiple economic cycles and the COVID-19 pandemic. When our physical sites were forced to close as a result of the COVID-19 pandemic, there was minimal impact on the retention of Soho House members, with the Soho House Member Retention rate remaining at 92% for fiscal 2020. We also saw the demand across all of our membership brands strengthen, with over 30,000 applications for our membership brands submitted during fiscal 2020. The power of our model is driven by the important role we believe that we play in our members’ lives and the value we consistently provide them for their membership fees. We believe our retention compares favorably to leading consumer subscriptions or memberships—across music, media, fitness, entertainment and commerce.

The demand for our membership is also demonstrated by our large and growing global wait list, which as of January 1, 2021 stands at over 48,000 applicants. Awareness of our distinct membership offerings and their scarcity is spread by our members organically through word of mouth, social media and press coverage. With virtually no marketing or sales costs associated with acquiring new members, we have been able to grow our membership by a 16% compound annual growth rate (‘CAGR’) between fiscal 2016 and 2020, while expanding our Membership Revenue at a 24% CAGR during the same period.

There are multiple consumer forces at play that have increased the relevance of memberships. We have observed a secular shift in the ways that people live and work—with less time spent in traditional corporate offices and more time in social spaces that encourage creativity and mutual engagement. We believe that these trends will only accelerate, and that the freedom to be able to choose where to live and work—particularly in light of the COVID-19 pandemic—will likely have a significant impact on our target market. We believe this will create an even greater demand for curated communities that can grow and thrive in a more deliberate environment.

For first quarter 2021, we had total revenues of $72 million, a net loss of $93 million and Adjusted EBITDA of $(23) million. For first quarter 2020, we had total revenues of $142 million, a net loss of $45 million and Adjusted EBITDA of $(9) million. For fiscal 2020, we had total revenues of $384 million, a net loss of $235 million and Adjusted EBITDA of $(44) million. For fiscal 2019, we had total revenues of $642 million, a net loss of $128 million, and Adjusted EBITDA of $18 million. For fiscal 2018, we had total revenues of $575 million, a net loss of $90 million, and Adjusted EBITDA of $37 million.

For first quarter 2021, of our $72 million in revenue, $40 million (56%) was attributable to Membership Revenues, $16 million (22%) to In-House Revenues, and $16 million to Other Revenues (22%). For first quarter 2020, of our $142 million in revenue, $48 million (34%) was attributable to Membership Revenues, $68 million (48%) to In-House Revenues, and $26 million to Other Revenues (18%). For fiscal 2020, of our $384 million in revenue, $177 million (46%) was attributable to Membership Revenues, $127 million (33%) to In-House Revenues, and $81 million to Other Revenues (21%). For fiscal 2019, of our $642 million in revenue, $168 million (26%) was attributable to Membership Revenues, $312 million (49%) to In-House Revenues, and



 

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$162 million to Other Revenues (25%). For fiscal 2018, of our $575 million in revenue, $134 million (23%) was attributable to Membership Revenues, $271 million (47%) to In-House Revenues, and $170 million to Other Revenues (30%). Please see “—Summary Historical Consolidated Financial and Operating Data” for a definition of Non-GAAP Adjusted EBITDA and a reconciliation to net loss, the most directly comparable GAAP measure.

Membership Revenues are comprised of annual membership fees and one-time initial registration fees paid by members. In-House Revenues include all revenues realized within our Houses, including food and beverage, accommodation, and spa products and treatments. Other Revenues include all revenues not realized within our Houses, including Scorpios, Soho Works and standalone restaurants, design and procurement fees from Soho House Design and Soho Home among others. We view Membership Revenues and In-House Revenues as interrelated, insofar as although there is no minimum spend for any member on our In-House offerings that generate In-House Revenues, in practice the significant majority of In-House Revenues are generated by our members, and the pricing of our In-House offerings reflects that accordingly.

 

TOTAL MEMBERSHIP (THOUSANDS)

 

  

MEMBERSHIP REVENUE (MILLIONS)

 

LOGO   

 

LOGO

 

*

Represents Soho House Member Retention only.

OUR MEMBERSHIP PLATFORM

All of our memberships have been built to enrich the lives of their members, as well as expand our membership offering to a broader audience.

SOHO HOUSE

Soho House remains at the core of our membership platform by creating a foundation upon which additional membership businesses can be built and scaled. While our physical Houses provide our foundation, the people inside them are the soul of Soho House. As a membership founded for the creative industries, we are proud to have championed members who have gone on to shape our cultural landscape as world class writers, artists, performers, directors, founders, designers, and producers – all reflecting the spirit and energy of Soho House.

The membership of each House is assembled by a select committee of influential creatives and innovators that represent the local area in which the membership is founded. Our members actively engage in creating the culture of each House, helping to shape and localize it by participating in member events and contributing to editorial and digital content. We believe this adds to the value of each House, enriching the membership and



 

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enhancing the attractiveness of membership to prospective members worldwide. With a current US Every House annual membership fee of approximately $3,400 providing access to all of our Houses globally, we believe our membership offering provides compelling value to our members that increases as we add new Houses and more members to our global community. Our Houses attract members from every demographic, with members from “Generation Z” (21 years old and younger) and “Millennials” (22- to 37-year-olds) constituting the fastest-growing cohorts. We also believe that the pricing of our In-House offerings represents great value to our members because of the level of quality provided, reinforcing the overall membership experience, rewarding their brand loyalty and creating opportunities for future and recurring revenues.

 

LOGO

 

Information on the websites and social media platforms referenced above is not incorporated by reference into this prospectus.

We created the following types of membership under Soho House to reach a broader audience and enhance the experience of our existing members:

 

   

CITIES WITHOUT HOUSES

In 2017, we introduced a new type of Soho House membership known as Cities Without Houses (‘CWH’), which opens up the Soho House membership to people who live in cities where we do not yet have a physical House. This membership allows us to welcome members to our global community in new geographies, generates additional revenues on our existing base of Houses and provides intelligence for future growth, which we have employed to open new Houses in certain locations, including in Austin, Texas and Paris, both of which are expected to open in 2021. We currently have more than 5,000 CWH members across 45 cities, paying an annual US membership price of $2,630.



 

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SOHO HOUSE DIGITAL MEMBERSHIP

The ambition for Soho House has always been to create a truly global membership that brings creative people together, from all over the world. We believe that we will be able to achieve this through the introduction of Soho House Digital Membership—a new, paid digital-only membership that we plan to launch in late 2021. Not limited by our physical footprint, Soho House Digital Membership will expand our global reach, allowing us to move further into Asia, Africa and South America, adding fascinating creatives from dynamic cities to our membership.

Soho House Digital Membership will be subject to the same application and approval process as Soho House membership, allowing like-minded individuals to connect, communicate and collaborate with each other, in a purely digital space through the SH.APP. It will make our membership truly diverse, and will enable the best creatives from all over the world to make meaningful connections with each other. In the same way that we’ve grown Cities Without Houses membership in 45 cities around the world, we will use our connections and liaisons on the ground in new cities to build awareness of digital membership, growing it organically through existing creative communities.

By leveraging our digital platforms in this way, and removing the reliance on physical spaces to experience the benefits of our membership, we have created a gateway to previously untapped growth opportunities. We believe this new membership type will be attractive to potential members who are already used to socializing, networking and working digitally. Existing Soho House members will also receive the full functionalities of the Soho House Digital Membership, and therefore, the introduction of the Soho House Digital Membership only serves to improve the richness of their membership experience, making it more valuable – with new opportunities to connect with and consume content from a truly global and diverse membership base.

 

   

SOHO FRIENDS

There are a significant number of people who enjoy the Soho House way of living and who have already visited our Houses as guests, stayed in our bedrooms, or visited our public restaurants and spas, but do not currently have a Soho House membership. To respond to this audience, we launched Soho Friends in November 2020 for an annual subscription cost of £100. We offer access to physical spaces, including Soho House bedrooms, and Soho Studios (our new social spaces for Soho Friends and Soho House members) that host curated programs of events and screenings, with additional benefits from our restaurants, spas and online retail brands, although Soho Friends do not have full access to our Houses. Between November 2020 and April 2021, we have received almost 6,000 applications, the majority of which originated from a recommendation of a Soho House member or a MCG employee, and accepted over 4,000 Soho Friends members. We intend to grow this membership brand in a measured way so that our Soho House members continue to account for the majority of visitors to our Houses and restaurants.

SOHO HOME

Soho Home was created as a result of the constant requests from our members to recreate the look and feel of the Houses in their own homes. Soho Home is an interiors and lifestyle retail brand that offers handcrafted furniture, lighting, textiles, tableware and accessories through e-commerce. Over the past year, we have transformed Soho Home into a high growth retail business, and in October 2020, we launched SOHO HOME+, which is a subscription-based membership platform with over 2,600 members as of April 4, 2021, that offers price discounts, free delivery, and expert design advice plus early access to new collections and seasonal sales for an annual price of £60.

SOHO WORKS

First launched in 2015, Soho Works provides its members with the space and resources to work alongside other like-minded individuals and businesses — facilitating connections and providing the tools to flourish. Aimed at



 

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existing Soho House and Soho Friends members, Soho Works draws on the same design principles and membership ethos as Soho House, but is a space purposed entirely for work and creative collaboration.

Beginning with one location in London, we have since opened eight additional sites in London, New York and Los Angeles over the last two years and as of April 4, 2021, we had over 1,000 members. Soho Works membership rates vary by location and Soho House membership status. For Soho House members, a US Soho Works membership ranges from $250—$600 per month, depending on membership type.

SCORPIOS BEACH CLUB

Set in a cove on the southern tip of Mykonos, Scorpios offers a one of a kind beach experience with a well- established globally recognized brand. With a restaurant, terraces and daybeds, and a distinctive wellness offering, Scorpios enriches the lives of its guests who are looking to escape from their daily lives. We believe the Scorpios concept has significant potential to expand into additional locations as a key part of our platform and we expect to open our second site in Tulum, Mexico at the end of 2022. While we do not currently offer a standalone membership, there is significant interest from our customers to do so and we therefore plan to launch a unique Scorpios membership in 2022.

THE NED

The Ned has created a new space in the heart of the City of London for its members to meet, eat, drink and socialize. The Ned brand seeks to embody a “city within a city” full-service destination, by playing host to multiple restaurants, bedrooms, a range of grooming services, spa, gym and a full service members’ club. The membership offered by The Ned (‘Ned’s Club’) is aimed at a broader group of professional people. As of April 4, 2021, Ned’s Club had over 3,000 members paying an annual subscription price of £3,150, and intends to expand into additional cities beyond London, as well as launch Ned Friends – a more accessible membership similar to Soho Friends, for frequent visitors and customers of The Ned. We receive management fees under our hotel management contract for the operation of The Ned.

OUR STRENGTHS

We have eight core strengths that give the Membership Collective Group an enduring competitive advantage:

TWENTY-FIVE YEARS OF EXPERIENCE

We are the only company to have pioneered and scaled a private membership platform with a global presence, anchored in a loyal and diverse member community, and network of interconnected physical and digital spaces. Each of our communities serve as cultural cornerstones in their respective cities, and we attribute our success to the first-mover advantage, gained through identifying a unique opportunity in the marketplace early.

Crucially, the value of our membership and brand strengthens as we expand into new cities and properties, which is in contrast to other membership-based companies that may experience brand dilution as they scale. The value of an Every House membership becomes more compelling to both new and existing members as we grow our business, enhancing our revenue potential.

A GROWING AND LOYAL MEMBERSHIP

The MCG’s annual membership fees from our growing network of more than 119,000 members (including over 111,300 Soho House members) as of April 4, 2021, create a recurring and predictable revenue stream that has proven to be resilient across economic cycles. The stability of our Membership Revenue is further supported by our industry-leading retention rates, averaging approximately 94% for annual Soho House Member Retention between fiscal 2016 and 2020.



 

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The broad appeal of our membership underpins our attractive long-term growth, and we have seen the relevance of our curated membership grow over time. Since we enabled non-members to register and create public accounts on our website for the first time in April 2020, we have seen approximately 242,000 non-members sign-up to our site as of January 2021. Our Membership Revenues have grown at a 24% CAGR between fiscal 2016 and fiscal 2020.

A WAY OF LIVING

We have established a distinctive style and way of living that has given our memberships a notable presence in popular culture, evidenced by our strong social media following. As of May 2021, we have almost 1 million Instagram followers across our global accounts. In 2020, our social media reach has grown by almost 25%, with our engagement rate increasing 63% year on year. Our brand recognition extends far beyond our current geographic footprint, providing a distinct advantage in the execution of our growth plan.

A PLATFORM TO LAUNCH NEW MEMBERSHIPS

We have developed a deep understanding of membership businesses, and built digital systems and in-house design and development teams, which together form the foundation of our membership platform. We are able to significantly reduce start-up costs and absorb expenses associated with launching and operating a new membership by leveraging our existing membership base and physical and digital assets, which we believe can lead to an attractive margin as the membership matures.

Over the last two years we have developed a digital platform which is feature rich, robust and scalable. The platform powers our member experiences – both on the SH.APP and on our web platforms and serves as the backbone for acquisition, membership management and member services. We have customized this platform through proprietary technology combined with best of class software. Our data warehouse and use of single-sign-on technology extends the platform allowing our members to use digital products seamlessly – whether in our Houses or outside – with their experiences appropriately personalized. We extended the platform for new types of memberships in 2020, and subsequently for associated businesses, and in late 2021 we plan to launch our new, paid digital-only Soho House Digital Membership.

A FLEXIBLE REAL ESTATE MODEL

Our highly stable and visible membership base enables us to consider non-traditional real estate and provides us with opportunities to create unique spaces with character and soul. Soho House Design, our talented team of in-house designers and architects have transformed a variety of historic or under-utilized buildings into vibrant spaces that have become cornerstones of their emerging and culturally rich neighborhoods. Given our market recognition, we are constantly approached by landlords and developers directly to consider their properties for our new locations, and act as anchor tenant, resulting in more efficient acquisition and development costs.

Our real estate partners benefit from the impact of the Soho House brand on the value of their underlying property and surrounding neighborhood. This enables us to achieve favorable lease agreements, increase tenant improvement allowances from landlords to support our capital light expansion, and in some cases receive a share of the upside in the value of the property. Such dynamics have allowed us to open multiple Houses in a capital efficient manner across Shoreditch, London, the Meatpacking district in New York, the Gothic Quarter in Barcelona and the downtown industrial arts district in Los Angeles. We expect to increasingly apply our capital light model to the future Houses in our pipeline. We typically enter into long-term leases (20-year initial term plus multiple extension options) that provide us with certainty of long-term usage of the real estate.

MULTIPLE PATHWAYS TO DRIVE GROWTH

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white space both in countries and cities where we already operate, as well as in new geographies. Many major markets remain untouched, and we know from our Cities Without Houses membership and our broader digital offers that there is significant untapped potential for physical sites in cities and countries across the globe. Once Houses are opened, we have a track record of growing revenue sustainably—due to the strength of demand for our memberships, combined with our ability to add new members with limited incremental investment.

We are also able to expand our addressable market by launching new memberships that meet the needs of a broader audience and complement our current offering. This extends to the digital space, where we have created a gateway to previously untapped growth opportunities via our new digital membership. We are still in the early stages of growth, and these opportunities give us confidence in our ability to sustain attractive growth over the long-term. It is the complementary nature of these physical and digital platforms that drive operational efficiencies, and by moving members through our ecosystem, create multiple touchpoints for revenue generation.

AN ATTRACTIVE FINANCIAL MODEL

Our financial profile is characterized by high growth, recurring revenue and margin expansion, underpinned by the economics of our physical locations and membership.

Our unique business model provides compelling House-level economics driven by our ability to grow the member base of each House over long periods of time as operations are refined and frequency of use by existing members normalizes. The ability to add members to our Houses over time drives an increase in House-level contribution and House-level contribution margin over the long-term and sets us apart from traditional hospitality companies, which have more fixed occupancy profiles. To this end, our more mature Houses typically have larger membership bases and generate higher House-Level Contribution Margins. Notably, the membership list of our oldest House continues to grow and maintains a wait list, demonstrating the continued popularity of even our mature Houses.

For our larger, amenity-rich Houses that anchor our brand in a city, we target stabilized average revenues of $20 million to $30 million by the fifth year of operation. As at fiscal 2019 we achieved or exceeded this target for eight out of our nine large Houses that had been open for at least five years. We target House-Level Contribution Margins of 20% to 30% by the fifth year of operation and as at fiscal 2019, we achieved or exceeded this target for seven out of nine of our large Houses that had been open for at least five years. We target cash-on-cash returns in excess of 50% once membership reaches a level that we consider normalized based on the size of the House. Historically this goal has been achieved in six out of our nine large Houses within five to 11 years of opening. Under the new asset light strategy we believe this goal can be reached in three to five years, although none of our Houses opened under this strategy have been operating long enough to achieve this target. Due to the impact of the COVID-19 pandemic on our sales and profitability, the metrics above were not achieved in fiscal 2020 or in fiscal 2021 to date.

Historically we have made significant investments in the development of our Houses, either in purchasing an ownership position and/or making material investment in the build out of the property alongside our landlords. Beginning several years ago, with the growing reputation of Soho House as a marquee tenant, we began making a conscious shift to an asset light development model to conserve and drive improved return on our capital. Under this model, our landlord agrees to fund a substantial portion, or all, of the development costs of a House, to our design specifications, leaving us to fund only pre-opening expenses (and art and other unique interior design elements). Virtually all of the Houses that we plan to open over the next three years reflect this asset-light model.

While our investment in our full-size Houses has historically approached, or in certain cases exceeded, $10 million, under our asset-light model we expect our contribution to open new Houses, comprised primarily of pre-opening expenses and art, will fall in the $3 million to $6 million range. Despite a modest increase in average rents from this strategy, we believe the considerably reduced capital investment will result in meaningfully improved cash-on-cash returns and capital efficiency.



 

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A new Soho House membership incurs virtually no membership acquisition cost, since we do not conduct any paid marketing. Driven by consistently high retention and minimal costs associated with retaining or supporting our members, Soho House enjoys a very attractive member lifetime value. We believe new memberships will also provide compelling economics and be accretive to our profit, as they can be created and operated in an asset-light manner that leverages the existing platform.

AN EXPERIENCED AND FOUNDER-LED MANAGEMENT TEAM

Our executive management team is led by our Founder and Chief Executive Officer, Nick Jones, who has over 40 years of experience within the membership and hospitality businesses. While we were a privately-owned enterprise, Nick guided our international expansion through both strong and notably weak economic environments to build what has become one of the world’s leading membership and lifestyle brands.

Our executive management team brings considerable and diverse experience gleaned from previous senior roles in the hospitality, retail, design, digital, creative and financial services industries. Andrew Carnie, our President, joined Membership Collective Group from retail brand Anthropologie, where he most recently served as Group President. Several other members of our senior team, including our Chief Membership Officers and Chief Operating Officer, have been with the company since the beginning, working their way up to become some of our most valued leaders.

We have built a world class in-house digital team that partners with our operational experts to create and grow our global platforms. We also leverage the expertise of our shareholders, who have an extensive operational track record in the hospitality sector. Ron Burkle, who is recognized as a leading investor in hospitality and related consumer industries, takes an active role as the Executive Chairman of our Board. Richard Caring, an investor since 2008 and one of the members of our Board, also brings years of industry and operating experience to the group.

OUR GROWTH PLAN

We are still in the early stages of our expansion and we believe our track record as well as our core capabilities have positioned us to achieve significant and sustained growth through the following initiatives:

OPEN NEW SOHO HOUSES

Expansion into new areas is exciting for us and our members, and furthers the reach of our brand. Opening Houses in existing cities satisfies unmet demand (as represented by our local wait lists), and leverages our existing infrastructure.

Since January 1, 2018, we have opened 10 new Houses, increasing our total House count by 56% to 28 Houses as of April 4, 2021. Our current pipeline anticipates opening eighteen new Houses in total by year-end 2023, which, if achieved, would increase our worldwide House total to 46, resulting in a 64% increase to our existing House base. Our development pipeline extends our global footprint to exciting cities such as Tel Aviv, Paris, Rome and Austin as well as new destination experiential Houses, such as a wellness retreat in Lake Arrowhead and a ranch in Sonoma. We continue to see substantial long-term growth opportunities in the Asia Pacific, Africa and South America regions. We currently anticipate a long-term growth target of three to five Soho House openings annually over time.

Notably, aside from the temporary closure of certain Houses for public health and safety reasons (including the COVID-19 pandemic) or for refurbishment, we have never closed a House at any point in our 25-year history.



 

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We have a proven track record of consistently opening successful new sites that achieve member growth targets and generate strong long-term unit economics.

CONTINUOUSLY ENHANCE THE MEMBER EXPERIENCE

We maintain a relentless focus on enhancing the member experience and expanding the role we play in our members’ lives. We continue to elevate the quality of our food and beverage, accommodation, spa services, events and other goods and services. In addition to adding new Houses and new experiential destinations, we are growing our wellness concept through the development of Soho Health Clubs, which will offer a unique socially optimized space for members to move their bodies, look after their health and well-being. Over the past twelve months, we have introduced a number of digital solutions to improve our member experience including ‘House Pay’, our proprietary digital payment service, ‘House Guest’, our global guest check in service, as well as other room and table booking functionalities on the SH.APP to make it easier for our members to stay or dine with us. We have also made the majority of our House spaces ‘laptop free’ areas, ensuring that we always maintain the ambience and social atmosphere of our spaces. In fiscal 2020, we hosted more than 300 digital events on the SH.APP, and a total of 827,000 bookings have been made on the SH.APP.

CONTINUE TO SCALE EXISTING MEMBERSHIPS

GROW SOHO FRIENDS MEMBERSHIP

In 2019, there were over one million non-member guests who visited our Houses, many of whom visited frequently. Our intention is to continue to convert these customers into Soho Friends members. We recently introduced our House Guest system to collect data and better understand our customers and visitors, which has created a foundation to scale Soho Friends. We will be launching Soho Friends membership in North America and Europe in 2021, as well as opening new Soho Studio spaces.

EXPAND SOHO HOME AND SOHO HOME+ MEMBERSHIP

Over the past year, we have transformed Soho Home into a high growth retail business with its own subscription-based platform. In fiscal 2020 and in first quarter 2021, Soho Home grew its online sales by 52% and 141%, respectively, benefiting both from a newly designed product range, a reinvigorated website as well as a favorable market backdrop due to more customers shopping online and shopping for homeware. In October 2020 we launched SOHO HOME+, the UK’s first homeware subscription service, and gained over 2,600 members as of April 4, 2021, providing a recurring membership revenue stream.

Soho Home’s brand awareness increased during fiscal 2020 due to the issuance of membership credits and the ability to redeem these on Soho Home online, particularly in North America where we were previously underpenetrated. Online sales in North America increased 188% during fiscal 2020 and 278% in first quarter 2021. We believe Soho Home has significant potential to continue its strong digital-first growth, followed by the expansion of physical retail spaces.

GROW SOHO WORKS

In recent years, we have expanded Soho Works by adding new locations as well as adding new members to the existing locations and developing our Soho Works digital platform. We believe there is a significant opportunity to grow Soho Works to 19 total locations by 2023 that are primarily located next to existing Soho House sites, due to changes in the way that people live and work – with less time spent in traditional corporate offices and more time in social communities.



 

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OPEN NEW SCORPIOS BEACH CLUB SITES

Scorpios will play a critical role in providing a must-visit destination for many of our members, striving for a unique experience with a particular focus on wellness. Scorpios, in Mykonos, currently attracts an affluent, internationally diverse and loyal customer base, which gives us confidence in the appetite for future locations and a future membership brand. We plan to open one new Scorpios Beach Club per year from 2022 onwards with our second site due to open in Tulum, Mexico at the end of 2022. Given our customer base, we expect to open new locations and launch new membership types in the future.

EXPAND THE NED

The Ned has identified an additional site for opening by the end of 2021, and also plans to open another by the end of 2022. There are plans to continue opening one to two new sites for The Ned annually going forward. The Ned will play a meaningful role in broadening our target audience, who crave an authentic membership experience. We have a management contract for existing operation of The Ned in London and receive management fees for our operation of The Ned.

LAUNCH AND GROW NEW MEMBERSHIPS

In late 2021, we plan to launch Soho House Digital Membership. This digital-only membership will leverage our existing digital platform, which is being developed to include new features that enable meaningful digital exchange. Members with this membership will have an enriched profile, be able to search for other members, be recommended to other members, grow their digital network, and communicate through direct messaging, audio and video. Through proof of concept, we know that members see value in connecting for social, work and practical purposes. We are now building and finessing this membership type and are confident of launching a valuable digital product. Like our current membership types, the digital membership will continue to evolve post launch based on member feedback.

Our track record gives us the confidence to successfully scale new memberships globally, while providing us with the insight necessary to understand where to extend the Membership Collective Group platform. Our know-how of operating physical spaces and complementing that with sophisticated digital offerings, will help further extend our offer. For instance, the digital platform will extend Soho House’s digital assets – in connections, bookings, content and payments – through the SH.APP and our websites – to new memberships, business areas (e.g. wellness) and business acquisitions.

HOUSE FOUNDATIONS

House Foundations is our social responsibility and sustainability program, the pillars of which form the foundations of our global membership platform. House Foundations brings together our work in diversity and inclusion and environmental sustainability – as well as coaching and nurturing talent in the industries that we operate in.

We are committed to building an inclusive culture and helping to make the creative industries more accessible to emerging creative talent around the world. We value diversity and want our members and teams to be represented in places where everyone feels at home.

Our mentorship program connects members to young people looking to start their careers in the creative industries. We focus on supporting people from marginalized or lower socioeconomic groups in the local communities around our Houses. We currently have over 300 mentees paired with our members in four cities and are expanding into six additional global cities in 2021. In our last London cohort pre-COVID-19, 94% of mentees received paid job offers as a result of the program.



 

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Soho Chance is our latest initiative, designed to help entrepreneurs and creatives who are starting out, or starting again, to get a new project off the ground with coaching from our teams and access to our physical and digital platforms. In summer 2021, we expect to launch an entry-level training program called Soho Apprenticeships to provide practical skills, training and support to those with minimal to no experience or qualifications.

The work we do through House Foundations is underpinned by Soho Give, a charitable foundation supporting causes that align with Soho House’s values. The charity will support three key areas; aiding development in the creative and hospitality industries for those from under-represented and lower socioeconomic backgrounds, helping to build a more sustainable world in the way Soho House runs its operations and giving support to the local communities where Soho House sites are located.

We are also in the process of embedding sustainable management practices across our business. This includes initiatives that range from where we source our food to how we design and build our Houses. We have taken steps to strengthen our local sourcing and supply chain policies and practices, reduce our environmental impact with changes to our waste management and energy efficiency, and we recently joined the United Nations Global Compact, thereby committing to tracking and measuring our social and environmental impact against the UN Sustainable Development Goals (‘UN SDGs’). Our ambition is to aggregate the power of our business, suppliers, partners, employees and members to make a positive contribution to society and the environment.

Our House Foundations project is the vision of our Founder, Nick Jones, and is led and championed by the Board and the leadership team. Our team, supported by our expert advisors (The Sustainability Group) reports to the Chief Operating Officer, and aims to ensure the Company’s environmental, social and corporate governance (‘ESG’) program has a positive impact on the environment, the lives of our members, and the wider communities in which we operate.

RESILIENCE THROUGH THE COVID-19 PANDEMIC

The COVID-19 pandemic has acted as a catalyst for a period of significant transformation across MCG and clearly demonstrated the resilience of our membership-led business model.

Despite the significant impact on our sales and profitability that the pandemic had in fiscal 2020 and continues to have in fiscal 2021, it has allowed us to accelerate changes within the business, both to focus even greater energy on improving our offer for members, and to drive sustainable efficiencies through a lower cost base. We accelerated our digital expansion and launched new membership types, Soho Friends and SOHO HOME+, and we have further digital projects ready to launch in 2021.

In response to the pandemic, we made significant changes to lower our cost base in a structured way. We implemented an extensive staff restructuring program, through which we reduced the number of roles in our support office and reorganized the team structures at our sites. As a result, we expect our annual salaries and wage cost as a percentage of sales excluding membership to run at a lower percentage when we fully reopen. We have hired a new procurement team focused on delivering a program to reduce our indirect costs through initiatives such as vendor consolidation, renegotiation of existing contracts, as well as other cost reduction measures. We have also lowered our cost of sales on food and beverage through menu simplification as well as through better stock and waste procedures at our sites. We believe we will be able to maintain these lower cost ratios when our business levels return to pre-COVID-19 levels.

While the pandemic has allowed us to implement these changes at pace, it has adversely affected our near-term operating and financial results. As a result of the government-imposed lockdowns in many of the territories in which our properties are located, a majority of our sites have been forced to temporarily close or operate under restricted hours and with social distancing regulations in place throughout much of 2020 and into 2021. As a



 

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result of the forced closures and restricted hours, our In-House Revenues declined significantly. In addition, for paying members, we issued membership credits in fiscal 2020 and during fiscal 2021 equivalent to the face value of their membership for the period of time their local House was closed that can be redeemed on Soho Home online as well as redeemed for food and beverage purchases (but not membership fees) once the Houses reopen.

In light of these forced closures for extended periods, we have seen a small increase in attrition among existing members, as well as an increase in the number of members freezing their memberships. Each Soho House member may request a temporary freeze to their membership on a six, nine or twelve month basis during which time the member will not be required to pay membership fees but will not have access to the Houses or any of our membership apps, and will not receive any communications from us. At the end of the freeze period the member will either resume their membership and continue paying membership fees, or their membership will be cancelled.

Our 25-year track record of membership growth and loyalty leads us to believe that these impacts are likely to be short term in nature. We note that through the course of 2020, and in spite of the pandemic, we saw further additions to our member waitlist, attesting to the continued desirability of our platform.

So, while COVID-19 has clearly been and continues to be a challenge in the near-term, we expect the ways in which we have improved our business to benefit us in the medium- to long- term. We believe the pandemic has not only underlined the resilience of our business model and the significant and sustained attraction of our memberships, but it has also created a greater demand for curated membership that can grow and thrive in a more deliberate environment.

Recent Developments

Repayment of US PPP Loans

On April 24, 2020, in respect of our various US subsidiaries, we received 11 Payroll Protection Plan loans (“PPP loan”) totaling $22 million, as a 1% interest rate and a maturity of 2 years. Payments under these loans were deferred for the first 6 months for both principal and interest. We used amounts under these PPP loans for qualifying expenses, including, but not limited to, payroll costs, rent, interest on mortgage debt and utilities over the 24-week eligibility period. We repaid these PPP loans in full on April 1, 2021.


 

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LOGO



 

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SUMMARY RISKS ASSOCIATED WITH OUR BUSINESS

An investment in our Class A common stock involves numerous risks described in “Risk Factors” and elsewhere in this prospectus. You should carefully consider these risks before making a decision to invest in our Class A common stock. Key risks include, but are not limited to, the following:

 

   

the current outbreak of COVID-19 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 potentially create widespread business continuity issues of an as yet unknown 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 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 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;

 

   

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 and implement our growth strategies;

 

   

changes in consumer discretionary spending and general economic factors may adversely affect our results of operation;

 

   

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 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 financial condition;

 

   

Yucaipa, through its participation in the Voting Group, will have significant influence over us after this offering, including control over decisions that require the approval of stockholders, which could limit your ability to influence the outcome of matters submitted to stockholders for a vote;

 

   

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;



 

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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 results of operation and financial condition;

 

   

if we fail to properly maintain the confidentiality and integrity of our data, including member and 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 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 restaurants;

 

   

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” beginning on page 33.

SPONSOR OVERVIEW

The Yucaipa Companies, LLC (‘Yucaipa,’ or our ‘Sponsor’) is a premier investment firm that has established a record of fostering economic value through the growth and responsible development of companies. Founded in 1986 by Ron Burkle, the firm has completed mergers and acquisitions valued at more than $40 billion and is widely recognized as one of the preeminent investors in the hospitality, retail, distribution, technology, entertainment and sports industries. As an investor, Yucaipa works with management to strategically reposition businesses and implement operational improvements, resulting in value creation for investors.

Yucaipa manages a substantial portfolio of hospitality related assets with dedicated resources focused on improving the operating performance of its investments. Yucaipa’s hospitality portfolio includes over 75 properties currently operating or under development, totaling over 15,000 rooms. Yucaipa continues to grow these platforms while seeking new ways to leverage its investment and operational expertise to further improve the value of its assets.

Yucaipa’s principal address is 9130 W. Sunset Blvd., Los Angeles, CA 90069.

After giving effect to the reorganization transactions described below under “—Our Structure” and after giving effect to the sale of the shares of Class A common stock offered hereby, Yucaipa will own approximately             shares of Class B common stock, or approximately     % of the combined voting power of our common stock outstanding after this offering (    % if the underwriters exercise in full their option to purchase additional shares of Class A common stock). As a result, we expect to be a ‘controlled company’ within the meaning of the corporate governance standards of the New York Stock Exchange (‘NYSE’), on which we intend to list our Class A common stock under the ticker symbol ‘MCG.’ See “Risk Factors—Risks Related to our Common Stock.”



 

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EMERGING GROWTH COMPANY STATUS

We are an ‘emerging growth company,’ as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not ‘emerging growth companies,’ including, but not limited to: presenting only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley; having reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy or information statements; being exempt from the requirements to hold a non-binding advisory vote on executive compensation or seek stockholder approval of any golden parachute payments not previously approved; and not being required to adopt certain accounting standards until those standards would otherwise apply to private companies.

Although we are still evaluating our options under the JOBS Act, we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us so long as we qualify as an ‘emerging growth company’ and thus the level of information we provide may be different than that of other public companies. If we do take advantage of any of these exemptions, some investors may find our securities less attractive, which could result in a less active trading market for our Class A common stock, and the price of our Class A common stock may be more volatile. As an ‘emerging growth company’ under the JOBS Act, we are permitted to delay the adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Section 107 of the JOBS Act provides that our decision to not take advantage of the extended transition period for complying with new or revised accounting standards is irrevocable.

We could remain an ‘emerging growth company’ until the earliest to occur of:

 

   

the last day of the fiscal year following the fifth anniversary of this offering;

 

   

the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion;

 

   

the day we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the ‘Exchange Act’), which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such fiscal year; and

 

   

the date on which we have issued more than $1.0 billion in non-convertible debt securities during the preceding three-year period.

OUR STRUCTURE

Our business to date has been conducted through Soho House Holdings Limited, a Jersey, Channel Islands private limited company, and its subsidiaries and joint ventures. In connection with this offering, we have formed Membership Collective Group Inc., a Delaware corporation and the issuer of the shares of Class A common stock offered hereby. Immediately prior to the consummation of this offering, (a) certain existing equity holders of Soho House Holdings Limited consisting of the Voting Group members will exchange their equity interests in Soho House Holdings Limited for a number of shares of Class B common stock of Membership Collective Group Inc. having an equivalent value and (b) the other existing equity holders of Soho House Holdings Limited who are not members of the Voting Group will exchange their equity interests for a number of shares of Class A common stock of Membership Collective Group Inc. having an equivalent value. These transactions will be accounted for as a reorganization of entities under common control. As a result, the consolidated financial



 

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statements of Membership Collective Group Inc. will recognize the assets and liabilities received in the exchanges at their historical carrying amounts, as reflected in the historical financial statements of Soho House Holdings Limited. Membership Collective Group Inc. will consolidate Soho House Holdings Limited on its consolidated financial statements. Membership Collective Group Inc. is a holding company with nominal assets and no liabilities, contingencies, or commitments, which will not have conducted any operations prior to the consummation of this offering other than acquiring 100% of the equity interests of Soho House Holdings Limited. Based upon the assumed initial public offering price of $            , which is the midpoint of the estimated initial offering price range (the midpoint of the initial public offering price range set forth on the cover of this prospectus), there will be (a)              newly-issued shares of Class A common stock issued to existing equity holders of Soho House Holdings Limited and (b)              newly-issued shares of Class B common stock issued to existing equity holders of Soho House Holdings Limited, consisting of members of the Voting Group. The Class B common stock has the same rights to dividends and distributions, whether in cash or stock, as the Class A common stock, but entitle the holder of Class B common stock to ten votes per share on matters presented to stockholders of Membership Collective Group Inc. See “Description of Capital Stock.”

Pursuant to our Certificate of Incorporation, each holder of our Class B common stock shall have the right to convert its Class B common stock into Class A common stock, at any time, upon notice to Membership Collective Group Inc., on a one-for-one basis. Additionally, shares of Class B common stock will automatically convert into shares of Class A common stock, on a one-for-one basis, upon transfer to any non-permitted holder of Class B common stock.

Concurrently with the consummation of this offering, we and the holders of our Class B common stock, consisting of affiliates of The Yucaipa Companies, LLC, and its founder and our executive chairman and director, Ron Burkle, our founder and Chief Executive Officer, Nick Jones, and one of our directors, Richard Caring (and in each case, certain affiliates and family members) (collectively, the ‘Voting Group’), will enter into a Stockholders’ Agreement pursuant to which the Voting Group will agree to vote together as a group with respect to certain matters so long as the Voting Group owns a requisite percentage of our total outstanding common stock. Immediately following the consummation of this offering, and the issuance of the Converted Preference Shares, the Voting Group will hold all of our issued and outstanding Class B common stock, representing approximately     % of the combined voting power of our common stock (or approximately     % if the underwriters exercise in full their option to purchase additional shares of Class A common stock). Once the Voting Group owns less than 15% of the shares of our total outstanding common stock, all remaining Class B common stock will automatically convert on a one-for-one basis into Class A common stock. See “Certain Relationships and Related Party Transactions—Related Party Transactions—Stockholders’ Agreement.”



 

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The following reflects our organizational structure immediately following the consummation of reorganization transactions and this offering, and the issuance of the Converted Preference Shares:

 

 

LOGO

CORPORATE INFORMATION

Membership Collective Group Inc. is a company incorporated on February 10, 2021 under the laws of the State of Delaware, United States of America, with file number 4945249, pursuant to the Delaware General Corporation Law and subordinate legislation thereunder. Our registered address in the state of incorporation is at 1209 Orange Street, City of Wilmington, County of New Castle, 19801 Delaware, United States of America, and our principal executive offices are located at 180 Strand, London, WC2R 1EA, United Kingdom. Our legal entity identifier (‘LEI’) is 213800XNSPPBRF2E5A41. Our telephone number is +44 (0207) 8512300 and our website is www.membershipcollectivegroup.com. Information on, or accessible through, our website is not part of this prospectus, nor is such content incorporated by reference herein.



 

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THE OFFERING

 

CLASS A COMMON STOCK

             shares of Class A common stock (             shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock), including              shares of our Class A common stock to be sold to the underwriters and             shares of our Class A common stock to be sold directly by us to UK Eligible Participants. The Shares of Class A common stock will be in registered form and not certificated.

 

UNDERWRITERS’ OPTION TO PURCHASE ADDITIONAL SHARES

We have granted the underwriters a 30-day option to purchase up to              additional shares of Class A common stock from us at the initial public offering price less the underwriting discount.

 

CLASS A COMMON STOCK PUBLIC OFFERING PRICE

$         per share, which is the mid-point of the price range set forth on the cover page of this prospectus.

 

CLASS A COMMON STOCK TO BE OUTSTANDING AFTER THIS OFFERING(1)

             shares of Class A common stock (             shares of Class A common stock if the underwriters exercise in full their option to purchase an additional             shares of Class A common stock) or              shares of Class A common stock if each outstanding share of Class B common stock were converted into one share of Class A common stock (as permitted under our Certificate of Incorporation).

 

CLASS B COMMON STOCK TO BE OUTSTANDING AFTER THIS OFFERING(1)

             shares of Class B common stock.

 

 

 

USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of          shares of our Class A common stock to the underwriters and          shares of our Class A common stock directly to UK Eligible Participants will be approximately $         million after deducting the              underwriting discounts and commissions and our other estimated offering expenses (assuming an initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus). If the underwriters exercise in full their option to purchase an additional              shares of Class A common stock from us, we estimate the net proceeds to us will be approximately $         million.

 

  We intend to use the net proceeds we receive from this offering to repay certain outstanding indebtedness and the remainder for general corporate purposes. See “Use of Proceeds” for further detail.

 

(1) 

The number of shares of Class A common stock and shares of Class B common stock outstanding after this offering is based on              shares of Class A common stock and              Class B common stock outstanding as of                     , 2021, after giving effect to the reorganization transactions, the sale of the shares of Class A common stock offered hereby and the conversion of all outstanding Senior Preference Shares of Soho House Holdings Limited into an aggregate of              shares of Class A common stock of Membership Collective Group Inc. immediately upon closing of this offering, based on the assumed initial public offering price of $             per share, which is the midpoint of the estimated initial offering price range set forth on the cover page of this prospectus.



 

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LISTING

We intend to list our shares of Class A common stock on the NYSE under the ticker symbol ‘MCG.’

 

VOTING RIGHTS

Upon the consummation of this offering, the holders of our Class A common stock will be entitled to one vote per share of Class A common stock, and the holders of our Class B common stock will be entitled to ten votes per share of Class B common stock. Pursuant to our Certificate of Incorporation, each holder of our Class B common stock shall have the right to convert its shares of Class B common stock into shares of Class A common stock, at any time, upon notice to us, on a one-for-one basis. Additionally, shares of Class B common stock will automatically convert into shares of Class A common stock, on a one-for-one basis, upon transfer to any non-permitted holder of Class B common stock.

 

  Pursuant to the Stockholders’ Agreement described under “Certain Relationships and Related Party Transactions—Related Party Transactions—Stockholders’ Agreement,” the Voting Group and certain members thereof will be entitled to designate a number of individuals to be included in the nominees recommended by our Board for election to our Board (including a majority of such nominees immediately following the consummation of this offering), so long as the Voting Group owns a requisite percentage of our total outstanding common stock. Following the consummation of this offering, the Voting Group and its members will be entitled to designate individuals for nomination for election to our Board as follows:

 

   

so long as the Voting Group owns at least 35% of our total outstanding shares of common stock, it will be entitled to designate nine directors for nomination, of which Yucaipa shall have the right to designate seven directors for nomination, Mr. Caring shall have the right to designate one director for nomination and Mr. Jones shall have the right to designate one director for nomination;

 

   

so long as the Voting Group owns less than 35% but at least 15% of our total outstanding shares of common stock, it will be entitled to designate six directors for nomination, of which Yucaipa shall have the right to designate four directors for nomination, Mr. Caring shall have the right to designate one director for nomination and Mr. Jones shall have the right to designate one director for nomination;

 

   

so long as the Voting Group owns less than 15% but at least 9% of our total outstanding shares of common stock, it will continue to vote as a group and be entitled to designate three directors for nomination, of which Yucaipa shall have the right to designate one director for nomination, Mr. Caring shall have the right to designate one director for nomination and Mr. Jones shall have the right to designate one director for nomination; and

 

   

in the event that the Voting Group owns less than 9% of our total outstanding shares of common stock, neither the Voting Group nor



 

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any member (subject to the following paragraph) will be entitled to designate any individuals for nomination for election to the Board;

 

  provided, however, that in the event at any time either Mr. Caring or Mr. Jones (in the case of Mr. Jones, at such time as Mr. Jones is not also our Chief Executive Officer) (including their respective affiliates and family members) shall own less than 5% of our total outstanding shares of common stock, such member shall no longer have the nominee designation rights set forth above and such designation shall instead be made by Yucaipa.

 

  Separately, in any case where any individual member of the Voting Group owns more than 5% of the total number of our outstanding shares of common stock at any time after the Voting Group owns less than 9% of the total number of our outstanding shares of common stock, each such member shall be entitled to nominate one director for election. However, the other Voting Group members shall have no obligation to vote in favor of any such nomination. Additionally, for so long as Mr. Jones serves as our Chief Executive Officer, he will be entitled to remain as a director on our Board.

 

  The members of the Voting Group will agree in the Stockholders’ Agreement to vote their shares of the common stock in favor of the directors nominated as set forth above.

 

  In the event that the Voting Group owns less than 15% of the shares of our total outstanding common stock, all remaining shares of Class B common stock will automatically convert on a one-for-one basis into shares of Class A common stock. The Stockholders’ Agreement will automatically terminate once the Voting Group owns less than 9% of the shares of our total outstanding common stock.

 

  Holders of Class A common stock and Class B common stock will vote together as a single class on all matters requiring approval by our stockholders unless otherwise required by law.

 

  Upon consummation of this offering, assuming no exercise of the underwriters’ option to purchase an additional                shares of our Class A common stock, holders of our Class A common stock will hold approximately    % of the combined voting power of our outstanding common stock, and holders of our Class B common stock will hold approximately    % of the combined voting power of our outstanding common stock.

 

  If the underwriters exercise in full their option to purchase an additional                shares of our Class A common stock, holders of our Class A common stock will hold approximately    % of the combined voting power of our outstanding common stock, and holders of our Class B common stock will hold approximately    % of the combined voting power of our outstanding common stock.


 

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  For a description of the rights of the holders of our Class A common stock and our Class B common stock, see “Description of Capital Stock—Class A Common Stock and —Class B Common Stock.”

 

DIVIDEND POLICY

We do not currently pay dividends on any of our common stock and we currently intend to retain all available funds and any future earnings for use in the operation of our business. We may, however, pay cash dividends on our common stock, including our Class A common stock, in the future. Any future determination to pay dividends will be made at the discretion of our Board and will depend upon many factors, including our financial condition, earnings, legal and regulatory requirements, restrictions in our debt agreements and other factors our Board deems relevant. See “Dividend Policy.”

 

CONTROLLED COMPANY

Following this offering, we will be a ‘controlled company’ within the meaning of the corporate governance rules of the NYSE. We intend to rely upon the ‘controlled company’ exception relating to the Board and committee independence requirements under the listing rules of the NYSE. Pursuant to this exception, we will be exempt from the rules that would otherwise require that our Board consist of a majority of independent directors and that our compensation committee and nominating and corporate governance committee be composed entirely of independent directors.

 

  The ‘controlled company’ exception does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of the Exchange Act and the listing rules of the NYSE, which require that our audit committee have at least one independent director upon the listing of our Class A common stock on the NYSE, a majority of independent directors within 90 days following the effective date of the registration statement relating to this offering, and exclusively independent directors within one year following the effective date of the registration statement relating to this offering. See “Management—Director Independence.”

 

COMMUNITY OFFERS

Up to         % of the shares of our Class A common stock to be sold in this offering are being offered directly from us, at the initial public offering price per share set forth on the cover page of this prospectus, to certain UK Eligible Employees and UK Eligible Members, in each case who are located in the United Kingdom, which sales will be made only pursuant to a prospectus prepared by us in accordance with the prospectus regulation rules of the FCA and made under section 73A of the Financial Services and Markets Act 2000 by applying through PrimaryBid Limited, a UK-based platform (or applying as otherwise described in the prospectus), through a directed share program, which we refer to as the UK Community Offer. The underwriters will not receive any underwriting discounts or commissions from our sale of shares of our Class A common stock to such UK Eligible Participants. In addition, at our request, the underwriters have reserved up to         % of the shares of our Class A



 

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common stock to be sold in this offering for sale to certain eligible employees who are located outside the United Kingdom and eligible members who are located in the United States, which sales will be made by Morgan Stanley & Co. LLC, an underwriter in this offering, through a directed share program, which we refer to as the US Community Offer. Subject to the following sentence, each Eligible Participant will be able to purchase 100 shares (but no other number) of our Class A common stock (or, for UK Eligible Participants, as near 100 shares as possible based on foreign currency conversions) in this offering through the Directed Share Program. In the event the demand for shares of our Class A common stock in the Community Offers exceeds the number of shares of our Class A common stock reserved for sale in the Community Offers, we reserve the right to allocate shares in our sole discretion, which may result in each Eligible Participant receiving (and being obligated to pay for) fewer than 100 shares of our Class A common stock. We do not know if these parties will choose to purchase all or any portion of these offered shares, but any purchases they do make will reduce the number of shares of our Class A common stock available to the general public in this offering. Any portion of the shares of our Class A common stock being offered pursuant to the US Community Offer which are not purchased by Non-UK Eligible Participants will be offered by the underwriters to the general public on the same terms as the other shares of our Class A common stock, and any portion of the shares of our Class A common stock being offered pursuant to the UK Community Offer which are not purchased by UK Eligible Participants will not be resold and will remain unissued. Shares sold through the Community Offers will not be subject to lockup restrictions. See “Underwriting” for additional information.

 

  This prospectus has not been approved by the FCA and does not constitute an offer to UK Eligible Participants or the general public in the United Kingdom. We have prepared a prospectus in accordance with the prospectus regulation rules of the FCA in connection with the offer and sale of the Class A common stock to UK Eligible Participants, made under section 73A of the Financial Services and Markets Act 2000. Any offer to UK Eligible Participants will be made only by means of the prospectus that has been approved by the FCA for use in the United Kingdom.

 

RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. Please refer to the information contained under the caption “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before making a decision to invest in our Class A common stock.


 

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SUMMARY HISTORICAL CONSOLIDATED

FINANCIAL AND OPERATING DATA

The following tables set forth our summary historical consolidated financial and operating data in both actual results and constant currency. The summary historical consolidated financial data as of and for fiscal 2020, fiscal 2019 and fiscal 2018 have been derived from our historical audited consolidated financial statements and notes thereto included elsewhere in this prospectus which is derived from our historical consolidated financial statements not included in this prospectus. The summary historical unaudited consolidated financial data as of April 4, 2021 and for each of the 13-week periods ended April 4, 2021 and March 29, 2020 has been derived from our historical consolidated unaudited financial statements and notes thereto included elsewhere in this prospectus. The summary historical unaudited consolidated financial data as of March 29, 2020 has been derived from the Company’s internal management accounts. These historical consolidated unaudited financial statements and internal management accounts were prepared on a basis consistent with our audited financial statements and include, in the opinion of management, all adjustments that we consider necessary for a fair presentation of the financial position and results of operations as of and for those periods. Operating results for the 13-week period ended April 4, 2021 are not necessarily indicative of the results that may be expected for the entire year or any future period.

The following summary financial and operating data should be read in conjunction with, and are qualified in their entirety by reference to, the information included under the headings “Basis of Presentation,” “Selected Historical Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical audited consolidated financial statements and notes thereto included elsewhere in this prospectus. Our historical results are not necessarily indicative of our financial condition or operating results for any future period.

Summary historical consolidated financial and operating data, in both actual results and constant currency, are as follows:

 

     As of and For the 13-Weeks Ended     As of and For the Fiscal Year Ended  
     April 4,
2021
    March 29,
2020
    January 3,
2021
    December 29,
2019
    December 30,
2018
 
     (Unaudited)        
     (Dollar amounts in thousands, except per share data)  

Consolidated Statements of Operations Data

          

Revenues

          

Membership revenues

   $ 40,493     $ 47,752     $ 176,910     $ 167,582     $ 134,060  

In-House revenues

     16,259       67,871       126,774       312,330       271,392  

Other revenues

     15,649       25,929       80,692       162,123       169,853  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 72,401     $ 141,552     $ 384,376     $ 642,035     $ 575,305  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

          

In-House operating expenses (exclusive of depreciation and amortization)(1)

     (45,809     (95,469     (220,036     (379,985     (310,923

Other operating expenses (exclusive of depreciation and amortization)

     (28,193     (26,129     (109,251     (144,455     (147,776

General and administrative expenses

     (16,505     (24,147     (74,954     (75,506     (62,443

Pre-opening expenses

     (4,825     (5,687     (21,058     (23,437     (20,323

Depreciation and amortization

     (17,845     (14,949     (69,802     (57,139     (48,387

Other

     (22,784     (2,323     (44,005     (20,371     (17,838
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     (135,961     (168,704     (539,106     (700,893     (607,690
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

   $ (63,560   $ (27,152   $ (154,730   $ (58,858   $ (32,385
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Business interruption income

     —         —         —         —         650  


 

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     As of and For the 13-Weeks Ended     As of and For the Fiscal Year Ended  
     April 4,
2021
    March 29,
2020
    January 3,
2021
    December 29,
2019
    December 30,
2018
 
     (Unaudited)        
     (Dollar amounts in thousands, except per share data)  

Interest expense, net

     (29,604     (17,756     (77,792     (64,108     (57,700

Gain (loss) on sale of property and other, net

     —         1       98       (1,340     (639

Share of (loss) profit of equity method investments

     (696     (176     (3,627     774       270  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     (30,300     (17,931     (81,321     (64,674     (57,419
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (93,860     (45,083     (236,051     (123,532     (89,804
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

     823       103       776       (4,468     (43
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (93,037   $ (44,980   $ (235,275   $ (128,000   $ (89,847
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Soho House Holdings Limited

     (90,479     (43,631     (228,461     (127,742     (91,356

Net loss per share

          

Basic and diluted

   $ (0.49   $ (0.26   $ (1.24   $ (0.76   $ (0.56

Pro forma weighted average ordinary shares, basic and diluted

          

Pro forma basic and diluted earnings per share

   $         $        

Consolidated Balance Sheet Data

          

Cash and cash equivalents

   $ 71,674     $ 46,250     $ 52,887     $ 44,050     $ 47,748  

Restricted cash

   $ 7,029     $ 7,694     $ 7,083     $ 12,265     $ 23,709  

Total assets

   $ 2,122,162     $ 1,918,641     $ 2,104,445     $ 1,964,977     $ 1,435,107  

Total liabilities

   $ 2,186,750     $ 2,035,041     $ 2,303,333     $ 2,064,830     $ 1,512,921  

Redeemable preferred shares

   $ 176,274     $ 14,700     $ 14,700     $ 14,700     $ 29,700  

Redeemable C ordinary shares

   $ 207,405     $ 67,416     $ 160,405     $ 67,416     $ —    

Total non-current liabilities

   $ 1,806,135     $ 1,721,615     $ 1,950,375     $ 1,762,191     $ 1,176,010  

Total shareholders’ deficit

   $ (448,267   $ (198,516   $ (373,993   $ (181,969   $ (107,514

Total liabilities, redeemable preferred and ordinary shares and shareholders’ deficit

   $ 2,122,162     $ 1,918,641     $ 2,104,445     $ 1,964,977     $ 1,435,107  

Other Operating Data (unaudited)

          

Number of Houses

     28       26       27       26       23  

Number of Soho House Members

     111,311       123,357       113,509       119,832       101,968  

Number of Other Members

     7,874       586       5,252       424       241  

Soho House Member Retention

     n/a       n/a       92     95     95

House-Level Contribution(2)

   $ 10,123     $ 19,352     $ 81,159     $ 97,946     $ 94,529  

As a percentage of House Revenues

     18     17     27     20     23

Total Other Contribution

   $ (11,724   $ 602     $ (26,070   $ 19,649     $ 22,077  

Adjusted EBITDA(3)

   $ (22,792   $ (8,943   $ (44,080   $ 17,650     $ 37,288  

As a percentage of Total Revenue

     (31 )%      (6 )%      (11 )%      3     6

Number of Active App Users

     76,308       79,184       77,226       90,885       76,021  

 

(1)

In-House operating expenses includes our rent expense of $29,155 and $26,382 for the 13-weeks period ended April 4, 2021 and March 29, 2020, respectively, and $110,707, $88,761 and $61,097 for the fiscal years ended January 3, 2021, December 29, 2019 and December 30, 2018, respectively. Rent expense under ASC 842 includes an amount related to future rent increases and free-rent periods of $10,423 and $7,896 for the 13-weeks period ended April 4, 2021 and March 29, 2020, respectively, and $15,627, $33,128 and $9,434 for the fiscal years ended January 3, 2021, December 29, 2019 and December 30, 2018, respectively. These amounts are not related to the total contractual rent cashflows for the periods presented in the Consolidated Statements of Operations above.


 

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(2)

‘House-Level Contribution’ is defined as House Revenues (which we define as Membership Revenues plus In-House Revenues, less Non-House Membership Revenue) less ‘In-House Operating Expenses,’ which includes expense items such as food and beverage costs, labor costs, variable overheads and fixed costs, such as rent. It does not reflect the impact of depreciation, amortization, impairment, gain or loss on sale of property, business interruption income or general and administrative expenses. Our management considers House-Level Contribution to be an important management measure to evaluate the performance and profitability of each House, and growth in aggregate House-Level Contribution allows us to leverage our general and administrative costs and improve overall profitability. For a reconciliation of House-Level Contribution to Operating Loss see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”

(3)

‘Adjusted EBITDA’ is defined as net income (loss) before depreciation and amortization, interest expense, net, provision (benefit) for income taxes, adjusted to take account of the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include, but are not limited to, loss (gain) on sale of property and other, net, share of loss (profit) from equity method investments, foreign exchange, share of equity method investments adjusted EBITDA and share-based compensation expense (See “Summary Historical Consolidated Financial and Operating Data” included elsewhere in this prospectus). We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses (income) that do not relate to ongoing business performance. A reconciliation of Adjusted EBITDA to Net Loss is presented below.

 

    For the 13-Weeks Ended     For the Fiscal Year Ended  
    April 4,
2021
    March 29,
2020
    January 3,
2021
    December 29,
2019
    December 30,
2018
 
   

In Constant Currency
(Unaudited)(1)

(Dollar amounts in thousands, except per share data)

 

Consolidated Statements of Operations Data

         

Revenues

         

Membership revenues

  $ 40,493     $ 49,417     $ 176,910     $ 168,037     $ 131,862  

In-House revenues

    16,259       70,753       126,774       313,631       273,184  

Other revenues

    15,649       27,424       80,692       163,045       156,594  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

  $ 72,401     $ 147,594     $ 384,376     $ 644,713     $ 561,640  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

         

In-House operating expenses (exclusive of depreciation and amortization)(2)

    (45,809     (99,394     (220,036     (381,472     (312,917

Other operating expenses (exclusive of depreciation and amortization)

    (28,193     (27,614     (109,251     (145,161     (134,489

General and administrative expenses

    (16,505     (26,340     (74,954     (75,804     (60,643

Pre-opening expenses

    (4,825     (6,203     (21,058     (23,529     (19,960

Depreciation and amortization

    (17,845     (15,637     (69,802     (57,302     (47,125

Other

    (22,784     (2,607     (44,005     (20,446     (17,126

Total operating expenses

    (135,961     (177,795     (539,106     (703,714     (592,260
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

  $ (63,560   $ (30,201   $ (154,730   $ (59,001   $ (30,620
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Business interruption income

    —         —         —         —         650  

Interest expense, net

    (29,604     (18,887     (77,792     (64,276     (55,667

Gain (loss) on sale of property and other, net

    —         2       98       (1,343     (644

Share of (loss) profit of equity method investments

    (696     (230     (3,627     717       265  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

    (30,300     (19,115     (81,321  

 

 

 

(64,902

 

    (55,396
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 

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    For the 13-Weeks Ended     For the Fiscal Year Ended  
    April 4,
2021
    March 29,
2020
    January 3,
2021
    December 29,
2019
    December 30,
2018
 
   

In Constant Currency
(Unaudited)(1)

(Dollar amounts in thousands, except per share data)

 

Loss before income taxes

    (93,860     (49,316     (236,051     (123,903     (86,016

Income tax benefit (expense)

    823       113       776       (4,536     (26
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (93,037   $ (49,203   $ (235,275   $ (128,439   $ (86,042
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Soho House Holdings Limited

  $ (90,479   $ (47,840   $ (228,461   $ (128,193   $ (87,483
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share

         

Basic and diluted

  $ (0.49   $ (0.26   $ (1.24   $ (0.76   $ (0.56

Other Operating Data

         

House-Level Contribution(3)

  $ 10,123     $ 19,912     $ 81,159     $ 98,208     $ 92,130  

As a percentage of House Revenues

    18     17     27     20     23

Total Other Contribution

  $ (11,724   $ 674     $ (26,070   $ 19,872     $ 22,105  

Adjusted EBITDA(4)

  $ (22,792   $ (11,068   $ (44,080   $ 17,738     $ 37,012  

As a percentage of total revenue

    (31 )%      (8 )%      (11 )%      3     7

 

(1)

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for an explanation of our constant currency results.

(2)

In-House operating expenses includes our rent expense of $29,155 and $27,223 for the 13-weeks period ended April 4, 2021 and March 29, 2020, respectively, and $110,707, $89,179 and $60,067 for the fiscal years ended January 3, 2021, December 29, 2019 and December 30, 2018, respectively. Rent expense under ASC 842 includes an amount related to future rent increases and free-rent periods of $10,423 and $8,189 for the 13-weeks period ended April 4, 2021 and March 29, 2020, respectively, and $15,627, $33,284 and $9,275 for the fiscal years ended January 3, 2021, December 29, 2019 and December 30, 2018, respectively. These amounts are not related to the total contractual rent cashflows for the periods presented in the Consolidated Statements of Operations above.

(3)

‘House-Level Contribution’ is defined as House Revenues (which we define as Membership Revenues plus In-House Revenues, less Non-House Membership Revenue) less ‘In-House Operating Expenses,’ which includes expense items such as food and beverage costs, labor costs, variable overheads and fixed costs, such as rent. It does not reflect the impact of depreciation, amortization, impairment, gain or loss on sale of property, business interruption income or general and administrative expenses. Our management considers House-Level Contribution to be an important management measure to evaluate the performance and profitability of each House, and growth in aggregate House-Level Contribution allows us to leverage our general and administrative costs and improve overall profitability For a reconciliation of House- Level Contribution to Operating Loss see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”

(4)

‘Adjusted EBITDA’ is defined as net income (loss) before depreciation and amortization, interest expense, net, provision (benefit) for income taxes, adjusted to take account of the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include, but are not limited to, loss (gain) on sale of property and other, net, share of loss (profit) from equity method investments, foreign exchange, share of equity method investments adjusted EBITDA and share-based compensation expense (See “Summary Historical Consolidated Financial and Operating Data” included elsewhere in this prospectus). We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses (income) that do not relate to ongoing business performance.


 

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Below

is a reconciliation to Adjusted EBITDA from Net Loss for first quarter 2021 and first quarter 2020.

 

     April 4,
2021
    March 29,
2020
          March 29,
2020
       
     Actual     Actual     Change %     In Constant
Currency (1)
    Change %  
     (Unaudited, dollar amounts in thousands)  

Net Loss

   $ (93,037   $ (44,980     n/m     $ (49,203     n/m  

Depreciation and amortization

     17,845       14,949       19     15,637       14

Interest expense, net

     29,604       17,756       67     18,887       57

Income tax (benefit) expense

     (823     (103     n/m       (113     n/m  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     (46,411     (12,378     n/m       (14,792     n/m  

Gain on sale of property and other, net

     —         (1     n/m       (2     n/m  

Share of loss of equity method investments

     696       176       n/m       230       n/m  

Foreign exchange

     14,867 (2)      391       n/m       437       n/m  

Share of equity method investments Adjusted EBITDA

     871       1,210       (28 )%      1,267       (31 )% 

Share-based compensation expense

     2,129       —         n/m       —         n/m  

Membership credits expense(3)

     2,750       —         n/m       —         n/m  

COVID-19 related charges(4)

     31       1,162       n/m       1,255       n/m  

Corporate financing and restructuring costs(5)

     2,275       497       n/m       537       n/m  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ (22,792   $ (8,943     n/m     $ (11,068     n/m  

 

(1)

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for an explanation of our constant currency results.

(2)

The increase in foreign exchange period on period is driven by an increase in non-USD denominated borrowings, which have increased since the preceding period, foreign exchange volatility, and an out of period adjustment as described in Note 2 of the Company’s condensed consolidated financial statements included elsewhere in this document.

(3)

Beginning on March 14, 2020, due to the COVID-19 pandemic, we issued membership credits to active members of our closed Houses to be redeemed for certain Soho Home products and services Membership credits were a one-time goodwill gesture, issued as a marketing offer to active members. The expense represents our best estimate of the cost in fulfilling the membership credits.

(4)

Represents items of additional expense incurred in order to comply with health and safety protocols while keeping certain Houses open during the pandemic.

(5)

Our Corporate financing and restructuring costs vary significantly each year and period presented based on financing and restructuring being undertaken. Such costs do not relate to normal, recurring, cash operating expenses. In first quarter 2021, these costs consisted of certain items relating to acquiring shareholdings of joint ventures and non-controlling interests of $250 not held by the Company and refinancing fees incurred totalling $2,025. In first quarter 2020, we commenced an internal restructuring to simplify the business in terms of headcount and cost structure, incurring costs of $497.



 

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Below is a reconciliation to Adjusted EBITDA from Net Loss for fiscal 2020 and fiscal 2019; see “Selected Historical Consolidated Financial and Operating Data” for a reconciliation for fiscal 2018:

 

     January 3,
2021
    December 29,
2019
          December 29,
2019
       
     Actual     Actual     Change %     In Constant
Currency (1)
    Change %  
           (Unaudited, dollar amounts in thousands)  

Net Loss

   $ (235,275   $ (128,000     84   $ (128,439     83

Depreciation and Amortization

     69,802       57,139       22     57,302       22

Interest expense, net

     77,792       64,108       21     64,276       21

Income tax (benefit) expense

     (776     4,468       n/m       4,536       n/m  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     (88,457     (2,285     n/m       (2,325     n/m  

(Gain) loss on sale of property and other, net

     (98     1,340       n/m       1,343       n/m  

Share of loss (profit) from equity method investments

     3,627       (774     n/m       (717     n/m  

Foreign exchange

     (3,354     (3,465     (3 )%      (3,468     (3 )% 

Share of equity method investments Adjusted EBITDA

     3,563       6,747       (47 )%      6,771       (47 )% 

Share-based compensation expense

     2,618       —         n/m       —         n/m  

Membership credits expense(2)

     12,156       —         n/m       —         n/m  

COVID-19 related charges(3)

     4,606       —         n/m       —         n/m  

Corporate financing and restructuring costs(4)

     14,147       6,127       n/m       6,145       n/m  

Abandoned project and site closure costs

     7,111       —         n/m       —         n/m  

Impairment charge on receivables

     —         9,960       n/m       9,989       n/m  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ (44,080   $ 17,650       n/m     $ 17,738       n/m  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for an explanation of our constant currency results.

(2)

Beginning on March 14, 2020, due to the COVID-19 pandemic, we issued membership credits to active members of our closed Houses to be redeemed for certain Soho Home products and services. Membership credits were a one-time goodwill gesture, issued as a marketing offer to active members. The expense represents our best estimate of the cost in fulfilling the membership credits.

(3)

Represent items of additional expense incurred in order to comply with health and safety protocols while keeping certain Houses open during the pandemic.

(4)

Our Corporate financing and restructuring costs vary significantly each year and period presented based on financing and restructuring being undertaken. Such costs do not relate to normal, recurring, cash operating expenses. In fiscal 2020, we undertook an internal restructuring to simplify the business in terms of headcount and cost structure incurring $5,956, as well as $3,323 of losses in respect of contractual arrangements and $2,992 of site restructuring and closure costs, further we began preparations for a refinancing transaction incurring $1,551 as well as including establishing an equity compensation plan, incurring $325. In fiscal 2019, this included fees in respect of the Scorpios acquisition of $6,127.



 

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RISK FACTORS

Investing in our Class A common stock involves a high degree of risk, including the potential loss of all or part of your investment. Before making a decision to invest in our Class A common stock, you should carefully read and consider all of the risks and uncertainties described below, as well as other information included in this prospectus, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included elsewhere in this prospectus. The occurrence of any of the following risks or additional risks and uncertainties that are currently immaterial or unknown could materially and adversely affect our business, financial condition, liquidity, results of operations, cash flows or prospects. This prospectus also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below. See “Special Note Regarding Forward-Looking Statements and Market Data.”

Risks Related to Our Business

The current outbreak of COVID-19, or the future outbreak of any other highly infectious or contagious diseases, has caused, and will continue to cause, disruption to our business, financial condition, liquidity, results of operations, cash flows or prospects. Further, the spread of the COVID-19 outbreak has caused severe disruptions in the global economy and financial markets and could potentially create widespread business continuity issues of an as yet unknown magnitude and duration.

In December 2019, COVID-19 was reported to have surfaced in Wuhan, China. COVID-19 has since spread to over 100 countries, including every state in the United States (‘US’). On March 11, 2020 the World Health Organization declared COVID-19 to be a pandemic.

The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has evolved rapidly and many countries, including the United Kingdom (‘UK’) and the US, reacted by instituting quarantines, mandating business and school closures, and restricting travel. Many experts predict that the outbreak will trigger a period of global economic slowdown or a global recession.

The COVID-19 pandemic has adversely affected our near-term operating and financial results and will continue to adversely impact our long-term operating and financial results. As a result of the imposition of government-imposed lockdowns in many of the territories in which our properties are located, a majority of our sites have been forced to close or operate under restricted hours and with social distancing regulations in place throughout much of 2020 and into 2021. As a result of the forced closures and restricted hours, our In-House Revenues declined significantly.

The forced closure of many of our Houses for extended periods of time has also resulted in an increase in attrition among existing members as well as an increase in the number of members freezing their memberships. Each member may request a temporary freeze to their membership on a six, nine or twelve month basis during which time the member will not be required to pay membership fees but will not have access to the Houses or any of our membership Apps, and will not receive any communications from us. At the end of the freeze period the member will either resume his or her membership and continue paying membership fees, or his or her membership will be cancelled. As of April 4, 2021, we had over 16,500 Frozen Members. Due to the uncertainty of the COVID-19 pandemic, we may continue to see higher than average levels of attrition, increasing delinquencies in the payment of member dues, or we may encounter difficulties in attracting new members, any of which may materially and adversely affect our business, financial condition, liquidity, results of operation, cash flows or prospects.

 

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In light of the evolving nature of COVID-19 and the uncertainty it has caused around the world, we do not believe it is possible to predict the COVID-19 pandemic’s cumulative and ultimate impact on our future business, results of operation, financial condition and cash flows. The extent of the impact of the COVID-19 pandemic on our business financial results and cash flows will depend largely on future developments, including the duration and extent of the spread of COVID-19 globally, the prevalence of local hospitality restrictions, the availability and adoption of effective vaccines, local, global and international travel restrictions, the impact on capital and financial markets and on the US and global economies, foreign currencies exchange, and governmental or regulatory orders that impact our business, all of which are highly uncertain and cannot be predicted. Moreover, even after restrictions are lifted, demand for our offerings may remain depressed for a significant length of time, and we cannot predict if and when demand will return to pre-COVID-19 levels. In addition, we cannot predict the impact the COVID-19 pandemic has had and will have on our business partners and third-party vendors and service providers, and we may continue to be materially adversely impacted as a result of the material adverse impact our business partners and third-party vendors suffer now and in the future.

In response to the economic challenges and uncertainty resulting from the COVID-19 pandemic and its impact on our business, we accelerated our cost efficiencies programs. During fiscal 2020, we implemented four rounds of redundancies; which reduced Group Head Office employee headcount by 19%. This reduction in headcount has resulted in the loss of institutional knowledge, relationships, and expertise for certain critical roles, which may not have been effectively transferred to continuing employees and may divert attention away from operating our business, create personnel capacity constraints, and hamper our ability to grow, develop innovative products or membership platforms, and compete. Any of these impacts could materially adversely impact our business and reputation and impede our ability to operate or meet strategic objectives. This has led to increased attrition and could lead to reduced employee morale and productivity, as well as problems with retaining existing employees and recruiting future employees, all of which could have a material adverse impact on our business, results of operation, and financial condition.

To the extent the COVID-19 pandemic continues to materially adversely affect our business, results of operation, financial condition and cash flows, it may also have the effect of heightening many of the other risks described in these “Risk Factors” or elsewhere in this prospectus. Any of the foregoing factors, or other knock-on effects of the COVID-19 pandemic that are not currently foreseeable, will materially adversely impact our business, results of operation, and financial condition.

We have incurred net losses in each year since our inception, and we may not be able to achieve profitability.

We have incurred net losses of $93 million for first quarter 2021 and net losses of $235 million for fiscal 2020. As of April 4, 2021, we had an accumulated deficit of $848 million and as of January 3, 2021, we had an accumulated deficit of $757 million. Historically, we have invested significantly in efforts to open new Houses, launch and grow complimentary businesses, hire additional employees, and enhance our membership experience. Beginning in the second quarter of 2020, as a response to the COVID-19 pandemic we significantly reduced our fixed and variable costs including by reducing discretionary capital spend. Nevertheless, we have continued to make significant investments in our membership platforms, including through our digital platforms and in new Houses. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue from these investments or otherwise sufficiently offset these expenses. While we have enacted measures to reduce our expenses, we expect to continue to incur a net loss in fiscal 2021, and we are utilizing a significant portion of our cash to support our operations in fiscal 2021 as a consequence of suffering a material decrease in revenues.

Our planned growth could put strains on our senior management, employees, information systems and internal controls which may adversely impact our business and operations.

We have experienced significant growth in our business activities and operations in the past few years, including the number of Houses and new business areas that form part of our operations. Our past expansion has placed, and our planned future expansion, including our investments in our digital platforms and new Houses, will place, significant demands on our administrative, operational, financial and other resources. Any failure by us to

 

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manage growth effectively could seriously harm our business. To be successful, we will need to continue to implement management information systems and improve our operating, administrative, financial and accounting systems and controls.

As a result of our planned growth, we will need to recruit and train new employees and maintain close coordination among our executive, accounting, finance, legal, human resources, risk management, marketing, technology, sales, membership and operations functions. These processes may be extremely time consuming and expensive, increase management responsibilities and require significant management attention, and we may not realize a return on our investment in these processes and there can be no assurance that such processes will be successful.

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 and operations would be adversely affected.

Our trademarks, trade names, image and brands, including Soho House, Soho Home and Scorpios, have been associated with creativity, design, quality, exclusivity, service and style, and we have been recognized for providing our members with access to a community that provides curated member events programming and services, including high-quality food and beverage offerings, accommodation, working spaces, luxury beach settings, and wellness and beauty-care services. Our Houses have regularly attracted international press and social media coverage as a result of our association with leading cultural and creative influencers and innovators, exclusive events and—we believe—exceptionally high service standards. A key component of our image and brands lies in our ability to develop and offer dining and lifestyle experiences that cater to our members and guests. There can be no assurance that we will continue to be successful in this regard or that we will be able to maintain such levels of quality and exclusivity and avoid the dilution, infringement, misappropriation or other violation of our names, image, brands, trademarks or other intellectual property rights, particularly as we continue to expand.

Our success largely depends on our membership bases. The strength of our name, images, brands, trademarks and other intellectual property rights are a fundamental part of our ability to attract new members and retain current members, and our businesses would be adversely affected if our public image, reputation, brands, trademarks or other intellectual property rights were to be diminished, infringed, misappropriated or otherwise violated. If an event occurs that negatively affects our members’ perception of our name, images or brands, members may cancel their memberships or visit our properties and use our other offerings less frequently, or public perception of our names, images or brands may be negatively impacted which, in turn, could result in reduced traffic at our stand-alone restaurants, working spaces and/or spas, adversely affecting our business, financial condition, liquidity, results of operation, cash flows or prospects. Further, we are also at risk that the public may confuse our name, images, brands, trademarks and other intellectual property with other similarly-named brands. Such similarly-named brands may not operate at the same high standards that we do, resulting in negative goodwill for our name, images and brands.

In general, incidents that could be damaging to our brand may arise from events that are or may be beyond our ability to control, such as:

 

   

actions taken (or not taken) by our employees relating to health, safety, construction, welfare, or otherwise;

 

   

security or data breaches or incidents, fraudulent activities associated with our membership database or electronic payment systems or unauthorized access to or use or disclosure of confidential, sensitive or PII;

 

   

litigation and legal claims, regardless of the merits or the outcome;

 

   

third-party misappropriation, dilution, infringement or other violation of our intellectual property; and

 

   

illegal activity targeted at us or others.

 

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Our brand value could be diminished significantly if any such incidents or other matters erode confidence in our systems, which could result in fewer memberships being sold or renewed and ultimately lower Membership Revenues, which may adversely affect our business, results of operations and financial condition.

Finally, if we expand too rapidly we are susceptible to the perceived erosion of the desirability of our brand. In any such event, attrition among existing members may increase markedly, and we may encounter difficulties in attracting new members, any of which may adversely affect our business, results of operation and financial condition.

We may have to significantly increase our advertising, communications and marketing costs to prevent our name, image and brand value from diminishing, which may adversely affect our business and operations.

We largely rely on our existing membership base and our members’ personal networks for public relations and advertising our products and services and, as a result, we have virtually no marketing or sales costs associated with acquiring new members, and very low sales costs to market our products. However, as our business continues to grow and we seek to attract a larger membership or customer base for our different services and products, we may need to significantly increase and evolve our advertising, communications and marketing strategies, and more traditional advertising and marketing campaigns may not be successful, particularly in jurisdictions where the membership model for private clubs is not well known or is less developed. This may result in us incurring significantly more costs and expending other resources and investment to attract and retain members and other customers, which may adversely affect our business, results of operations and financial condition.

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.

We rely on intellectual property registrations and trademark, trade dress and copyright laws in the US and internationally, as well as technological measures and contractual provisions, such as confidentiality agreements with our employees, contractors and consultants, to establish and protect our brands, maintain our competitive position and protect our intellectual property from infringement, misappropriation or other violation. The success of our business depends partly upon our continued ability to obtain and use our trademarks, service marks and trade names to increase awareness of our brands and to assist with their roll out and expansion across the world. Effective protection of intellectual property rights is expensive and difficult to maintain, both in terms of application and registration costs as well as the costs of defending and enforcing those rights. It is challenging for us to monitor the unauthorized use of our intellectual property for every brand in our business across multiple jurisdictions, and we will not be able to protect our intellectual property rights if we are unable to enforce our rights or if we do not detect unauthorized use, infringement, misappropriation or other violation of our intellectual property rights. We rely on, and will continue to rely on, litigation and regulatory actions to enforce our intellectual property rights against third parties who infringe, misappropriate or otherwise violate our intellectual property rights, which could result in substantial costs and diversion of resources (particularly management time) for us, may result in counterclaims or other claims against us, and may also harm our reputation or limit our business operations.

As we have grown, we have sought to register and protect our intellectual property rights in an increasing number of jurisdictions, a process that can be expensive and may not always be successful. In particular, the legal systems of some foreign countries can make it difficult to protect our intellectual property rights to the same degree as under the laws of the UK, the EU and the US, and we may fail to maintain or be unable to obtain adequate protections for certain of our intellectual property rights in all countries in which we operate. Brand squatting has been an issue for us in places such as South America and Asia, and particularly in China and Australia, where the presence of pre-existing third-party rights holders with ‘Soho’ trademarks has made registering our ‘Soho House’ trademark a challenge. We cannot be certain that all the steps we take and have

 

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taken to date are adequate to prevent imitation, use, infringement, misappropriation or other violation of our trademarks by others.

Currently, we do not own registered trademarks for all of our Houses and other brands, and while we may have unregistered rights in these trademarks, it may be harder for us to rely on any such unregistered rights to prevent third parties from copying or using our trademarks or logos without our permission. We have not been able to protect our trademarks in significant jurisdictions, such as China and Mexico. Our trademarks may be opposed, contested, circumvented or found to be unenforceable, weak or invalid, and we may not be able to prevent third parties from infringing, misappropriating or otherwise violating our trademarks or using similar trademarks in a manner that causes confusion or dilutes the value or strength of our brand. Failing to adequately obtain, maintain, protect, defend and enforce our portfolio of our brands and other intellectual property could diminish their value, goodwill and market acceptance and may also result in customer confusion. This may adversely affect our business and operations or our ability to implement our growth strategy. For more information, see “Business—Intellectual Property.”

In addition to registered intellectual property rights, we rely on non-registered proprietary information, technology and intellectual property rights, including with respect to the SH.APP and our other software, such as unregistered copyrights, confidential information, trade secrets, know-how and technical information. We attempt to protect our intellectual property, technology, and confidential information in part through confidentiality, non-disclosure and invention assignment agreements with our employees, consultants, contractors, corporate collaborators, advisors and other third parties who develop intellectual property on our behalf or with whom we share information. However, we cannot guarantee that we have entered into such agreements with each party who has developed intellectual property on our behalf or each party that has or may have had access to our confidential information, know-how and trade secrets. These agreements may not be self-executing or may be insufficient or breached, or may not effectively prevent unauthorized access to or unauthorized use, disclosure, misappropriation or reverse engineering of, our confidential information, intellectual property, or technology. Moreover, these agreements may not provide an adequate remedy for breaches or in the event of unauthorized use or disclosure of our confidential information or technology or infringement of our intellectual property. Additionally, individuals not subject to invention assignment agreements may make adverse ownership claims in respect of our current and future intellectual property, and, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. For more information, see “Business—Intellectual Property.”

We may have disputes with, or be sued by, third parties for infringement, misappropriation or other violation of their intellectual property or proprietary rights, which could have a negative impact on our business.

Third parties may assert claims that we are infringing, misappropriating or otherwise violating their trademark, copyright or other intellectual property rights, and any claims or litigation, regardless of the outcome, may cause us to incur significant expenses and have a negative impact on our business. We cannot assure you that third parties will not seek to block, enjoin, oppose, or invalidate our use of certain trademarks or other intellectual property, seek monetary damages or other remedies for the prior use of our brand names or other intellectual property, or allege that the sale of our products or services is a violation of their trademark, copyright or other intellectual property rights. Defending any claims or litigation, even those without merit, could divert our management’s attention, consume significant time, result in costly legal fees or settlement, licensing, royalty or damages payments, restrict our business by requiring us to cease offering or re-design certain products or services, impose other unfavorable terms, require us to satisfy indemnification obligations and damage our reputation, which may materially adversely affect our business, results of operations and financial condition.

 

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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 and implement our growth strategies.

Our future success and our ability to manage future growth depend, in large part, upon the efforts of our senior management team. Our senior management team is comprised of highly regarded and experienced figures within our industry with proven track records of successful international expansion. They have extensive experience with, and an understanding of, our members and customers who appreciate high quality alternatives to the traditional dining, entertainment and accommodation options and the price points at which such members and customers are willing to pay for the distinctiveness of the products or services. It could be difficult for us to find appropriate replacements for our senior management, as competition for such personnel is intense. For example, we currently depend on our CEO and founder, Nick Jones, for his continued service and performance. Although we have entered into an employment agreement with Mr. Jones, the agreement has no specific duration and constitutes at-will employment. The loss of the services of one or more members of our senior management team, including Mr. Jones, could have an adverse effect on our ability to manage our business and implement our growth strategies.

We identified material weaknesses in connection with our internal control 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.

In connection with the audits of our consolidated financial statements for fiscal 2020, fiscal 2019 and fiscal 2018, our management and independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. The material weaknesses related to (i) our lack of a sufficient number of personnel with an appropriate level of knowledge and experience in the application of GAAP, commensurate with our financial reporting requirements and (ii) the fact that policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions were either not designed and in place, or not operating effectively. As a result, numerous adjustments to our consolidated financial statements were identified and made during the course of the audit process.

We are currently not required to comply with Section 404 of the Sarbanes-Oxley Act, and are therefore not required to make an assessment of the effectiveness of our internal control over financial reporting. However, as a public company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. In addition, we will be required to furnish a report by our management on the effectiveness of our internal control over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act, at the time we file our second annual report on Form 10-K with the SEC, which be for the year ending December 31, 2022. Further, our independent registered public accounting firm is not required and has not been engaged to express, nor have they expressed, an opinion on the effectiveness of our internal control over financial reporting. Had we and our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional control deficiencies may have been identified by our management or independent registered public accounting firm, and such control deficiencies could have also represented one or more material weaknesses in addition to those previously identified. We are currently in the process of remediating these material weaknesses and we are taking steps that we believe will address their underlying causes. We have enlisted the help of external advisors to provide assistance in the areas of internal controls and GAAP accounting in the short term, and are evaluating the longer-term resource needs of our accounting staff, including GAAP expertise. These remediation measures may be time-consuming and costly, and might place significant demands on our financial, accounting and operational resources. In addition, there is no assurance that we will be successful in hiring any necessary finance and accounting personnel in a timely manner, or at all.

Assessing our procedures to improve our internal control over financial reporting is an ongoing process. We can provide no assurance that our remediation efforts described herein will be successful and that we will not have material weaknesses in the future. Any material weaknesses we identify could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements.

 

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We have incurred significant losses as a consequence of the COVID-19 pandemic.

During first quarter 2021, we incurred a consolidated net loss of $93 million and negative cash flows from operations of $104 million. During fiscal 2020, we incurred a consolidated net loss of $235 million and negative cash flows from operations of $38 million. Our financial statements have been prepared on the basis that we will continue to operate as a going concern, contemplate the realization of assets and the satisfaction of liabilities in the normal course of our business and make certain assumptions surrounding working capital events, projected cash flows and our ability to control expenses as necessary. While we believe these assumptions are reasonable, many of them relate to the effects that we expect loosening COVID-19 restrictions to have on our business and we can make no assurance that they will ultimately prove to be true. In particular, key factors such as the timing of the reopening of Houses in a manner compliant with local laws and regulations (as well as anticipated demand), the level of in-House sales (primarily sales of food and beverage) that, even after reopening, may be subject to reduced capacity as a result of ongoing restrictions, the continued high level of membership retention and renewals and the implementation of extensive cost reduction measures that continue to support the timing of House re-openings and anticipated levels of activities will all affect our future cash flows and accordingly our ability to continue to operate as a going concern.

Our future performance depends in large part on our ability to respond to changes in consumer tastes, preferences and perceptions.

Our industry is driven in large part by consumer preferences and perceptions. Our success depends significantly on our ability to anticipate and respond to dynamic and evolving consumer tastes and preferences in a timely manner. If we fail to continue to create and offer quality Houses, restaurants, co-working spaces, wellness and other offerings, among other offerings, or provide superior service, we may not be able to sustain or increase membership and other member traffic, which may adversely affect our business, results of operation and financial condition. With respect to our restaurants, we may invest in the development of menu items and concepts which may not be as successful as we anticipate. If consumer tastes and preferences change, we may be required to adapt our offerings and we may not be able to do so quickly or successfully at a manageable cost. Moreover, if prevailing preferences and perceptions cause consumers to avoid our Houses, restaurants and other offerings in favor of alternatives, our business would materially suffer.

The growth of our business presents many risks, including risks related to the incurrence of debt or the expenditure of cash on new businesses, the risk that we may not be able to integrate new membership concepts into our existing business, which may prevent us from realizing the strategic and financial goals contemplated at the time of any such transaction and thus adversely affect our business.

Our business has grown, in part, through a number of carefully selected investment opportunities several of which we have financed through the incurrence of indebtedness. Any strategic transaction we may undertake in the future could likewise result in the incurrence of debt and contingent liabilities or in the use by us of available cash on hand to finance any such acquisitions or other opportunities. We may experience difficulties in integrating new Soho House, Ned’s Club, Scorpios, Soho Home, digital or other membership concepts into our business. In addition, our management may be distracted by the development and opening of new Houses and growth of new businesses. Thus, if we fail to integrate new membership concepts, there could be a material adverse effect on our business, results of operation, and financial condition.

In addition, our debt burden may increase if, as we have from time to time in the past, we borrow funds to finance any future investment or expansion opportunities, which could have a negative impact on our cash flows and our ability to finance our overall operations. Although we analyze and conduct due diligence (including detailed feasibility studies and site visits) on potential new Houses and other opportunities, our assessments are subject to a number of assumptions, including but not limited to, profitability, growth, interest rates and company valuations, and our inquiries may fail to uncover relevant information. There can be no assurance that our assessments or due diligence of and assumptions regarding new Houses or other opportunities will prove to be correct, and actual developments may differ significantly from our expectations.

 

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Our continued growth depends on our ability to expand our presence in new and existing markets and develop complementary properties, concepts and product lines.

A substantial amount of our historical growth has been due to successfully establishing Houses in key cultural cities around the world and integrating our complementary products and services inside and outside of our Houses. We intend to replicate our model on an individualized but consistent basis in each city and continue focusing on the cross-selling opportunities created by our comprehensive portfolio of offerings. Our continued growth is dependent upon a number of factors, many of which are beyond our control, including our ability to: find quality locations and reach commercially acceptable agreements regarding the lease or, more rarely, the purchase of locations; compete for appropriate sites; convey the appeal and exclusivity of each of our brands to new markets to attract our target membership; comply with applicable zoning, land use, environmental, health and safety laws, and data privacy, protection and security laws, regulations and requirements; obtain, maintain, protect, defend and enforce our intellectual property rights, raise or have available an adequate amount of money for construction, development and/or opening costs; obtain appropriate permits and licensing, secure acceptable suppliers, particularly in emerging markets; and timely hire, train and retain the skilled management, chefs and other employees necessary to meet staffing needs. Any failure on our part to recognize or respond to each of these challenges may adversely affect the success of any new properties.

Typically, there has been a ‘ramp-up’ period of time before we consider a House to be ‘mature’ and expect it to achieve our targeted level of performance. Consumer recognition of our brand has been important in the success of our Houses in our existing markets and recognition may be lacking in new geographic markets. We believe pent-up demand supports our continued growth but there can be no assurance we will successfully attract enough members and guests to new Houses and associated offerings, or that the operating results generated at new Houses and associated offerings will meet our expectations or equal the operating results generated at our existing Houses and offerings or that we will successfully complete development and expansion projects on a timely basis. Our capital and other expenditures may also be higher than expected due to cost overruns, unexpected delays or other unforeseen factors. We may also incur costs for Houses and other concepts which fail to open due to unforeseen circumstances, which could lead to material adverse effects on our business, financial condition, liquidity, results of operation, cash flows or prospects.

We are exposed to the risks that pertain to the specific jurisdictions in which we currently or may in the future operate, which could hinder our ability to maintain and expand our international operations.

We currently have owned or leased Houses or other properties in the UK, the US, Canada, Turkey, Spain, the Netherlands, Germany, Greece, India and Hong Kong and plan in the next few years to expand to other international markets, including France, Italy, Israel and Mexico. The success and profitability of our current and future international operations are subject to numerous risks and uncertainties in each of these jurisdictions, many of which are outside of our control, such as exchange rate fluctuations, local economic conditions, availability of talented and qualified employees, import and export restrictions and tariffs, litigation in foreign jurisdictions, differing or limited protection of our intellectual property rights, cultural differences, increased expenses from inflation, political or economic instability, taxes and payment terms. Furthermore, changes in policies and/or laws in the UK, the US or other foreign jurisdictions resulting in, among other things, higher taxation or currency conversion limitations could reduce the anticipated benefits of our international operations. Any actions by countries or other jurisdictions in which we conduct or plan to conduct business to reverse policies that encourage foreign trade and investment could adversely affect our business relationships and gross profit. We may not be able to maintain and expand our international operations successfully or on economically favorable terms and, as a result, our business, results of operation and financial condition could be adversely affected.

Foreign currency fluctuations may reduce our net income and our capital levels, adversely affecting our financial condition.

Our financial statements are prepared, and our financial results will be reported in, US dollars. As a result, we are exposed to foreign currency exchange rate risk both as a result of our operations in a variety of non-US countries,

 

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and our investments that are denominated in currencies other than the US dollar. We currently have no hedging arrangements in place to manage our exposure to foreign currency exchange risk.

Our results or equity may be reduced by fluctuations in foreign currency exchange rates that could materially adversely affect our business, results of operation and financial condition.

The UK’s withdrawal from the European Union (‘EU’) could have an adverse effect on our business.

In June 2016, UK voters approved a referendum to withdraw the UK’s membership from the EU, which is commonly referred to as “Brexit.” The UK’s withdrawal from the EU occurred on January 31, 2020, but the UK remained in the EU’s customs union and single market for a transition period that expired on December 31, 2020. On December 24, 2020, the UK and the EU entered into a trade and cooperation agreement (the ‘Trade and Cooperation Agreement’), which was applied on a provisional basis from January 1, 2021. While the economic integration does not reach the level that existed during the time the UK was a member state of the EU, the Trade and Cooperation Agreement sets out preferential arrangements in areas such as trade in goods and in services, digital trade and intellectual property. Negotiations between the UK and the EU are expected to continue in relation to the relationship between the UK and the EU in certain other areas which are not covered by the Trade and Cooperation Agreement. The long term effects of Brexit will depend on the effects of the implementation and application of the Trade and Cooperation Agreement and any other relevant agreements between the UK and the EU.

We have operations in the UK and the EU and, as a result, we face risks associated with the potential uncertainty and disruptions that may follow Brexit and the implementation and application of the Trade and Cooperation Agreement, including with respect to volatility in exchange rates and interest rates, disruptions to the free movement of data, goods, services, people and capital between the UK and the EU and potential material changes to the regulatory regime applicable to our operations in the UK. The uncertainty concerning the UK’s future legal, political and economic relationship with the EU could adversely affect political, regulatory, economic or market conditions in the EU, the UK and worldwide and could contribute to instability in global political institutions, regulatory agencies and financial markets. These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets and could significantly reduce global market liquidity and limit the ability of key market participants to operate in certain financial markets. In particular, it could also lead to a period of considerable uncertainty in relation to the UK financial and banking markets, as well as to the regulatory process in Europe. Asset valuations, currency exchange rates and credit ratings may also be subject to increased market volatility.

We may also face new regulatory costs and challenges as a result of Brexit that could have a material adverse effect on our operations. For example, as of January 1, 2021, the UK lost the benefits of global trade agreements negotiated by the EU on behalf of its members, which may result in increased trade barriers that could make our doing business in areas that are subject to such global trade agreements more difficult. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which laws of the EU to replace or replicate. There may continue to be economic uncertainty surrounding the consequences of Brexit that adversely impact customer confidence resulting in customers reducing their spending budgets on our services, which could materially adversely affect our business, financial condition and results of operation.

Similarly, the curtailment of freedom of movement and the imposition of restrictions on the ability of EU nationals to live and work in the UK may have an impact on our ability to recruit and retain staff in the UK, which could materially adversely affect our business.

The ongoing instability and uncertainty surrounding Brexit and the implementation and application of the Trade and Cooperation Agreement, could require us to restructure our business operations in the UK and the EU and could have an adverse impact on our business and employees in the UK and EU.

 

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We have certain fixed costs which we may be unable to adjust in a timely manner in response to a reduction in revenue.

The costs associated with owning, leasing and/or operating our Houses are significant, some of which may not be altered in a timely manner in response to changes in demand for our services. Rent expenses and property taxes constitute our primary fixed costs, and our profitability is dependent on our ability to anticipate and react to increases in food, labor, employee benefits and similar costs over which we have limited or no control. Food and beverage costs are a significant part of our operating expenses and have increased significantly in recent years and we anticipate those increases may continue. If our revenues decline and we are unable to reduce our expenses in a timely manner, or are unable or unwilling to pass these costs on to our members and guests, our business, results of operation and financial condition may be materially and adversely affected.

Food shortages or increases in food costs could slow our growth or harm our business.

A key part of our business is the supply of quality food that meets our requirements at prices that remain attractive to our customers. This means we need to achieve favorable commercial terms with our suppliers and ensure there is an uninterrupted supply chain which keeps pace with our growth in each of the jurisdictions in which we are based. If there is an interruption to food supply or a food shortage on a local or global scale (including as a result of inclement weather, issues in production or distribution, unanticipated demand or other conditions), this could reduce the availability of food in, and increase the pricing of, the food chain supplies that we use to run our operations. As we continue to expand into new territories in lesser developed countries, the risk of an interruption in our supply chain is more likely. Failure to source quality food at prices that are attractive to our customers may force us to increase our own pricing or remove certain items from our menus. This could make us less attractive to our members and customers who may then choose to reduce their dining in our businesses. Alternatively, we may be unwilling to pass these increased costs on to our members and customers, which would decrease our profit margins. In either case, this could have a material adverse effect on our business, results of operation and financial condition.

We are a holding company and our principal asset after the completion of this offering will be our direct ownership of Soho House Holdings Limited and the other operating companies. We will accordingly be dependent upon distributions from our subsidiaries to pay dividends (if any) taxes and other expenses.

Membership Collective Group Inc. is a holding company and, upon completion of this offering, our principal asset will be our direct ownership of Soho House Holdings Limited and the other operating companies. We have no independent means of generating revenue. We intend to cause Soho House Holdings Limited and the other operating companies to make distributions to us in an amount sufficient to allow us to pay our taxes and operating expenses, but we are limited in our ability to cause Soho House Holdings Limited and the other operating companies to make these and other distributions to us (including for purposes of paying corporate and other overhead expenses and dividends) under our credit facilities. Our existing credit facilities and any future indebtedness we may incur may restrict the ability of Soho House Holdings Limited and the other operating companies to make distributions to us. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Yucaipa, through its participation in the Voting Group, will have significant influence over us after this offering, including control over decisions that require the approval of stockholders, which could limit your ability to influence the outcome of matters submitted to stockholders for a vote.

We are currently controlled by Yucaipa, our Sponsor, and after the completion of this offering, we will be controlled by the Voting Group of which Yucaipa is a part. The Voting Group has agreed to vote with the other members of the Voting Group in favor of the election of Directors nominated by members of the Voting Group in accordance with a Stockholders’ Agreement entered into between us and each member of the Voting Group. After giving effect to the reorganization transactions described in “Prospectus Summary—Our Structure” and giving effect to the sale of the Class A common stock offered hereby, and the conversion of all outstanding Senior Preference Shares of Soho House Holdings Limited into shares of Class A common stock of Membership Collective Group Inc., Yucaipa will own approximately     % of our Class B common stock, or approximately     % of the combined voting power of our common stock outstanding after this offering (or approximately     %

 

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of the combined voting power of our common stock if the underwriters exercise in full their option to purchase an additional                shares of Class A common stock), and the Voting Group will own Class B common stock representing approximately     % of the combined voting power of our common stock outstanding after this offering (or approximately     % of the combined voting power of our common stock if the underwriters exercise in full their option to purchase an additional                 shares of Class A common stock). Once the Voting Group owns less than 15% of the shares of our total outstanding common stock, all remaining Class B common stock will automatically convert on a one-for-one basis into Class A common stock, however the Voting Group will continue to be entitled to certain board nomination rights for so long as it continues to own at least 9% of the shares of our total outstanding common stock.

The holders of our Class B common stock, which comprise certain affiliates of Yucaipa, our CEO (Mr. Jones), and a member of our Board (Mr. Caring), will be entitled to ten votes per share, whereas the holders of our Class A common stock offered hereby will be entitled to one vote per share of Class A common stock. As long as the Voting Group owns or controls common stock representing at least a majority of our outstanding combined voting power, and its members agree to act together, it will have the ability to exercise substantial control over all corporate actions requiring stockholder approval, irrespective of how our other stockholders may vote, including the election and removal of directors and the size of our Board and the approval of any significant corporate transaction, including a sale of all or substantially all of our assets. Even if the Voting Group’s ownership falls below 50% of the combined voting power of our outstanding common stock, acting together, it may continue to be able to strongly influence or effectively control our decisions, including as a result of the right of the Voting Group to nominate individuals for election to our board of directors. Additionally, the Voting Group’s interests may not align with the interests of our other stockholders. Yucaipa and Mr. Caring are in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Yucaipa and Mr. Caring may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

Following this offering, our audit committee will be responsible for reviewing all related party transactions for potential conflict of interest situations and approving all such transactions. See “Certain Relationships and Related Party Transactions.” Our audit committee will consist of directors who are independent as required by SEC and the listing rules of the NYSE, subject to the permitted phase-in period afforded by such rules. In addition, our code of ethics, following this offering, will contain provisions designed to address conflicts of interest. However, such provisions may not be effective in limiting Yucaipa’s significant influence over us.

Risks Related to Our Indebtedness

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.

We have a substantial amount of debt, which requires significant principal and interest payments. As of April 4, 2021, we had $826 million of total debt (net of issuance costs) excluding operating leases outstanding (see Note 12 to our audited consolidated financial statements included elsewhere in this prospectus). Subject to the restrictions contained in our debt facilities, we may be able to incur additional indebtedness from time to time to finance working capital, capital expenditure or investments, or for other purposes. These restrictions will not prevent us from incurring obligations that do not constitute indebtedness, may be waived by certain votes of debt holders and, if we refinance our existing indebtedness, such refinancing indebtedness may contain fewer restrictions on our activities. To the extent new indebtedness or other financial obligations are added to our and our subsidiaries’ currently anticipated indebtedness levels, the related risks that we and our subsidiaries face could intensify.

 

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Our substantial debt could adversely affect our financial condition and increase the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on, or other amounts due in respect of our indebtedness. Our substantial indebtedness, combined with our other existing and any future financial obligations and contractual commitments, could have important consequences. For example, it could:

 

   

make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations under our credit facilities, including restrictive covenants, could result in an event of default under such facilities;

 

   

increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have proportionately less indebtedness;

 

   

require the dedication of a substantial portion of our cash flow from operations towards the payment of amounts due on our indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions, joint ventures and development or other corporate purposes;

 

   

increase our cost of borrowing and cause us to incur substantial fees from time to time in connection with debt amendments or refinancing;

 

   

increase our exposure to rising interest rates because a portion of our borrowings is at variable interest rates;

 

   

limit our flexibility in planning for, or reacting to, changes in our business and our industry;

 

   

place us at a competitive disadvantage compared to our competitors that are less highly leveraged and that, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting, including acquiring new assets;

 

   

restrict us from making strategic acquisitions or cause us to make non-strategic divestitures to service or repay such indebtedness; and

 

   

limit our ability to borrow additional funds, or dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, and other corporate purposes.

Each of these factors may have a material adverse effect on our business, results of operation and financial condition.

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 terms of our outstanding indebtedness restrict us from engaging in specified types of transactions. These covenants restrict our ability, among other things, to:

 

   

incur indebtedness or guarantees or engage in sale and leaseback transactions;

 

   

incur liens;

 

   

engage in mergers, acquisitions and asset sales;

 

   

alter the business conducted today by the company and its restricted subsidiaries;

 

   

make investments and loans;

 

   

declare dividends or other distributions;

 

   

enter into agreements limiting restricted subsidiary distributions; and

 

   

engage in certain transactions with affiliates.

Our indebtedness limits our ability to engage in these types of transactions even if we believe that a specific transaction would contribute to our future growth or improve our results of operation. We believe that we will be

 

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able to operate our business without breaching the terms of our indebtedness. In addition, the credit agreements governing our credit facilities require us to meet specified financial and operating results and maintain compliance with specified financial covenants and ratios. In particular, under our Revolving Credit Facility (as defined in the section entitled “Description of Certain Indebtedness and Preferred Equity—Revolving Credit Facility” in the prospectus), from March 31, 2020 we are required to maintain a Consolidated Obligor EBITDA (as defined in the Revolving Credit Facility) at or above a certain level. This level is £5 million ($7 million) at April 4, 2021 and scales up to £32 million ($44 million) from December 31, 2021 in line with the anticipated recovery from the pandemic. We are currently in compliance with such covenants.

A breach of any of the restrictive covenants in our credit facilities or senior secured notes could result in an event of default, which could trigger acceleration of our indebtedness and may result in the acceleration of, or default under, any other debt we have incurred or we may incur in the future to which a cross-acceleration or cross-default provision applies, which could have a material adverse effect on our business and operations. In the event of any default under our credit facilities or senior secured notes, the applicable lenders or notes purchasers could elect to terminate borrowing commitments and declare all borrowings and loans outstanding, together with accrued and unpaid interest and any fees and other obligations, to be immediately due and payable. In addition, or in the alternative, the applicable lenders or agents could exercise their rights under the security documents, entered into in connection with our credit facilities and our senior secured notes. We have pledged a significant portion of our assets as collateral under our credit facilities and our senior secured notes.

If we were unable to repay or otherwise refinance these borrowings and loans when due, the applicable lenders or agents could proceed against the collateral granted to them to secure that indebtedness, which could force us into bankruptcy or liquidation. In the event the applicable lenders or agents accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. Any acceleration of amounts due under the agreements governing our credit facilities or senior secured notes or the exercise by the applicable lenders or agents of their rights under the security documents would likely have a material adverse effect on our business and operations. As a result of these restrictions, we may be:

 

   

limited in how we conduct our business;

 

   

unable to raise additional debt or equity financing on terms acceptable to us, or at all, to operate during general economic or business downturns; or

 

   

unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our strategy.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.

Borrowings under our credit facilities are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease.

Borrowings under the Revolving Credit Facility bear interest at a floating rate equal to a minimum LIBOR of 0% of the relevant currency or EURIBOR (as the case may be) plus an applicable margin of 3.35%. If the specified LIBOR or EURIBOR rate were to increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease.

We may enter into interest rate swaps, caps or other derivative financial instruments that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we currently have no hedging arrangements in place, and as such do not maintain derivative financial instruments with respect to all of our variable rate indebtedness, and any swaps we enter into in the future may not fully mitigate our interest rate risk.

 

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We will require a significant amount of cash to service our indebtedness. The ability to generate cash or refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control.

We are a holding company, and as such have no independent operations or material assets other than our ownership of equity interests in our subsidiaries and joint ventures, and our subsidiaries’ and our joint ventures’ contractual arrangements with members and customers, and we will depend on our subsidiaries and joint ventures to distribute funds to us so that we may pay our obligations and expenses.

Our ability to make scheduled payments on, or to refinance our respective obligations under, our indebtedness and to fund planned capital expenditures and other corporate expenses will depend on the ability of our subsidiaries and joint ventures to make distributions, dividends or advances to us, which in turn will depend on our subsidiaries’ and joint ventures’ future operating performance and on economic, financial, competitive, legislative, regulatory and other factors and any legal and regulatory restrictions on the payment of distributions and dividends to which they may be subject. Many of these factors are beyond our control.

For the purposes of our going concern assessment, we have considered the on-going impact of the COVID-19 pandemic and the resultant global economic uncertainties on our business and have undertaken a detailed assessment of cash flow and other forecasts covering a period of at least the next 12 months. As part of the going concern assessment, we have modelled a number of different scenarios. Given current economic conditions, including but not limited to the continued impact of the COVID-19 pandemic, our modelling of various scenarios, as compared to detailed forecasts, considers the potential impact of such generalized economic uncertainties on our business across all regions and the extent to which this could adversely affect House openings and cash flows. However, we can provide no assurance that the scenarios included in our models will ultimately provide to be true, our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized, or that future borrowings will be available to us in an amount sufficient to enable us to satisfy our respective obligations under our indebtedness or to fund our other needs without taking other steps to reduce or delay expenditure. In order for us to satisfy our obligations under our indebtedness and fund planned capital expenditures, we must continue to execute our business strategy or take such other steps to reduce or delay expenditure. If we are unable to do so, we may need to reduce or delay our planned capital expenditures or refinance all or a portion of our indebtedness on or before maturity. Significant delays in our planned capital expenditures may materially and adversely affect our future revenue prospects. In addition, we can provide no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

Risks Related to Our Properties

Our properties are currently geographically concentrated in a limited number of cities and, accordingly, we could be disproportionately harmed by an economic downturn in these cities or by a disaster, such as a hurricane, earthquake or terrorist attack, among other catastrophes.

The concentration of our properties in a limited number of cities exposes us to greater risk to local economic, business and other conditions than more geographically diversified companies. For example, an economic downturn, a natural disaster, a terrorist attack, civil disturbances or similar catastrophes in London, New York or Los Angeles would likely have a disproportionate effect on our overall results of operation. In addition, certain of our properties are located in markets that are more susceptible to natural disasters than others, which could adversely affect those properties, the local economies, or both. Specifically, the Miami, Florida area, where Soho Beach House is located, is susceptible to hurricanes, such as those that occurred in 2017; West Hollywood, California, where Soho House West Hollywood is located, and Istanbul, Turkey, where Soho House Istanbul is located, are susceptible to earthquakes; and there have been multiple terrorist attacks in areas where a number of our Houses are located, including London, Istanbul and Mumbai. Our properties are also at risk of man-made disasters, particularly fires. Our properties are also at risk of being negatively impacted by civil disturbances, protest or rioting, such as the 2019 political protests which impacted Soho House Hong Kong. While we maintain property and business interruption insurance, we carry large deductibles, and there can be no assurance that if an

 

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earthquake, hurricane or other natural or man-made disaster or other catastrophe should affect our geographical areas of operations, we would be able to maintain our current level of operations or profitability, or that property and business interruption insurance would adequately reimburse us for our losses. Any such economic downturn, disaster or other catastrophe could adversely affect our business, results of operation and financial condition.

We own some of our properties, which exposes us to a fall in property prices which could harm our business.

While our model is to lease our properties, there are certain properties within our portfolio—Babington House (Somerset, England), High Road House (London, England), Soho Beach House (Miami, US), Ludlow House (New York, US) and Soho House Barcelona (Barcelona, Spain)) that we own, whether wholly-owned or by way of a joint venture. The property market in any jurisdiction may fall resulting in an erosion of value that we have built up in the owned properties and therefore adversely impacting our business, results of operations and financial condition.

Our efforts to develop, redevelop or renovate our owned and leased properties could be delayed or become more expensive, which could reduce revenues or impair our ability to compete effectively.

The condition of aging properties could negatively impact our ability to attract members, or result in higher operating and capital costs, either of which could reduce revenues or profits. While we have budgeted for replacements and repairs to furniture, fixtures and equipment at our properties, there can be no assurance that these replacements and repairs will occur, or even if completed, will result in improved performance. In addition, these efforts are subject to a number of risks, including:

 

   

construction delays or cost overruns (including with respect to labor and materials) that may increase project costs;

 

   

obtaining zoning, occupancy, and other required permits or authorizations;

 

   

changes in economic conditions that may result in weakened or lack of demand or negative project returns;

 

   

governmental restrictions on the size or kind of development;

 

   

lack of availability of rooms or spaces for revenue-generating activities during construction, modernization or renovation projects;

 

   

environmental conditions of properties being developed;

 

   

force majeure events, including earthquakes, tornadoes, hurricanes, floods or tsunamis; and

 

   

design defects that could increase costs.

If properties under development or renovation are delayed in opening as scheduled, or if renovation investments adversely affect or fail to improve performance, this could lead to material adverse effects on our business, results of operation and financial condition.

Because most of our properties are leased, we are subject to the risk that these leases could expire or be terminated, including as a result of our default on payments under the lease, either of which would cause us to lose the ability to operate these properties.

Most of our Houses and the properties from which we operate our businesses are occupied under leases and the operation of our businesses in those Houses depends on our right to use the premises demised by the relevant lease. We are subject to the risk that a lessor could refuse to extend the agreed term of any lease agreement or that a lease agreement could be terminated before expiration of the lease term (e.g., due to a contractual break option available to the lessor or a breach of a statutory provision applicable to certain fixed-term lease agreements in the UK and Germany) or not be renewed on commercially reasonable terms or at all. Under the

 

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typical terms of the relevant leases, in the event of certain material breaches by us, the landlord may enforce its right to forfeit or terminate the lease. In some instances, the tenant has customary rights to apply for relief from any such forfeiture or termination, which application is likely to be successful if the relevant breach is remedied at the same time. However, more generally, there can be no assurances that any affected landlord would continue to allow us to use the land demised by the lease if we fail to meet our contractual obligations thereunder.

We are subject to the risk of condemnation or compulsory forfeiture.

Our business would be materially adversely affected if a condemnation or compulsory purchase order occurs in respect of any properties in which we have a long leasehold or freehold interest, since we would no longer be able to use and occupy the relevant property, and it would be unlikely that the amount received pursuant to the condemnation or compulsory purchase would represent the fair market value of the relevant property. Any property in any jurisdiction in which we operate may at any time be expropriated or compulsorily acquired by, among others, a local authority or a governmental department in connection with redevelopment or infrastructure projects which are of public benefit. Any of these developments could have a material adverse effect on our business, or results of operation and financial condition.

Any mortgage debt obligations we incur will expose us to increased risk of property losses due to foreclosure, including as a result of our cross-defaults to other indebtedness which could have a material adverse effect on us, including our financial condition, liquidity and results of operation.

Incurring mortgage debt increases our risk of property losses because any defaults on indebtedness secured by our owned properties may result in foreclosure actions initiated by lenders and ultimately our loss of the property securing the loan for which we are in default. For tax purposes, a foreclosure of any non-recourse mortgage on any of our properties may be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. In certain of the jurisdictions in which we operate, if any such foreclosure is treated as a sale of the property and the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we could recognize taxable income upon foreclosure but may not receive any cash proceeds.

In addition, any default under our mortgage debt obligations may increase the risk of cross-default on our other indebtedness, including other mortgage debt. If this occurs, we may not be able to satisfy our obligations under our indebtedness, which could have a material adverse effect on us, including our business, results of operation and financial condition.

We believe that we will be able to operate our business without breaching the terms of any of our mortgage debt obligations. We are currently in compliance with all such terms.

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.

We have in the past and may in the future acquire, develop or redevelop properties through joint ventures with third parties, acquiring non-controlling interests in or sharing responsibility for managing the affairs of a House, joint venture or other entity. To the extent we own or lease properties through joint ventures or other entities, we may not be in a position to exercise sole decision-making authority regarding the ownership or operations of such House or property, joint venture or other entity. Investments in joint ventures or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners might become bankrupt or fail to fund their share of required capital contributions. Likewise, partners may have economic or other business interests or goals which are inconsistent or compete with our business interests or goals and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of creating impasses on decisions if neither we nor our partner have full control over the joint venture or other entity. Disputes between us and our partners may result in litigation or arbitration that

 

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would increase our expenses and prevent management from focusing their time and effort on our business. Consequently, actions by, or disputes with, our partners might result in subjecting Houses or other properties owned or leased by the joint venture to additional risk. In addition, we may, in certain circumstances, be liable for the actions of our partners. See “Business—Joint Ventures, Operating Agreements and Partnership Agreements.”

Preparing our consolidated financial statements requires us to have access to information regarding the results of operation, financial position and cash flows of our joint ventures. Any deficiencies in our joint ventures’ internal controls over financial reporting may affect our ability to report our financial results accurately or prevent or detect fraud. Such deficiencies also could result in restatements of, or other adjustments to, our previously reported or announced operating results, which could diminish investor confidence and reduce the market price for our shares. Additionally, if our joint ventures are unable to provide this information for any meaningful period or fail to meet expected deadlines, we may be unable to satisfy our financial reporting obligations or timely file our periodic reports.

We may be subject to unknown latent defects or contingent liabilities related to our existing properties or properties that we acquire, which could have a material adverse effect on us, including our business, financial condition, liquidity, results of operation and prospects.

Our properties or properties that we may in the future acquire may be subject to unknown latent defects or contingent liabilities for which we may have no recourse, or only limited recourse, against the sellers. In general, the representations and warranties provided under the transaction agreements related to our existing properties and any future acquisitions of properties by us may not survive the closing of the transactions. Furthermore, indemnification under such agreements may not exist or be limited and subject to various exceptions or materiality thresholds, a significant deductible or an aggregate cap on losses. As a result, there is no guarantee that we will recover any amounts with respect to losses due to breaches by the transferors or sellers of their representations and warranties or other prior actions by the sellers. In addition, the total amount of costs and expenses that may be incurred with respect to liabilities associated with these properties may exceed our expectations, and we may experience other unanticipated adverse effects, all of which may materially and adversely affect us, including our business, results of operation and financial condition.

Our properties or properties that we may lease or acquire may contain or develop harmful mold that could lead to liability for adverse health effects and costs of remediating the problem, either of which could have a material adverse effect on us, including our results of operation.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. Some of the properties in our portfolio or properties that we may acquire or lease may contain microbial matter, such as mold and mildew, which could require us to undertake a costly remediation program to contain or remove the mold from the affected property. Furthermore, we can provide no assurances that we will be successful in identifying harmful mold and mildew at properties that we seek to acquire or lease in the future, which could require us to take remedial action at such properties. The presence of mold could expose us to liability from guests, employees, contractors and others if property damage or health concerns arise, which could have a material adverse effect on us, including our results of operation and financial condition.

Risks Related to our Technology and Data

Our business relies heavily on information systems and technology, and any failure, interruption or weakness in our or our third-party service providers’ information systems or technology may prevent us from effectively operating our business and damage our reputation. A failure to adequately update our existing systems and implement new systems could harm our businesses and adversely affect our results of operation.

We increasingly rely on information technology (‘IT’) systems, including our point-of-sale processing systems in our Houses, restaurants and other businesses and other information systems managed by third-party service

 

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providers, to interact with our members and customers and collect, maintain, store, transfer, disclose and otherwise process customer and member information and other PII, including for our operations, collection of cash, management of our supply chain, accounting, staffing, payment obligations, Automated Clearing House (‘ACH’) transactions, credit and debit card transactions, and other processes and procedures. We leverage our internal IT systems, and those of our third-party service providers, to enable, sustain, and support our business interests.

Given the communication channels through which we engage with our members, customers and employees, and other aspects of our business, it is important that we and our third-party service providers maintain uninterrupted operation of our business-critical computer systems. Our operations depend upon our ability, and the ability of our third-party service providers, to protect our computer equipment and other systems against damage, failure, interruption and other security incidents. However, our systems, and those of our third-party service providers, including back-up systems, are subject to damage, interruption, disruption or outage from, among other things, physical theft, human error, power outages and loss, computer and telecommunications failures, computer viruses and worms, installation of malicious software, internal or external security or data breaches, phishing, ransomware, malware, social engineering attacks, credential stuffing, denial-of-service attacks, catastrophic events and natural disasters such as fires, floods, earthquakes, tornadoes and hurricanes, wars, terrorism, fraud, negligence, misconduct or errors by our employees or other third parties, including state-sponsored organizations with significant financial and technological resources, and other disruptive problems or security breaches. If our or our third-party service providers’ systems are damaged or cease to function properly, we may have to make significant investments to fix or replace them, and we may suffer interruptions in our operations in the interim. Any interruption in such systems could have a material adverse effect on our business, results of operation and financial condition.

The failure of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, expanding our systems as we grow, security breaches or other security incidents of our and our third-party service providers’ systems, or other unanticipated problems, could result in interruptions to, or delays in, our business and member and customer service, unauthorized access or misuse of data, including PII, and may reduce efficiency in our operations.

In addition, the implementation of technology changes and upgrades to maintain current systems and integrate new systems, as well as transitions from one service provider to another, may also cause service interruptions, disruptions or outages, operational delays due to the learning curve associated with using a new system, transaction processing errors and system conversion delays, and may cause us to fail to comply with applicable laws, rules, regulations, policies, industry standards, contractual obligations and other legal requirements related to data privacy, protection and security. If our information systems or those of our third-party service providers fail, and our or our third-party service providers’ back-up or disaster recovery plans are not adequate to address such failures, such events may adversely affect our business and operations. If we need to move to a different third-party system, our operations, including electronic funds transfer drafting, could be interrupted. In addition, remediation of such problems could result in significant, unplanned operating or capital expenditures, which may have an adverse effect on our business, results of operations and financial condition.

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.

Our IT and other systems, and those of our third-party service providers, are vulnerable to cybersecurity risks. For example, certain persons and entities may attempt to penetrate our network, the systems hosting our website, the SH.APP or our other networks and systems, and may otherwise seek to misappropriate our proprietary or confidential information, including PII, or cause interruptions of our service. Because the techniques used by such persons and entities to access or sabotage networks and systems are increasingly diverse and sophisticated, change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques. Back-up and redundant systems may be insufficient or may fail, which may result in a disruption of availability of our products or services to our members or compromise the integrity or availability of our members’ information.

 

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In addition, sophisticated operating system software and applications that we procure from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of our networks, system, or our processing of personal information or other data. Furthermore, we depend upon our employees, independent contractors, consultants and other third parties with whom we do business to appropriately handle confidential data and deploy our IT resources in a safe and secure fashion that does not expose our network systems to security breaches and the loss of data. Accordingly, if any of our IT or cybersecurity systems, processes or policies, or those of any of our manufacturers, logistics providers, customers, independent contractors or other third-party service providers fail to protect against or effectively and timely remediate unauthorized access, sophisticated hacking or terrorism, the mishandling, misuse or misappropriation of data, including PII, by employees, contractors or other persons or entities, software errors, failures or crashes, interruptions in power supply, virus proliferation or malware, communications failures, acts or war or sabotage, denial-of-service attacks or other cybersecurity breaches or security incidents, our ability to conduct our business effectively could be damaged in a number of ways, including:

 

   

sensitive data regarding our business, including intellectual property, personal information (including PII), and other confidential and proprietary data, could be stolen;

 

   

our electronic communications systems, including email and other methods, could be disrupted, delayed, or damaged, and our ability to conduct our business operations could be seriously damaged until such systems can be restored;

 

   

our ability to process customer orders and our distribution channels could be disrupted, interrupted or damaged, resulting in delays in revenue recognition, harm to our relationships with customers and prospective customers and harm to our reputation;

 

   

accidental release or loss of or access to information maintained in our or third-party service providers’ information systems and networks, including PII of our employees and our members, may occur; and

 

   

PII relating to various parties, including members, customers, employees and business partners, could be compromised, and we may be found to be in violation of applicable data privacy, security and protection laws, rules, regulations, industry standards, policies or contractual obligations.

Furthermore, outside parties may attempt to fraudulently induce our employees or employees of our third-party service providers to disclose sensitive or confidential information in order to gain access to our or our third-party service providers’ systems and processes. The number and complexity of these threats continue to increase over time. Although we develop, maintain and regularly monitor systems and controls designed to prevent cybersecurity events from occurring, and we have policies and processes to identify and mitigate threats, such efforts may not be adequate and may not be able to prevent security breaches or unauthorized access to important and confidential data, including PII. The development and maintenance of our IT systems, controls, and processes require ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Despite our efforts, including the implementation of threat protection, information and network security measures and business continuity and disaster recovery plans, our systems and those of our third-party service providers may be vulnerable, and we cannot guarantee that the inadvertent or unauthorized use of confidential, sensitive or personal information, including PII, will not occur, or that third parties will not gain unauthorized access to such information.

A number of the states, counties and cities in which we maintain facilities have issued “shelter in place” and similar orders in response to the recent global outbreak of COVID-19. As a result, a proportion of our employees are currently working remotely on less secure systems, and we may need to devote additional resources to enhance the security of our IT systems, which may not successfully prevent against all risks. This transition to a remote work environment may exacerbate certain risks to our business, including increasing the stress on, and our vulnerability to disruptions of, our IT infrastructure and computer systems, increased risk of phishing and other cybersecurity attacks, and increased risk of unauthorized dissemination of personal or confidential information. Additionally, our third-party vendors are experiencing similar challenges as they provide services to us.

 

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Should any of the above events occur, we could be subject to significant claims for liability from our customers, members, employees or other third parties and legal or regulatory investigations, inquiries or actions from governmental agencies or competent courts. In addition, our ability to protect our intellectual property rights could be compromised and our reputation and competitive position could be significantly harmed. Any regulatory, contractual or other actions, litigations, investigations, fines, penalties and liabilities relating to any actual or alleged misuse or misappropriation of PII or other confidential or proprietary information could be significant in terms of monetary exposure and reputational impact, and may necessitate changes to our business operations that may be disruptive to us. Additionally, we could incur significant costs in order to upgrade our cybersecurity systems, processes, policies and procedures and remediate damages. While we maintain cyber risk insurance, in the event of a significant security or data breach, this insurance may not cover all of the losses that we may suffer. The successful assertion of one or more large claims against us that exceed our available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation and our business, financial condition and results of operations. We also cannot ensure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims related to a security incident or breach, or that the insurer will not deny coverage as to any future claim. Consequently, our financial performance and results of operations could be materially adversely affected.

In addition, certain jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data. For example, the General Data Protection Regulation (2016/679) (‘GDPR’) and national laws supplementing the GDPR across the European Economic Area (‘EEA’), require companies to notify individuals of data security breaches that are likely to result in a high risk to the rights and freedoms of these individuals. Additionally, laws in all 50 US states require businesses to provide notice to customers whose PII has been disclosed as a result of a data breach. In some cases our agreements with certain customers may require us to notify them in the event of a security incident. Such mandatory disclosures could lead to negative publicity and may cause our current and prospective customers to lose confidence in the effectiveness of our data security measures. Moreover, if we, or a third-party service provider or a similar provider in our industry were to experience a security breach, customers may lose trust in the security of the business model and underlying technology generally, which could adversely impact our ability to retain existing customers or attract new ones.

Any actual or perceived threat of breach or disruption to our services or any compromise of personal data, including PII, or any actual or perceived violations of cybersecurity laws, rules or regulations, could impair our reputation, cause us to lose customers, members or revenue, cause us to face costly litigation or administrative or regulatory proceedings, result in member complaints, necessitate customer service or repair work, require increased security protection costs by deploying additional personnel and modifying or enhancing our protection technologies, require the investigation and remediation of any information security vulnerabilities and defending against and resolving legal and regulatory claims, all of which would involve substantial costs, divert our management’s attention and resources and have a material adverse effect on our business, financial condition and results of operations.

If we fail to properly maintain the confidentiality and integrity of our data, including member and customer credit or debit card and bank account information and other 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 and operations.

In the ordinary course of business, we collect, use, transmit, store, share and otherwise process member, customer and employee data, including credit and debit card numbers, bank account information, dates of birth, location information and other highly sensitive information, including PII, in IT systems that we maintain, with third-party service providers with whom we contract to provide services, and in connection with the SH.APP. Some of this data is sensitive and could be an attractive target for criminal attack by malicious third parties with a

 

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wide range of expertise and motives (including financial gain), including organized criminal groups, hackers, disgruntled current or former employees, and others. In particular, the increasing sophistication and resources of cyber criminals and other non-state threat actors and increased actions by nation-state actors make keeping up with new threats difficult and could result in a breach of security. The integrity, protection and security of such member, customer and employee data is critical to us.

Despite the security measures we and our third-party service providers have in place to protect confidential information and PII and to comply with applicable laws, rules, regulations, industry standards and contractual obligations relating to data privacy, protection and security, our facilities and systems and those of our third-party service providers, as well as the SH.APP, may be vulnerable to security or data breaches, acts of cyber terrorism or sabotage, vandalism or theft, computer viruses, misplaced, corrupted or lost data, programming or human errors or other similar events. Furthermore, the size and complexity of our IT systems and those of our third-party service providers make such systems potentially vulnerable to security or data breaches and other security incidents from inadvertent or intentional actions by our employees or third-party service providers or from attacks by malicious third parties. Because such attacks are increasing in sophistication and change frequently in nature, we and our third-party service providers may be unable to anticipate these attacks or implement adequate preventative measures, and any compromise of our systems, or those of our third-party vendors, may not be discovered, mitigated or remediated promptly or effectively.

Additionally, the collection, maintenance, use, disclosure, storage, transmission, disposal and other processing of PII by our businesses are regulated at the federal, state local, provincial and international levels as well as by certain industry groups, such as the Payment Card Industry organization and the National Automated Clearing House Association, and we cannot guarantee that we have been and will be in compliance with all such applicable laws, rules, regulations and standards. The regulatory framework for data privacy and security worldwide is continuously evolving and developing and, as a result, interpretation and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. The occurrence of unanticipated events and the development of evolving technologies often rapidly drives the adoption of legislation or regulation affecting the use, collection or other processing of data. New laws, amendments to or reinterpretations of existing laws, regulations, standards and other obligations may require us to change our business operations with respect to how we use, collect, store, transfer or otherwise process certain types of PII, implement new processes, and incur additional costs to comply with those laws and our members’ exercise of their rights thereunder.

Foreign data protection, privacy, consumer protection and other laws and regulations are often more restrictive than those in the United States. In particular, the EEA (comprised of the EU member states and Iceland, Liechtenstein and Norway) and the UK, have traditionally taken broader views as to types of data that are subject to privacy and data protection. The EU has adopted the GDPR, which went into effect in May 2018 and contains numerous requirements and changes from previously existing EU law, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs. The GDPR requires data controllers to implement more stringent operational requirements for processors and controllers of personal data, including, for example, transparent and expanded disclosure to data subjects (in a concise, intelligible and easily accessible form) about how their personal information is to be used, imposes limitations on retention of information, introduces mandatory data breach notification requirements, and sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. The GDPR also imposes strict rules on the transfer of personal data to countries outside the EEA, including the US. In 2016, the EU and US agreed to a transfer framework for data transferred from the EEA to the US, called the Privacy Shield, but the Privacy Shield was invalidated in July 2020 by the Court of Justice of the EU (‘CJEU’) in its Schrems II ruling. We continue to evaluate the impact of the Schrems II decision and are considering whether any additional steps need to be taken to continue to comply with applicable regulations in light of Schrems II. The standard contractual clauses issued by the European Commission for the transfer of personal data, a potential alternative to the Privacy Shield, may be similarly invalidated by the CJEU, and it remains to be seen whether additional means for lawful data transfers will become available. Fines for noncompliance with the GDPR are significant and can be up to the greater of €20 million or 4% of annual global

 

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turnover. We may also be liable should any individual who has suffered financial or non-financial damage arising out from our violation of the GDPR exercise their right to receive compensation against us. The GDPR also provides that EU member states may introduce further conditions, including limitations, and make their own laws and regulations further limiting the processing of ‘special categories of personal data,’ including personal data related to health, biometric data used for unique identification purposes and genetic information. The EU has also proposed the draft ePrivacy Regulation, which will replace both the ePrivacy Directive and all the national laws implementing this directive. The ePrivacy Regulation, as proposed, would impose strict opt-in marketing rules, change rules about cookies, web beacons and related technologies, and significantly increase penalties for violations. Such regulations could limit our ability to collect, use and share EU data, could cause our compliance costs to increase and could increase our potential liability, ultimately having an adverse impact on our business, and harm our business and financial condition.

Further, the UK’s vote in favor of exiting the EU, often referred to as Brexit, and ongoing developments in the UK have created uncertainty with regard to data protection regulation in the UK. As of January 1, 2021, following the expiry of transitional arrangements agreed to between the UK and EU, data processing in the UK is governed by a UK version of the GDPR (combining the GDPR and the UK’s Data Protection Act 2018), exposing us to two parallel regimes, each of which authorizes similar fines and other potentially divergent enforcement actions for certain violations. Pursuant to the Trade and Cooperation Agreement, which went into effect on January 1, 2021, the UK and the EU agreed to a specified period during which the UK will be treated like an EU member state in relation to transfers of personal data to the UK for four months from January 1, 2021. This period may be extended by two further months. Unless the European Commission makes an ‘adequacy finding’ in respect of the UK before the expiration of such specified period, the UK will become an ‘inadequate third country’ under the GDPR and transfers of data from the EEA to the UK will require a transfer mechanism, such as the standard contractual clauses. Furthermore, following the expiration of this specified period, there will be increasing scope for divergence in application, interpretation and enforcement of the data protection law as between the UK and EEA. Other countries have also passed or are considering passing laws requiring local data residency or restricting the international transfer of data.

In the US, numerous states have enacted or are in the process of enacting state level data privacy laws and regulations governing the collection, use, and other processing of personal information. For example, the California Consumer Privacy Act (the ‘CCPA’), which came into effect on January 1, 2020, established a new privacy framework for covered businesses such as ours, and may require us to modify our data processing practices and policies and incur compliance related costs and expenses. The CCPA provides new and enhanced data privacy rights to California residents, such as affording California residents the right to access and delete their information and to opt out of certain sharing and sales of personal information. The law also prohibits covered businesses from discriminating against California residents (for example, by charging more for services) for exercising any of their rights under the CCPA. The CCPA imposes severe civil penalties and statutory damages, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action is expected to increase the likelihood of, and risks associated with, data breach litigation. However, it remains unclear how various provisions of the CCPA will be interpreted and enforced. Furthermore, in November 2020, California voters passed the California Privacy Rights Act of 2020 (‘CPRA’). Effective in most material respects starting on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding the CCPA to include additional data privacy compliance requirements that may impact our business. The CPRA also establishes a regulatory agency dedicated to enforcing the CCPA and the CPRA.

We make public statements about our use, collection, disclosure and other processing of PII through our privacy policies, information provided on our website and press statements. Although we endeavor to comply with our public statements and documentation, we may at times fail to do so or it may be alleged that we have failed to do so. The publication of our privacy policies and other statements that provide promises and assurances about data privacy and security can subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual practices.

 

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Many of these laws and regulations are still evolving and being tested in courts and could be interpreted or applied in ways that could harm our business, particularly in the new and rapidly evolving industry in which we operate. Federal, state, local, provincial, and international regulators and industry groups may also consider and implement from time to time new data privacy, security and protection laws, rules, regulations and requirements that apply to our businesses, and we cannot yet determine the impact that such future laws, regulations and standards may have on our business. For example, laws in all 50 US states require businesses to provide notice under certain circumstances to customers whose PII has been disclosed as a result of a data breach. Compliance with evolving data privacy and security laws, rules, requirements and regulations may result in cost increases due to necessary changes to our systems and practices, new limitations or constraints on our business models, the development of new administrative processes and may prevent us from providing certain offerings in certain jurisdictions in which we currently operate and in which we may operate in the future. They also may impose further restrictions on our processing, sharing, transmission, collection, disclosure and use of PII in connection with the SH.APP or that are housed in one or more databases maintained by us or our third-party service providers. Any actual or perceived noncompliance with applicable data privacy, security and protection laws, rules and regulations, industry group requirements, contractual obligations, consent requirements or a security or data breach involving the misappropriation, loss or other unauthorized disclosure of personal, sensitive or confidential information, including PII, whether by us or by one of our third-party service providers, could have a material adverse effect on our business, operations, brand, reputation and financial condition, including decreased revenue, material fines and penalties, litigation, increased financial processing fees, compensatory, statutory, punitive or other damages, adverse actions against our licenses to do business and injunctive relief by court or consent order.

Regulatory Risks

We are subject to unionization and labor and employment laws and regulations, which could increase our costs and restrict our operations in the future.

Currently, none of our employees are represented by a union. Attempts may be made to organize all or part of our employee base. As we continue to expand and enter new territories, unions may make further attempts to organize all or part of our employee base. If some or all of our workforce were to become unionized, and the terms of the collective bargaining agreement were significantly different from our current compensation arrangements, it would likely increase our costs and adversely impact our profitability. Additionally, responding to such organization attempts could distract our management and would likely result in increased legal and other professional fees, and potential labor union contracts could put us at increased risk of labor strikes and disruption of our operations.

Our business is subject to a variety of employment laws and regulations and may become subject to additional requirements in the future. Although we believe we are in material compliance with applicable employment laws and regulations, in the event of a change in requirement, we may be required to modify our operations or to utilize resources to maintain compliance with such laws and regulations. Moreover, we may be subject to various employment-related claims, such as individual or class actions or government enforcement actions relating to alleged employment discrimination, employee classification and related withholding, wage-hour, labor standards or healthcare, pension and benefit issues. We may not be able to successfully defend such claims. We also may not be able to maintain a level of insurance that would provide adequate coverage against such potential claims. Our failure to comply with applicable employment laws and regulations and related legal actions against us may affect our ability to compete or have a material adverse effect on our business, results of operation and financial condition.

The industries in which we operate are heavily regulated and a failure to comply with regulatory requirements and protocols may result in an adverse effect on our business.

Our various properties are subject to numerous federal, state and local laws and regulations, including those relating to the preparation and sale of food and beverages, and specifically alcohol. The failure to comply with

 

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any such laws or regulations could subject us to a number of adverse consequences, including revocation or suspension of our liquor licenses by the relevant authorities and potential litigation. We are also subject to laws governing our relationship with our employees in such areas as minimum wage and maximum working hours, overtime, working conditions, hiring and firing employees and work permits. Also, our ability to remodel, refurbish or add to our existing properties may be dependent upon our ability to obtain necessary building permits or other authorizations from local authorities. In addition, we are subject to the numerous rules and regulations relating to taxation. Finally, the products that we sell as part of our retail offerings are subject to various laws and regulations, including with regard to product and fire safety and labelling. We expect our business to expand into new and complementary lines of businesses which may subject us to additional laws and regulations and further increase the regulatory burden on us. Any failure to comply with these and other regulatory requirements may result in an adverse effect on our business, results of operations and financial condition.

We could face costs, liabilities and risks associated with, or arising out of, environmental, health and safety laws and regulations.

We are subject to various federal, state, local and foreign environmental, health and safety laws and regulations that, among other matters, (i) regulate certain activities and operations, such as the use, management, generation, release, treatment, storage or disposal of, and exposure to, regulated or hazardous materials, substances or wastes, (ii) impose liability for costs of investigating and cleaning up, and for damages to natural resources from, spills, contamination from waste disposals on and off-site, or other releases of hazardous materials or regulated substances, and (iii) regulate workplace safety. Compliance with these laws and regulations could increase our cost of operation. Violation of these laws and regulations may subject us to sanctions or liabilities, including significant fines, penalties or other costs, suspension of our business or activities, or restrictions or revocation of licenses or permits, which could negatively impact our business, financial condition, liquidity, results of operation, cash flows or prospects. We could also be responsible for the investigation and remediation of environmental conditions at currently or formerly owned, operated or leased sites, as well as for associated liabilities, including liabilities for natural resource damages, third-party property damage or personal injury. Given that joint and several liability for contamination under certain environmental laws can be imposed on current or past owners or operators of a site without regard to fault, we may be subject to these liabilities regardless of whether we lease or own the property, and regardless of whether such environmental conditions were created by us or by a prior owner or tenant, third-party or a neighboring facility whose operations may have affected such property. We can also be liable for contamination at third-party sites to which we sent waste. In addition, from time to time, we may be required to remove, abate or manage certain substances such as asbestos, mold, radon gas, lead, or hazardous building materials or other hazardous conditions at our properties. We cannot assure you that environmental conditions relating to our prior, existing or future sites or those of predecessor companies whose liabilities we may have assumed or acquired will not have a material adverse effect on our business, results of operation and financial condition.

In addition, new laws, regulations or policies or changes in existing laws, regulations or policies or in their enforcement, future spills or accidents or the discovery of currently unknown conditions or non-compliances may give rise to investigation and remediation liabilities, compliance costs, fines and penalties or other sanctions, or liability and claims for alleged natural resource damages, personal injury or property damage, any of which may have a material adverse effect on our business, results of operations and financial condition.

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 restaurants.

Companies operating restaurants have from time to time faced lawsuits alleging that a guest suffered illness or injury during or after a visit to a restaurant, including actions seeking damages resulting from food borne illness and relating to notices with respect to chemicals contained in food products required under applicable laws. Similarly, food tampering, employee hygiene and cleanliness failures or improper employee conduct at the

 

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restaurants we operate could lead to product liability or other claims. We cannot guarantee to our customers that our internal controls and training will be fully effective in preventing such issues and associated claims. Regardless of whether any claims against us are valid or whether we are ultimately held liable, claims against us may receive significant media focus and publicity, may be expensive to defend and may divert management attention and other resources from our operations and hurt our business, brand, financial condition, liquidity, results of operation, cash flows or prospects. A judgment or settlement significantly in excess of our insurance coverage for any claims could materially adversely affect our business, results of operation and financial condition. We may not be able to successfully defend such claims. We also may not be able to maintain a level of insurance that would provide adequate coverage against such potential claims.

Failure to comply with the US Foreign Corrupt Practices Act (‘FCPA’), the UK Bribery Act 2010 (‘Bribery Act’) and similar laws associated with our activities could subject us to penalties and other adverse consequences.

We face significant risks if we fail to comply with the FCPA, the Bribery Act and other laws that prohibit improper payments or offers of payment to governments and their officials and political parties by us and other business entities for the purpose of obtaining or retaining business. In many countries, particularly in countries with developing economies, some of which represent significant markets for us, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA, the Bribery Act or other laws and regulations. Although we have implemented a company policy requiring our employees and consultants to comply with the FCPA, the Bribery Act and similar laws, such policy may not be effective at preventing all potential FCPA, Bribery Act or other violations. We also cannot guarantee the compliance by our vendors, suppliers and joint venture partners with applicable US laws, including the FCPA, the Bribery Act or other applicable non-US laws, including the Bribery Act. Therefore, there can be no assurance that none of our employees or agents will take actions in violation of our policies or of applicable laws, for which we may be ultimately held responsible. As a result of our focus on managing our growth, our development of infrastructure designed to identify FCPA and Bribery Act matters and monitor compliance is at an early stage. Any violation of the FCPA or the Bribery Act and related policies could result in severe criminal or civil sanctions, which could have a material and adverse effect on our business, results of operation and financial condition.

Taxation Risks

Anticipated changes in effective tax rates or adverse outcomes resulting from our exposure to various tax regimes in the countries in which we operate.

We will be subject to income taxes in the US, the UK and other jurisdictions in which we operate, and our domestic and foreign tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

 

   

changes in the valuation of our deferred tax assets and liabilities;

 

   

expected timing and amount of the release of any tax valuation allowances;

 

   

tax effects of stock-based compensation;

 

   

costs related to intercompany restructurings;

 

   

changes in tax laws, regulations and double taxation agreements, or in the interpretation, administration, or application thereof (in particular, as a result of Brexit); or

 

   

lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.

In addition, we may be subject to audits of our income, sales and other transaction taxes by US federal and state and foreign authorities. Outcomes from these audits could have an adverse effect on our business, results of operation and financial condition.

Net operating losses and excess interest deductions to offset future taxable income may be subject to certain limitations or forfeiture.

 

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Realization of these tax losses and interest deductions depends on future income, and there is a risk that our existing NOLs in certain jurisdictions including the US and the Netherlands could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our operating results.

A portion of the Company’s US deferred tax assets relates to NOLs, the use of which may not be available as a result of limitations on the use of acquired losses under Section 382 of the Internal Revenue Code of 1986, as amended (the ‘Code’). With respect to these operating losses, there is no assurance that they will be used given the current assessment of the limitations on their use or the current projection of future taxable income in the entities to which these losses relate. In addition, this offering, as well as future changes in our stock ownership, the causes of which may be outside of our control, could result in an additional ownership change under Section 382 of the Code. Our NOLs may also be impaired under US state laws. In addition, under the 2017 Tax Cuts and Jobs Act, NOLs generated in taxable years beginning after December 31, 2017 may be utilized to offset no more than 80% of taxable income annually. However, under the CARES Act, NOLs generated in taxable years 2018, 2019 and 2020 are not subject to this 80% limitation.

There is a risk that our UK losses and interest loss carryforwards may be restricted as a result of the changes in our stock ownership as a result of the offering process and/or as a result of the changes in the group structure as outlined in “Prospectus Summary—Our Structure.

Risks Related to Being a Public Company

We will incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices of which we have limited experience.

As a public company, and increasingly after we cease to be an ‘emerging growth company,’ we will incur significant legal, accounting, administrative and other costs and expenses that we have not previously incurred or experienced as a private company. We will be subject to the reporting requirements of the Exchange Act, which will require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, and rules subsequently implemented by the SEC and the NYSE, impose numerous requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted additional rules and regulations in these areas, such as mandatory ‘say on pay’ voting requirements that will apply to us when we cease to be an emerging growth company. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and may impact the manner in which we operate our business in ways we cannot currently anticipate. Our management and other personnel will need to devote a substantial amount of time to compliance with these laws and regulations. These requirements have increased and will continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities more time consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board or our board committees, or as executive officers.

The increased costs will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements and appropriately train our employees and management or bring in additional resources. However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application

 

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in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

If we do not have sufficiently experienced employees in the business or are not able to hire additional qualified employees, we may not be able to successfully manage our businesses and pursue our strategic objectives.

The financial and legal workforce of our business are predominantly based in the UK and historically our business has been subject to accounting principles generally accepted in the UK and English law. We also report our financial results under GAAP and, upon consummation of this offering, will be subject to US-related regulations, including applicable SEC and NYSE regulations. As a result, we will need to hire new employees with sufficient expertise to ensure our compliance with these and other regulations. Competition for such employees can be intense, and an inability to attract or recruit additional qualified employees in order to ensure regulatory compliance, to ensure the integrity of our own financial reporting processes and to expand our business, or the loss of any existing employees experienced in these fields, could adversely affect our business, financial condition, liquidity, results of operation, cash flows or prospects.

If our existing material weaknesses persist or we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately report our financial condition or results of operation, which may adversely affect investor confidence in us and, as a result, the value of our Class A common stock and our overall business.

The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. In particular, Section 404(a) of the Sarbanes-Oxley Act, or Section 404(a), will require us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting. Section 404(b) of the Sarbanes-Oxley Act, or Section 404(b), also requires our independent registered public accounting firm to attest to the effectiveness of our internal control over financial reporting. As an ‘emerging growth company’ we expect to avail ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404(b). However, we may no longer avail ourselves of this exemption when we are no longer an ‘emerging growth company.’ When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404(b) will correspondingly increase. Our compliance with applicable provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements.

Furthermore, investor perceptions of our company may suffer if additional deficiencies are found in our internal control over financial reporting, and this could cause a decline in the market price of our Class A common stock and accordingly our overall business. Regardless of compliance with Section 404, our failure to remediate the material weaknesses which have been identified or any additional failure of our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to implement these requirements effectively or efficiently, it could harm our business, financial condition, liquidity, results of operation, cash flows or prospects and could result in an adverse opinion on our internal controls from our independent registered public accounting firm.

We are an ‘emerging growth company,’ and the reduced disclosure requirements applicable to such companies could make our Class A common stock less attractive to investors.

We are an ‘emerging growth company,’ as defined in the Jumpstart Our Business Startups, or JOBS Act, enacted in April 2012, and may remain an ‘emerging growth company’ until the last day of the fiscal year following the

 

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fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a ‘large accelerated filer,’ our annual gross revenues equals or exceeds $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an ‘emerging growth company’ prior to the end of such five-year period. For as long as we remain an ‘emerging growth company,’ we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not ‘emerging growth companies.’

These exemptions include:

 

   

being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of operation” disclosure;

 

   

not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

 

   

reduced disclosure obligations regarding executive compensation; and

 

   

exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We have taken advantage of reduced reporting burdens in this prospectus. In particular, in this prospectus we have not included all of the executive compensation related information that would be required if we were not an emerging growth company. In addition, the JOBS Act provides that an ‘emerging growth company’ can take advantage of an extended transition period for complying with new or revised accounting standards, thereby delaying the adoption of these accounting standards until they would apply to private companies. We cannot predict if investors will find our Class A common stock less attractive because we may rely on these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock, and the price of our Class A common stock may be more volatile.

Risks Related to Our Common Stock

The dual class structure of our common stock has the effect of concentrating voting control with the Voting Group, including control over decisions that require the approval of stockholders; this will limit or preclude your ability to influence corporate matters submitted to a stockholder vote.

Each share of our Class B common stock is entitled to ten votes, and each share of our Class A common stock, which are the shares we are selling in this offering, is entitled to one vote per share. After giving effect to the sale of the Class A common stock offered hereby, and the issuance of the Converted Preference Shares, stockholders who beneficially own Class B common stock, including affiliates of Yucaipa and certain other stockholders (including Mr. Caring and Mr. Jones and their respective affiliates and family members) who together constitute the Voting Group, will control approximately     % of the combined voting power of our outstanding common stock following this offering (or approximately     % of the combined voting power of our outstanding common stock if the underwriters exercise in full their option to purchase an additional                     shares of Class A common stock).

Pursuant to our Certificate of Incorporation, each holder of our Class B common stock shall have the right to convert its shares of Class B common stock to shares of Class A common stock on a one-for-one basis. Additionally, shares of Class B common stock will automatically convert into shares of Class A common stock, on a one-for-one basis, upon transfer to any non-permitted holder of Class B common stock.

Because of the 10:1 voting ratio between shares of our Class B common stock and Class A common stock, the Voting Group (which collectively holds all of our outstanding shares of Class B common stock) will collectively

 

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control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders so long as the Voting Group owns a requisite percentage of our total outstanding common stock. Pursuant to the terms of the Stockholders’ Agreement, the Voting Group and its members will be entitled to designate individuals to be included in the nominees recommended by our Board for election to our Board as follows:

 

   

so long as the Voting Group owns at least 35% of our total outstanding shares of common stock, it will be entitled to designate nine directors for nomination, of which Yucaipa shall have the right to designate seven directors for nomination, Mr. Caring shall have the right to designate one director for nomination and Mr. Jones shall have the right to designate one director for nomination;

 

   

so long as the Voting Group owns less than 35% but at least 15% of our total outstanding shares of common stock, it will be entitled to designate six directors for nomination, of which Yucaipa shall have the right to designate four directors for nomination, Mr. Caring shall have the right to designate one director for nomination and Mr. Jones shall have the right to designate one director for nomination;

 

   

so long as the Voting Group owns less than 15% but at least 9% of our total outstanding shares of common stock, it will be entitled to designate three directors for nomination, of which Yucaipa shall have the right to designate one director for nomination, Mr. Caring shall have the right to designate one director for nomination and Mr. Jones shall have the right to designate one director for nomination; and

 

   

in the event that the Voting Group owns less than 9% of our total outstanding shares of common stock, neither the Voting Group nor any member will be entitled to designate any individuals for nomination for election to the Board; provided, however, that in the event at any time either Mr. Caring or Mr. Jones (in the case of Mr. Jones, at such time as Mr. Jones is not also our Chief Executive Officer) (including their respective affiliates and family members) shall own less than 5% of the shares of our outstanding common stock, such member shall no longer have the nominee designation rights set forth above and such designation shall instead be made by Yucaipa, unless, in each case, any individual member of the Voting Group owns more than 5% of our total outstanding common stock (at such time after the Voting Group owns less than 9% of our total outstanding shares of common stock), in which case such member will be entitled to nominate one director for election (though no other Voting Group member shall have any obligation to vote in favor of such nomination). In addition, for so long as Mr. Jones serves as our Chief Executive Officer, he shall remain a director on our Board.

 

   

Once the Voting Group owns less than 15% of the shares of our total outstanding shares of common stock, all remaining shares of Class B common stock will automatically convert on a one-for-one basis into shares of Class A common stock. Until such time as no members of the Voting Group are entitled to designate individuals to be included in the nominees recommended by our Board for election to our Board, or the Stockholders’ Agreement is otherwise terminated in accordance with its terms, the Voting Group acting together will agree to vote their Class B common stock in favor of the election of the nominees selected by the Voting Group as set forth above. As a result, for so long as any shares of Class B common stock remain outstanding, the Voting Group will have the ability to elect all of the members it nominates to our Board, and thereby, will exert a significant amount of control over our management and affairs. This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future. The difference in voting rights could also adversely affect the value of our Class A common stock by, for example, delaying or deferring a change of control or if investors view, or any potential future purchaser of our company views, the superior voting rights of the Class B common stock to have value.

In addition, our Certificate of Incorporation permits the issuance of additional shares of Class B common stock to members of the Voting Group after the completion of this offering. If any such additional shares of Class B common stock were to be issued to members of the Voting Group, because of the ten-to-one voting ratio between our Class B common stock and Class A common stock holders of Class A common stock would experience a further and potentially significant lessening of their voting power and ability to influence matters submitted to our stockholders.

 

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Additionally, the Voting Group’s interests may not align with the interests of our other stockholders. Yucaipa and Mr. Caring are in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Yucaipa and Mr. Caring may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

Upon the listing of our Class A common stock, we will be a ‘controlled company’ within the meaning of the rules of and, as a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements; you will not have the same protections afforded to stockholders of companies that are subject to all such requirements.

Because the Voting Group will continue to control a majority of the combined voting power of our common stock after completion of this offering for so long as it owns a requisite percentage of our total outstanding common stock, we will be a ‘controlled company’ within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a ‘controlled company’ and may elect not to comply with certain corporate governance requirements, including the requirements that it has, within one year of the date of the listing of our shares of Class A common stock:

 

   

a Board that is composed of a majority of independent directors, as defined under the listing rules of the NYSE;

 

   

a compensation committee that is composed entirely of independent directors; and

 

   

a nominating and corporate governance committee that is composed entirely of independent directors.

For at least a period of time following this offering, we intend to utilize certain of these exemptions. As a result, we will not have a majority of independent directors and our nominating and corporate governance committee and compensation committee will not consist entirely of independent directors. Accordingly, although we may transition to a Board with a majority of independent directors prior to the time we cease to be a ‘controlled company,’ you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE. Our status as a ‘controlled company’ could make our Class A common stock less attractive to some investors or otherwise negatively impact the price of our Class A common stock.

Certain of our directors have relationships with Yucaipa, which may cause conflicts of interest with respect to our business.

Following this offering, one of our directors, the Executive Chairman, Mr. Burkle, is affiliated with and is the founder of Yucaipa. Our Yucaipa-affiliated directors have fiduciary duties to us and, in addition, have duties to Yucaipa. As a result, Mr. Burkle may face real or apparent conflicts of interest with respect to matters affecting both us and Yucaipa, whose interests may be adverse to ours in some circumstances.

New investors in our Class A common stock will experience immediate and substantial book value dilution after this offering.

The initial public offering price of our Class A common stock will be substantially higher than the net tangible book value per share of the outstanding Class A common stock immediately after the offering. Based on our net tangible book value as of            , 2021, after giving effect to the conversion of all shares of Class B common stock into shares of Class A common stock, if you purchase our Class A common stock in this offering, you will suffer immediate dilution in net tangible book value of approximately $                per share. See “Dilution.”

Our Certificate of Incorporation will contain a provision renouncing our interest and expectancy in certain corporate opportunities.

Under our Certificate of Incorporation, none of Yucaipa, the companies owned or controlled by Yucaipa, any affiliates of Yucaipa, or any of their respective officers, directors, principals, partners, members, managers,

 

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employees, agents or other representatives will have any duty to refrain from engaging, directly or indirectly, in the same business activities, similar business activities or lines of business in which we operate. In addition, our Certificate of Incorporation will provide that, to the fullest extent permitted by law, no officer or director of ours who is also an officer, director, principal, partner, member, manager, employee, agent or other representative of Yucaipa or its affiliates will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such individual directs a corporate opportunity to Yucaipa or its affiliates and representatives, instead of us, or does not communicate information regarding a corporate opportunity to us that such individual has directed to Yucaipa or its affiliates and representatives. For instance, a director of our company who also serves as a director, officer or employee of Yucaipa or any of its portfolio companies or other affiliates may pursue certain acquisitions or other opportunities that may be complementary to our business and, as a result, such acquisition or other opportunities may not be available to us. Upon consummation of this offering, our Board will consist of fifteen members, one of whom will be affiliated with or employees of Yucaipa. These potential conflicts of interest could have a material and adverse effect on our business, financial condition, results of operations or prospects if attractive corporate opportunities are allocated by any of Yucaipa to itself or its affiliated funds, the portfolio companies owned by such funds or any of their affiliates instead of to us. A description of our obligations related to corporate opportunities under our Articles are more fully described in ‘‘Description of Capital Stock—Corporate Opportunity.’’

Anti-takeover provisions contained in our Certificate of Incorporation could impair a takeover attempt.

Certain provisions in our Certificate of Incorporation are intended to have the effect of delaying or preventing a change in control or changes in our management. For example, our Certificate of Incorporation includes provisions that establish an advance notice procedure for stockholder resolutions to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our Board. Additionally, our Certificate of Incorporation will provide that we are not governed by Section 203 of the Delaware General Corporation Law (‘DGCL’), which, in the absence of such provisions, would have imposed additional requirements regarding mergers and other business combinations. However, our Certificate of Incorporation will include a provision that restricts us from engaging in any business combination with an interested stockholder for three years following the date that person becomes an interested stockholder, but such restrictions shall not apply to any business combination between our controlling stockholder and any affiliate thereof or its direct and indirect transferees, on the one hand, and us, on the other, or certain other situations as described below in “Description of Capital Stock—Anti-Takeover Provisions—Section 203 of the DGCL.”

These provisions could delay or prevent hostile takeovers and changes in control or changes in our management, even if these events would be beneficial for our stockholders. For further information regarding the anti-takeover provisions, please see the section entitled “Description of Capital Stock.”

Our Certificate of Incorporation will designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers or employees.

Our Certificate of Incorporation, which will become effective immediately prior to the consummation of this offering, will provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf under Delaware law, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action arising pursuant to any provision of the DGCL, our Certificate of Incorporation or bylaws, (4) any other action asserting a claim that is governed by the internal affairs doctrine or (5) any other action asserting an “internal corporate claim,” as defined in Section 115 of the DGCL, shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) in all cases subject to the court having jurisdiction over indispensable parties named as defendants. These exclusive-forum provisions do not apply to claims under the Securities Act or the Exchange Act.

 

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To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.

Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. However, our Certificate of Incorporation, which will become effective immediately prior to the consummation of this offering, contains a federal forum provision which provides that unless the Company consents in writing to the selection of an alternative forum, the US federal district courts will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees and increase the costs to stockholders of bringing such a claim. If a court were to find the exclusive-forum provision in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.

A significant portion of our total outstanding share is restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our Class A common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our Class A common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of shares of our Class A common stock. After this offering, we will have                 shares of Class A common stock outstanding (assuming no exercise by the underwriters of their option to purchase an additional                shares of Class A common stock) and                shares of Class B common stock outstanding, which are convertible on a one-for-one basis into shares of our Class A common stock. All or substantially all of the shares of Class A common stock available upon conversion of our shares of Class B common stock outstanding after this offering will be subject to a 180-day lock-up period provided under agreements executed in connection with this offering. Such shares of Class B common stock will, however, be able to be converted into shares of Class A common stock and resold after the expiration of the lock-up agreement as described in the “Shares Eligible for Future Sale” in this prospectus. In addition J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC may, in their sole discretion, release all or some portion of the common stock subject to lock-up agreements at any time and for any reason.

We also intend to file a Form S-8 under the Securities Act to register all shares of Class A common stock that we may issue under our equity compensation plans. In addition, the Voting Group and certain of our other equity holders have certain demand registration rights that could require us in the future to file registration statements in connection with sales of our Class A common stock by the Voting Group. See “Certain Relationships and Related Party Transactions—Related Party Transactions—Registration Rights Agreement.” Such sales by the Voting Group and certain of our other equity holders could be significant. Once we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements described in the “Underwriting” section of this prospectus. As restrictions on resale end, the market price of shares of our Class A common stock could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them or are released from the restrictions of the lock-up agreements prior to their expiration, which may make it more difficult for you to sell your shares of Class A common stock at a time and price that you deem appropriate.

 

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We have never paid dividends on our share capital and do not anticipate paying cash dividends in the foreseeable future.

We have never declared or paid cash dividends on our share capital. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Accordingly, you may have to sell some or all of your shares of Class A common stock in order to generate cash flow from your investment. You may not receive a gain on your investment when you sell shares and you may lose the entire amount of the investment.

Future sales, or the perception of future sales, of our Class A common stock may depress the price of our Class A common stock.

If we sell, or any of our stockholders sells, a large number of shares of our Class A common stock, or if we issue a large number of shares of Class A common stock in connection with future acquisitions, financings or other transactions, the market price of shares of our Class A common stock could decline significantly. Moreover, the perception in the public market that we might issue, or our stockholders might sell, shares of Class A common stock could depress the market price of those shares.

Additionally, each holder of our Class B common stock has the right, pursuant to our Certificate of Incorporation, to convert its shares of Class B common stock into shares of our Class A common stock on a one-for-one basis. Such a conversion would increase the number of shares of Class A common stock available for sale and could have the effect of depressing the trading price of our shares of Class A common stock. Furthermore, any shares of our Class A common stock sold through the Community Offers will not be subject to lockup restrictions, which could have the effect of depressing the trading price of our shares of Class A common stock.

We cannot predict the size of future issuances of shares our Class A common stock or the effect, if any, that future issuances or sales of our shares will have on the market price of such shares. Sales of substantial amounts of our shares, including sales by significant stockholders, and shares issued in connection with any conversion of shares of Class B common stock or any additional acquisition, or the perception that such conversions or sales could occur, may adversely affect prevailing market prices for our shares of Class A common stock. Possible sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price we deem necessary or appropriate. See ‘‘Shares Eligible for Future Sale.’’

Our operating results and share price may be volatile, and the market price of shares of our Class A common stock after this offering may drop below the price you pay.

Our annual and quarterly operating results are likely to fluctuate in the future as a publicly traded company. In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could subject the market price of our shares to wide price fluctuations regardless of our operating performance. We and the underwriters will negotiate to determine the initial public offering price. You may not be able to resell your shares at or above the initial public offering price or at all. Our operating results and the trading price of shares of our Class A common stock may fluctuate in response to various factors, including:

 

   

market conditions in the broader stock market;

 

   

actual or anticipated fluctuations in our quarterly financial and operating results;

 

   

introduction of new products or services by us or our competitors;

 

   

issuance of new or changed securities analysts’ reports or recommendations;

 

   

results of operation that vary from expectations of securities analysis and investors;

 

   

guidance, if any, that we provide to the public, any changes in such guidance or our failure to meet such guidance;

 

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strategic actions by us or our competitors;

 

   

announcement by us, our competitors or our vendors of significant contracts or acquisitions;

 

   

sales, or anticipated sales, of large blocks of our common stock;

 

   

additions or departures of key personnel;

 

   

regulatory, legal or political developments;

 

   

tax developments;

 

   

public responses to press releases or other public announcements by us or third parties, including our filings with the SEC;

 

   

litigation and governmental investigations;

 

   

changing economic conditions;

 

   

changes in accounting principles;

 

   

default under agreements governing our indebtedness;

 

   

exchange rate fluctuations; and

 

   

other events or factors, including those from natural or man-made disasters, war, acts of terrorism or responses to these events.

These and other factors, many of which are beyond our control, may cause our operating results and the market price and demand for our shares to fluctuate substantially. While we believe that operating results for any particular quarter are not necessarily a meaningful indication of future results, fluctuations in our quarterly operating results could limit or prevent investors from readily selling their shares and may otherwise negatively affect the market price and liquidity of our shares. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert time and attention of our management from our business, which could significantly harm our profitability and reputation.

If our operating and financial performance in any given period does not meet the guidance that we provide to the public, the price of shares of our Class A common stock may decline.

We may provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in this prospectus and in our other public filings and public statements. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If, in the future, our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts or if we reduce our guidance for future periods, the market price of shares of our Class A common stock may decline as well.

General Risks

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, liquidity, results of operations, cash flows or prospects.

Events reported in the media, including social media, whether or not accurate or involving us, could create and/or amplify scrutiny and negative publicity for us or for the industry or market segments in which we operate. Such media topics could include, among other topics, food-borne or hygiene-related illnesses, issues with food traceability, contamination, unsanitary restaurant environments, issues relating to quality of service or product

 

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quality, allegations of discriminatory acts, injuries or guest misbehavior. Media reports relating to any of these topics, even where not involving us or inaccurate statements, could reduce demand for our products and/or services and could result in a decrease in customer traffic to or for any of our services. A decrease in traffic to our offerings could result in a decline in sales, which would have an adverse effect on our business, results of operation and financial condition.

If we are unable to compete effectively, our business and operations will be adversely affected.

We compete in numerous segments of the restaurant, hotel, working spaces, well-being, digital and retail industries, each of which faces its own challenges. Although we do not believe that we have a single direct competitor across all of the different sectors and geographies in which we operate, we face direct competition from other private members’ clubs, restaurants, bars, spas, hotels and co-working spaces that exist locally in proximity to our own Houses. No assurances can be given that these competing local clubs, restaurants, accommodation, co-working spaces, well-being, digital or retail providers, or other new entrants in any of these industries, will not expand and compete with us locally or globally. We believe that these business sectors are each highly competitive and primary competitive factors include name recognition, demographic considerations, effectiveness of public relations and brand recognition, level of service, convenience of location, quality of the property, pricing, product or service and range and quality of services and amenities offered. We compete with other restaurants, boutique hotels, co-working spaces and beauty care and retailers on a local level, as well as on a global level against certain larger chains with properties in the markets in which we operate. This competition may limit our ability to attract and retain existing members and customers and our ability to attract new members and customers. If we are unable to compete effectively in any of these market sectors, we could lose market share, which could adversely affect our business, results of operation and financial condition.

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 and results of operation.

Any disruption in the global financial markets could materially impact liquidity in the financial markets and affect the availability and cost of credit. As part of our strategy, we focus on growing our presence in both new and existing markets, through the establishment of new properties, expansion of existing properties and expanding complementary concepts and product lines. These investments require significant capital expenditures, especially since new Houses typically generate little or no cash flow until some time after the project’s completion and the House has reached a maturation point. To the extent expenditure is significant, we may rely upon the availability of debt or additional equity capital. In addition, our working capital and liquidity reserves may not be adequate to cover all of our cash needs and we may have to obtain additional equity or debt financing. Any disruption or uncertainty in the credit markets could negatively impact our ability to access additional financing. Sufficient financing may not be available or, if available, may not be available on terms acceptable to us, which may force us to seek alternative sources of potentially less attractive capital or financing or adversely cause us to suspend, abandon or delay development and other activities, including the opening of new Houses or expansion of existing Houses, in a manner that adversely affects our business.

Changes in consumer discretionary spending and general economic factors may adversely affect our results of operation.

Because a substantial portion of our revenues are derived from In-House Revenues, we believe our ability to generate revenues is correlated to discretionary spending, which is influenced by general economic conditions, and the availability of discretionary income and consumer confidence. National, regional and local economic conditions can adversely affect disposable consumer income and consumer confidence. Economic conditions remain volatile in certain of the jurisdictions in which we operate. As a result, our members and other guests may have lower disposable income and reduce the frequency with which they dine out, travel or utilize our other products or services, or they may choose less expensive restaurants, lower cost hotels or otherwise reduce the costs or frequency of their travel and leisure activities in the future. An uncertain economic outlook may

 

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adversely affect consumer spending in our hospitality operations, as consumers may spend less in anticipation of a potential prolonged economic downturn. Unfavorable changes in these factors or in other general economic conditions affecting our members and guests could reduce their spending at our properties, impose practical limits on our pricing (including our membership fees) and increase our costs. Any of these factors could have a material adverse effect on our business, results of operation and financial condition.

As we expand our footprint internationally outside of the US and Europe, we are exposed to additional risks, including increased complexity and costs of managing projects and international operations and geopolitical instability.

As we open additional properties and expand our presence in new markets over the next few years where we have little to no experience, we expect to face numerous challenges and risks, including:

 

   

geopolitical and economic instability and military conflicts;

 

   

limited protection of our intellectual property and other assets;

 

   

compliance with local laws and regulations and unanticipated changes in local laws and regulations, including tax laws and regulations;

 

   

trade and foreign exchange restrictions and higher tariffs;

 

   

timing and availability of import and export licenses and other governmental approvals, permits and licenses, including export classification requirements;

 

   

foreign currency fluctuations and exchange losses;

 

   

transportation delays and other consequences of limited local infrastructure, and disruptions, such as large-scale outages or interruptions of service from utilities or telecommunications providers;

 

   

potential difficulties in staffing international operations;

 

   

local business and cultural factors that differ from our normal standards and practices;

 

   

differing employment practices and labor relations;

 

   

heightened risk of terrorist acts;

 

   

regional health issues, travel restrictions and natural disasters; and

 

   

work stoppages.

Increases in energy costs could have an adverse effect on our business.

We may be adversely affected by an increase in energy costs to our businesses (including electricity, gas and water). This may be driven by energy shortages, interruptions to our business supply, inflation, or the availability of energy supplier offerings. In addition, the increasing focus on climate change, both in the US and across other countries, could lead to additional regulations resulting in increased energy costs. The ability of our business to respond to such increased costs will depend on our ability to anticipate, react and respond to such increases in a timely manner which we may be unable to do as this is outside of our control and can be difficult to predict. As a result, energy cost increases could have an adverse effect on our business, results of operations and financial condition.

Labor shortages or increases in labor costs could slow our growth or harm our business.

Our success depends in part upon our ability to attract, motivate and retain a sufficient number of highly qualified employees necessary to staff our Houses and other membership platforms and keep pace with our growth. The qualified individuals that we need to fill these positions are in short supply, and competition for such

 

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employees is intense. If we are unable to recruit and retain sufficiently qualified individuals, our business and growth could be adversely affected. Competition for qualified employees could require us to pay higher wages, which could result in higher labor costs. If our labor costs increase, our business, results of operation, and financial condition will be adversely affected.

We may incur property, casualty or other losses not covered by our insurance.

We maintain insurance coverage for certain catastrophic risks, for employee health care benefits, workers’ compensation, general liability, property damage, directors’ and officers’ liability, vehicle liability and inventory loss. In North America, we maintain a self-insured employee health care policy. The types and amounts of insurance may vary from time to time based on our decisions with respect to risk retention and regulatory requirements. The occurrence of significant claims, a substantial rise in costs to maintain our insurance or the failure to maintain adequate insurance coverage could have an adverse impact on our business, financial condition, liquidity, results of operation, cash flows or prospects.

As there is currently no market for our Class A common stock, an active trading market may not develop or continue to be liquid and the market price of our common stock may be volatile.

Prior to this offering, there has not been a public market for our Class A common stock. While we intend to list our Class A common stock on the NYSE, an active market for our Class A common stock may not develop or be sustained after this offering, which could depress the market price of our Class A common stock and could affect your ability to sell your shares. In the absence of an active public trading market, you may not be able to liquidate your investment in our Class A common stock. An inactive market may also impair our ability to raise capital by selling our Class A common stock, our ability to motivate our employees through equity incentive awards and our ability to expand our business by using our Class A common stock as consideration. In addition, the market price of our Class A common stock may fluctuate significantly in response to various factors, some of which are beyond our control. The initial public offering price per share will be determined by negotiations among us and the representatives of the underwriters and therefore that price may not be indicative of the market price of our Class A common stock after this offering. In particular, we cannot assure you that you will be able to resell your Class A common stock at or above the initial public offering price. The stock markets have experienced volatility in recent years that has been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our Class A common stock. In addition to the factors discussed elsewhere in this prospectus, the factors that could affect our share price are:

 

   

US and international political and economic factors unrelated to our performance;

 

   

actual or anticipated fluctuations in our quarterly operating results;

 

   

changes in or failure to meet publicly disclosed expectations as to our future financial performance;

 

   

changes in securities analysts’ estimates of our financial performance or lack of research and reports by industry analysts;

 

   

action by institutional stockholders, including purchases or sales of large blocks of common stock;

 

   

speculation in the press or investment community;

 

   

changes in market valuations or earnings of similar companies; and

 

   

announcements by us or our competitors of significant contracts, acquisitions or strategic partnerships.

In the past, following periods of volatility in the market price of a company’s securities, Class Action litigation has often been instituted against the relevant company. Any litigation of this type brought against us could result in substantial costs and a diversion of our management’s attention and resources, which would harm our business, results of operation and financial condition.

 

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If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our share price and trading volume could decline.

The trading market for our shares of Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If there is no coverage of our company by securities or industry analysts, the trading price for shares of our Class A common stock would be negatively impacted. Even if we obtain securities or industry analyst coverage, and if one or more of these analysts downgrades our shares of Class A common stock or publishes misleading or unfavorable research about our business, our share price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for shares of our Class A common stock could decrease, which could cause our share price or trading volume to decline.

We could be subject to securities class action litigation.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs, potential liabilities and the diversion of management’s attention and resources.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING

STATEMENTS AND MARKET DATA

This prospectus contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. Some of the statements under “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” and elsewhere in this prospectus contain forward-looking statements. In some cases, you can identify forward-looking statements by the following words: ‘may,’ ‘will,’ ‘could,’ ‘would,’ ‘should,’ ‘expect,’ ‘intend,’ ‘plan,’ ‘anticipate,’ ‘believe,’ ‘estimate,’ ‘predict,’ ‘project,’ ‘potential,’ ‘continue,’ ‘ongoing’ or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain.

In addition, you should refer to the “Risk Factors” section of this prospectus for a discussion of other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended, do not protect any forward-looking statements that we make in connection with this offering.

While we believe the market position, market opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us will be approximately $         million after deducting the underwriting discounts and commissions and our other estimated offering expenses (assuming an initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus) from the sale of              shares of our Class A common stock to the underwriters and              shares of our Class A common stock directly to UK Eligible Participants. If the underwriters exercise in full their option to purchase an additional              shares of Class A common stock, we estimate the net proceeds to us will be approximately $         million.

We estimate that the offering expenses (other than the underwriting discounts and commissions) will be approximately $         million.

We intend to use the net proceeds from this offering to repay outstanding indebtedness of $         under our Revolving Credit Facility, to pay the redemption price of the outstanding preferred shares of Soho House Holdings Limited in aggregate amount of $         and to use the remainder for general corporate purposes, including for working capital. The $         of indebtedness under our Revolving Credit Facility, to be repaid with a portion of the proceeds of this offering matures on January 25, 2023 and bears an interest rate of     %.

A $1.00 increase (decrease) in the assumed initial public offering price of $         per share would increase (decrease) the amount of proceeds to us from this offering by $         million, assuming the number of shares of Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

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DIVIDEND POLICY

We do not currently pay dividends on any shares of our common stock and we currently intend to retain all available funds and any future earnings for use in the operation of our business. We may, however, pay cash dividends on our shares of common stock, including our shares of Class A common stock, in the future. Any future determination to pay dividends will be made at the discretion of our Board and will depend upon many factors, including our financial condition, earnings, legal and regulatory requirements, restrictions in our debt agreements and other factors our board deems relevant. If we issue preference shares in the future, our board may declare and pay a dividend on one or more classes of shares to the extent one or more classes of shares ranks senior to or has a priority over another class of shares. Our ability to pay dividends on shares of our Class A common stock is limited by the terms of our existing indebtedness and may be restricted by the terms of any future credit agreement or any future debt or preferred securities of ours or of our subsidiaries. See “Description of Certain Indebtedness and Preferred Equity” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Furthermore, Membership Collective Group Inc. is a holding company and has no direct operations. All of Membership Collective Group Inc.’s business operations are conducted through its subsidiaries. Any dividends we pay in respect of our equity securities will depend upon our funds legally available for distribution, including dividends we receive from our subsidiaries. Membership Collective Group Inc.’s subsidiaries are required to comply with various conditions before they are able to pay dividends or make distributions to Membership Collective Group Inc. See “Description of Capital Stock—Class A Common Stock—Dividend Rights and—Class B Common Stock—Dividend Rights.”

 

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CAPITALIZATION

The following table sets forth our cash and capitalization as of April 4, 2021 (i) on a historical basis, derived from our consolidated financial statements included, and elsewhere in the prospectus, (ii) on a pro forma basis, giving effect to the transactions described under “Prospectus Summary—Our Structure” in this prospectus and the conversion of all outstanding senior convertible preference shares of Soho House Holdings Limited into an aggregate of              shares of Class A common stock of Membership Collective Group Inc. immediately upon the closing of this offering, based on the assumed initial public offering price of $             per share, which is the midpoint of the estimated initial offering price range set forth on the cover page of this prospectus and (iii) on a pro forma as adjusted basis, after also giving effect to the application of the net proceeds of the offering received by us, as described under “Use of Proceeds,” in each case as if they had occurred on April 4, 2021.

You should read this table in conjunction with “Use of Proceeds,” “Selected Historical Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and accompanying notes thereto included elsewhere in this prospectus.

 

     As of April 4, 2021  
     Actual     Pro Forma      Pro Forma As
Adjusted(1)
 
    

($ thousand)

(Unaudited)

 

Cash and cash equivalents

   $ 71,674                                         
  

 

 

   

 

 

    

 

 

 

Restricted cash

     7,029       
  

 

 

   

 

 

    

 

 

 

Total Debt, including current portion:

       

Debt, net of debt issuance costs

     544,110       

Property mortgage loans, net of debt issuance costs

     114,973       

Related party loans, net of imputed interest

     18,052       

Operating lease liabilities—sites trading less than one year

     58,452       

Operating lease liabilities—sites trading more than one year

     1,030,384       

Finance lease liabilities

     74,350       

Financing obligation

     74,247       
  

 

 

   

 

 

    

 

 

 

Total debt

   $ 1,914,568       
  

 

 

   

 

 

    

 

 

 

Senior convertible preference shares and redeemable preferred shares

   $ 176,274       
  

 

 

   

 

 

    

 

 

 

Redeemable C Ordinary Shares

   $ 207,405       
  

 

 

   

 

 

    

 

 

 

Shareholders’ deficit:

       

A ordinary shares; B ordinary shares; C ordinary shares; C2 ordinary shares; D ordinary shares

   $ 265,181       

Additional paid-in capital

     74,884       

Accumulated deficit

     (847,582     

Accumulated other comprehensive income

     2,708       

Non-controlling interest

     56,542       
  

 

 

   

 

 

    

 

 

 

Total shareholders’ deficit

   $ (448,267     
  

 

 

   

 

 

    

 

 

 

Total capitalization

   $ 1,849,980       
  

 

 

   

 

 

    

 

 

 

 

(1)

Assuming the number of shares of Class A common stock sold by us in this offering remains the same as set forth on the cover page, a $1.00 increase or decrease in the assumed initial public offering price would increase or decrease, as applicable, our total capitalization by approximately $            million.

 

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DILUTION

Our net tangible book value as of April 4, 2021 was $         million, or $         per share of Class A common stock after giving effect to the conversion of all shares of Class B common stock into shares of Class A common stock. Net tangible book value per share of Class A common stock before the offering has been determined by dividing net tangible book value (total book value of tangible assets, calculated as total assets less intangible assets, less total liabilities) by the number of shares of Class A common stock outstanding at April 4, 2021. Pro forma tangible book value represents tangible book value after giving effect to the conversion of all shares of Class B common stock into shares of Class A common stock and the conversion of all the Senior Preference Shares into shares of Class A common stock.

After giving effect to the sale of shares of Class A common stock sold by us in this offering at an assumed initial public offering price of $         per share of Class A common stock, the mid-point of the price range set forth on the cover page of this prospectus, the conversion of all shares of Class B common stock into shares of Class A common stock and after deducting the underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us and the application of the net proceeds therefrom as described in “Use of Proceeds,” our pro forma as adjusted net tangible book value at April 4, 2021 would have been $        , or $         per share of Class A common stock. This represents an immediate increase in pro forma as adjusted net tangible book value per share of Class A common stock of $         to the members of the Voting Group holding shares of Class B common stock and an immediate dilution in as adjusted net tangible book value per share of Class A common stock of $         to new investors who purchase the shares of Class A common stock in this offering. The following table illustrates this per share of Class A common stock dilution to new investors:

 

Assumed initial public offering price per share

                       $                

Net tangible book value per share as of April 4, 2021

   $       

Increase attributable to the pro forma adjustments described above

   $       
  

 

 

    

Pro forma net tangible book value per share as of April 4, 2021

   $       
Increase in pro forma as adjusted net tangible book value per share attributable to new investors in this offering    $       

Pro forma as adjusted net tangible book value per share after this offering

      $    
     

 

 

 

Dilution of net tangible book value per share to new investors

      $    
     

 

 

 

A $1.00 increase or decrease in the assumed initial public offering price of $         per share of Class A common stock, the mid-point of the price range set forth on the cover page of this prospectus, would increase or decrease total net tangible book value per share after this offering by per share of Class A common stock and the dilution to new investors by per share of Class A common stock, assuming that the number of shares offered by us set forth on the front cover of this prospectus remains the same, and after deducting the underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us.

 

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The following table summarizes, as of April 4, 2021, on the as adjusted basis described above, the total number of shares of Class A common stock purchased from us, the total consideration paid to us and the average price paid per share by the existing stockholders (assuming the conversion of all shares of Class B common stock into shares of Class A common stock) and by new investors purchasing shares from us in this offering, based on an initial public offering price of $         per share of Class A common stock, the mid-point of the price range set forth on the cover page of this prospectus before deducting the underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us (amounts in thousands, except percentages and per share data):

 

     Class A Common
Stock Purchased
    Total
Consideration
    Average
Price
Per
Share
 
     Number      Percent     Amount      Percent  

Existing stockholders

                                    $                                 $                

New investors

            
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

            
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

A $1.00 increase or decrease in the assumed initial public offering price of $         per share, the mid-point of the price range set forth on the cover page of this prospectus would increase or decrease total consideration paid by new investors in shares of Class A common stock and total consideration paid by all holders of Class A common stock by $         million, assuming that the number of shares offered by us set forth on the front cover of this prospectus remains the same, and after deducting the underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us. An increase or decrease of 1,000,000 shares in the number of shares of Class A common stock offered by us would increase or decrease the total consideration paid to us by new investors in Class A common stock and total consideration paid to us by all holders of Class A common stock by $         million, assuming the assumed initial public offering price of $         per share, the mid-point of the price range set forth on the cover page of this prospectus remains the same and after deducting the underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us.

If the underwriters exercise in full their option to purchase additional shares of Class A common stock, the number of shares of Class A common stock held by existing stockholders after the completion of this offering, after giving effect to the conversion of all shares of Class B common stock into shares of Class A common stock, will be            , or     % of the total shares of Class A common stock outstanding after this offering, and the number of shares of Class A common stock held by new investors, after giving effect to the conversion of all shares of Class B common stock into shares of Class A common stock, will be             , or     % of the total shares of Class A common stock outstanding after this offering.

The number of shares of Class A common stock to be outstanding after this offering is based on (1) shares of Class A common stock outstanding as of April 4, 2021, after giving effect to the conversion of all shares of Class B common stock into shares of Class A common stock, (2) the number of shares of Class A common stock offered in this offering and (3) the conversion of all outstanding senior convertible preference shares of Soho House Holdings Limited into an aggregate of              shares of Class A common stock of Membership Collective Group Inc. immediately upon the closing of this offering, based on the assumed initial public offering price of $             per share, which is the midpoint of the estimated initial offering price range set forth on the cover page of this prospectus.

 

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SELECTED HISTORICAL CONSOLIDATED

FINANCIAL AND OPERATING DATA

The following tables set forth our selected historical consolidated financial and operating data in both actual results and constant currency. The selected historical consolidated financial data as of and for fiscal 2020, fiscal 2019 and fiscal 2018, and for each of the fiscal years then ended, have been derived from our historical audited consolidated financial statements and notes thereto included elsewhere in this prospectus, which is derived from our historical consolidated financial statements not included in this prospectus. The selected historical unaudited consolidated financial data as of April 4, 2021 and for each of the 13-week periods ended April 4, 2021 and March 29, 2020 has been derived from our historical consolidated unaudited financial statements and notes thereto included elsewhere in this prospectus. The summary historical unaudited consolidated financial data as of March 29, 2020 has been derived from the Company’s internal management accounts. These historical consolidated unaudited financial statements and internal management accounts were prepared on a basis consistent with our audited financial statements and include, in the opinion of management, all adjustments that we consider necessary for a fair presentation of the financial position and results of operations for those periods. Operating results for the 13-week period ended April 4, 2021 are not necessarily indicative of the results that may be expected for the entire year.

The following selected financial and operating data should be read in conjunction with, and are qualified in their entirety by reference to, the information included under the headings “Basis of Presentation,” “Prospectus Summary—Summary Historical Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical audited consolidated financial statements and notes thereto included elsewhere in this prospectus. Our historical results are not necessarily indicative of our financial condition or operating results for any future period.

Selected historical consolidated financial and operating data, in both actual results and constant currency, are as follows:

 

    As of and For the 13-Weeks Ended     As of and For the Fiscal Year Ended  
        April 4,    
2021
        March 29,    
2020
    January 3,
2021
    December 29,
2019
    December 30,
2018
 
    (Unaudited)                    
    (Dollar amounts in thousands, except per share data)  

Consolidated Statements of Operations Data

         

Revenues

         

Membership revenues

  $ 40,493     $ 47,752     $ 176,910     $ 167,582     $ 134,060  

In-House revenues

    16,259       67,871       126,774       312,330       271,392  

Other revenues

    15,649       25,929       80,692       162,123       169,853  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

  $ 72,401     $ 141,552     $ 384,376     $ 642,035     $ 575,305  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

         

In-House operating expenses (exclusive of depreciation and amortization)(1)

    (45,809     (95,469     (220,036     (379,985     (310,923

Other operating expenses (exclusive of depreciation and amortization)

    (28,193     (26,129     (109,251     (144,455     (147,776

General and administrative expenses

    (16,505     (24,147     (74,954     (75,506     (62,443

Pre-opening expenses

    (4,825     (5,687     (21,058     (23,437     (20,323

Depreciation and amortization

    (17,845     (14,949     (69,802     (57,139     (48,387

Other

    (22,784     (2,323     (44,005     (20,371     (17,838
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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    As of and For the 13-Weeks Ended     As of and For the Fiscal Year Ended  
        April 4,    
2021
        March 29,    
2020
    January 3,
2021
    December 29,
2019
    December 30,
2018
 
    (Unaudited)                    
    (Dollar amounts in thousands, except per share data)  

Total operating expenses

    (135,961     (168,704     (539,106     (700,893     (607,690
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

  $ (63,560   $ (27,152   $ (154,730   $ (58,858   $ (32,385
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Business interruption income

    —         —         —         —         650  

Interest expense, net

    (29,604     (17,756     (77,792     (64,108     (57,700

Gain (loss) on sale of property and other, net

    —         1       98       (1,340     (639

Share of (loss) profit of equity method investments

    (696     (176     (3,627     774       270  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

    (30,300     (17,931     (81,321     (64,674     (57,419
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

    (93,860     (45,083     (236,051     (123,532     (89,804
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

    823       103       776       (4,468     (43
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (93,037   $ (44,980   $ (235,275   $ (128,000   $ (89,847
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Soho House Holdings Limited

    (90,479     (43,631     (228,461     (127,742     (91,356
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share (basic and diluted)

  $ (0.49   $ (0.26   $ (1.24   $ (0.76   $ (0.56

Consolidated Balance Sheet Data

         

Cash and cash equivalents

  $ 71,674     $ 46,250     $ 52,887     $ 44,050     $ 47,748  

Restricted cash

  $ 7,029     $ 7,694     $ 7,083     $ 12,265     $ 23,709  

Total assets

  $ 2,122,162     $ 1,918,641     $ 2,104,445     $ 1,964,977     $ 1,435,107  

Total liabilities

  $ 2,186,750     $ 2,035,041     $ 2,303,333     $ 2,064,830     $ 1,512,921  

Redeemable preferred shares

  $ 176,274     $ 14,700     $ 14,700     $ 14,700     $ 29,700  

Redeemable C ordinary shares

  $ 207,405     $ 67,416     $ 160,405     $ 67,416     $ —    

Total non-current liabilities

  $ 1,806,135     $ 1,721,615     $ 1,950,375     $ 1,762,191     $ 1,176,010  

Total shareholders’ deficit

  $ (448,267   $ (198,516   $ (373,993   $ (181,969   $ (107,514

Total liabilities, redeemable preferred shares and shareholders’ deficit

  $ 2,122,162     $ 1,918,641     $ 2,104,445     $ 1,964,977     $ 1,435,107  

Other Operating Data (unaudited)

         

Number of Houses

    28       26       27       26       23  

Number of Soho House Members

    111,311       123,357       113,509       119,832       101,968  

Number of Other Members

    7,874       586       5,252       424       241  

Soho House Member Retention

    n/a       n/a       92     95     95

House-Level Contribution(2)

  $ 10,123     $ 19,352     $ 81,159     $ 97,946     $ 94,529  

As a percentage of House Revenues

    18     17     27     20     23

Total Other Contribution

  $ (11,724   $ 602     $ (26,070   $ 19,649     $ 22,077  

Adjusted EBITDA(3)

  $  (22,792   $ (8,943   $ (44,080   $ 17,650     $ 37,288  

As a percentage of total revenue

    (31 )%      (6 )%      (11 )%      3     6

Number of Active App Users

    76,308       79,184       77,226       90,885       76,021  

 

(1)

In-House operating expenses includes our rent expense of $29,155 and $26,382 for the 13-weeks period ended April 4, 2021 and March 29, 2020, respectively, and $110,707, $88,761 and $61,097 for the fiscal years ended January 3, 2021, December 29, 2019 and December 30, 2018, respectively. Rent expense under ASC 842 includes an amount related to future rent increases and free-rent periods of $10,423 and $7,896 for the 13-weeks period ended April 4, 2021 and March 29, 2020, respectively, and $15,627, $33,128 and $9,434 for the fiscal years ended January 3, 2021, December 29, 2019 and December 30, 2018, respectively. These amounts are not related to the total contractual rent cashflows for the periods presented in the Consolidated Statements of Operations above.

(2)

‘House-Level Contribution’ is defined as House Revenues (which we define as Membership Revenues as well as In-House Revenues, less ‘Non-House Membership Revenue) less ‘In-House Operating Expenses,’ which includes expense items

 

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  such as food and beverage costs, labor costs, variable overheads and fixed costs, such as rent. It does not reflect the impact of depreciation, amortization, impairment, gain or loss on sale of property, business interruption income or general and administrative expenses. Our management considers House-Level Contribution to be an important management measure to evaluate the performance and profitability of each House, and growth in aggregate House-Level Contribution allows us to leverage our general and administrative costs and improve overall profitability. For a reconciliation of House-Level Contribution to Operating Loss see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”
(3)

‘Adjusted EBITDA’ is defined as net income (loss) before depreciation and amortization, interest expense, net, provision (benefit) for income taxes, adjusted to take account of the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include, but are not limited to, loss (gain) on sale of property and other, net, share of loss (profit) from equity method investments, foreign exchange, share of equity method investments adjusted EBITDA and share-based compensation expense (See “Summary Historical Consolidated Financial and Operating Data” included elsewhere in this prospectus). We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses (income) that do not relate to ongoing business performance. A reconciliation of Adjusted EBITDA to Net Loss is presented below.

 

    For the 13-Weeks Ended     For the Fiscal Year Ended  
       April 4,   
2021
       March 29,   
2020
    January 3,
2021
    December 29,
2019
    December 30,
2018
 
   

In Constant Currency (Unaudited)(1)

(Dollar amounts in thousands, except per share data)

 

Consolidated Statements of Operations Data

                                           

Revenues

         

Membership revenues

  $ 40,493     $ 49,417     $ 176,910     $ 168,037     $ 131,862  

In-House revenues

    16,259       70,753       126,774       313,631       273,184  

Other revenues

    15,649       27,424       80,692       163,045       156,594  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

  $ 72,401     $ 147,594     $ 384,376     $ 644,713     $ 561,640  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

         

In-House operating expenses (exclusive of depreciation and amortization)(2)

    (45,809     (99,394     (220,036     (381,472     (312,917

Other operating expenses (exclusive of depreciation and amortization)

    (28,193     (27,614     (109,251     (145,161     (134,489

General and administrative expenses

    (16,505     (26,340     (74,954     (75,804     (60,643

Pre-opening expenses

    (4,825     (6,203     (21,058     (23,529     (19,960

Depreciation and amortization

    (17,845     (15,637     (69,802     (57,302     (47,125

Other

    (22,784     (2,607     (44,005     (20,446     (17,126
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    (135,961     (177,795     (539,106     (703,714     (592,260
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

  $ (63,560   $ (30,201   $ (154,730   $ (59,001   $ (30,620
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Business interruption income

    —         —         —         —         650  

Interest expense, net

    (29,604     (18,887     (77,792     (64,276     (55,667

Gain (loss) on sale of property and other, net

    —         2       98       (1,343     (644

Share of (loss) profit of equity method investments

    (696     (230     (3,627     717       265  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

    (30,300     (19,115     (81,321     (64,902     (55,396
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

    (93,860     (49,316     (236,051     (123,903     (86,016

Income tax benefit (expense)

    823       113       776       (4,536     (26
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (93,037   $ (49,203   $ (235,275   $ (128,439   $ (86,042
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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    For the 13-Weeks Ended     For the Fiscal Year Ended  
       April 4,   
2021
       March 29,   
2020
    January 3,
2021
    December 29,
2019
    December 30,
2018
 
   

In Constant Currency (Unaudited)(1)

(Dollar amounts in thousands, except per share data)

 

Net loss attributable to Soho House Holdings Limited

  $ (90,479   $ (47,840   $ (228,461   $ (128,193   $ (87,483
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share

  $ (0.49   $ (0.26   $ (1.24   $ (0.76   $ (0.56

Other Operating Data

         

House-Level Contribution(3)

  $ 10,123     $ 19,912     $ 81,159     $ 98,208     $ 92,130  

As a percentage of House Revenues

    18     17     27     20     23

Total Other Contribution

  $ (11,724   $ 674     $ (26,070   $ 19,872     $ 22,105  

Adjusted EBITDA(4)

  $ (22,792   $ (11,068   $ (44,080   $ 17,738     $ 37,012  

As a percentage of Total Revenues

    (31 )%      (8 )%      (11 )%      3     7

 

(1)

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for an explanation of our constant currency results.

(2)

In-House operating expenses includes our rent expense of $29,155 and $27,223 for the 13-weeks period ended April 4, 2021 and March 29, 2020, respectively, and $110,707, $89,179 and $60,067 for the fiscal years ended January 3, 2021, December 29, 2019 and December 30, 2018, respectively. Rent expense under ASC 842 includes an amount related to future rent increases and free-rent periods of $10,423 and $8,189 for the 13-weeks period ended April 4, 2021 and March 29, 2020, respectively, and $15,627, $33,284 and $9,275 for the fiscal years ended January 3, 2021, December 29, 2019 and December 30, 2018, respectively. These amounts are not related to the total contractual rent cashflows for the periods presented in the Consolidated Statements of Operations above.

(3)

‘House-Level Contribution’ is defined as House Revenues (which we define as Membership Revenues plus In-House Revenues, less ‘Non-House Membership Revenue) less ‘In-House Operating Expenses,’ which includes expense items such as food and beverage costs, labor costs, variable overheads and fixed costs, such as rent. It does not reflect the impact of depreciation, amortization, impairment, gain or loss on sale of property, business interruption income or general and administrative expenses. Our management considers House-Level Contribution to be an important management measure to evaluate the performance and profitability of each House, and growth in aggregate House-Level Contribution allows us to leverage our general and administrative costs and improve overall profitability. For a reconciliation of House-Level Contribution to Operating Loss see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”

(4)

‘EBITDA’ is defined as net income (loss) before depreciation and amortization, interest expense, net, provision (benefit) for income taxes. ‘Adjusted EBITDA’ is defined as net income (loss) before depreciation and amortization, interest expense, net, provision (benefit) for income taxes, adjusted to take account of the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include, but are not limited to, loss (gain) on sale of property and other, net, share of loss (profit) from equity method investments, foreign exchange, share of equity method investments adjusted EBITDA and share-based compensation expense. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses (income) that do not relate to ongoing business performance.

 

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Below is a reconciliation to Adjusted EBITDA from Net Loss for the periods specified:

 

     For the 13-Weeks
Ended
    For the Fiscal Year Ended  
     April 4,
2021
    March 29,
2020
    January 3,
2021
    December 29,
2019
    December 30,
2018
 
    

(Unaudited)

(Dollar amounts in thousands)

 

Net Loss

   $ (93,037   $ (44,980   $ (235,275   $ (128,000   $ (89,847

Depreciation and amortization

     17,845       14,949       69,802       57,139       48,387  

Interest expense, net

     29,604       17,756       77,792       64,108       57,700  

Income tax (benefit) expense

     (823     (103     (776     4,468       43  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     (46,411     (12,378     (88,457     (2,285     16,283  

(Gain) loss on sale of property and other, net

     —         (1     (98     1,340       639  

Share of loss (profit) from equity method investments

     696       176       3,627       (774     (270

Foreign exchange

     14,867 (1)      391       (3,354     (3,465     1,315  

Share of equity method investments Adjusted EBITDA

     871       1,210       3,563       6,747       5,877  

Share-based compensation expense

     2,129       —         2,618       —         —    

Membership credits expense(2)

     2,750       —         12,156       —         —    

COVID-19 related charges(3)

     31       1,162       4,606       —         —    

Corporate financing and restructuring costs(4)

     2,275       497       14,147       6,127       13,444  

Abandoned project and site closure costs

     —         —         7,111       —         —    

Impairment charge on receivables

     —         —         —         9,960       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ (22,792   $ (8,943   $ (44,080   $ 17,650     $ 37,288  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

The increase in foreign exchange period on period is driven by an increase in non-USD denominated borrowings, which have increased since the preceding period, foreign exchange volatility, and an out of period adjustment as described in Note 2 of the Company’s condensed consolidated financial statements included elsewhere in this document.

(2)

Beginning on March 14, 2020, due to the COVID-19 pandemic, we issued membership credits to active members of our closed Houses to be redeemed for certain Soho Home products and services. Membership credits were a one-time goodwill gesture, issued as a marketing offer to active members. The expense represents our best estimate of the cost in fulfilling the Membership credits.

(3)

Represents items of additional expense incurred in order to comply with health and safety protocols while keeping certain Houses open during the pandemic.

 

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(4)

Our Corporate financing and restructuring costs vary significantly each year and period presented based on financing and restructuring being undertaken. Such costs do not relate to normal, recurring, cash operating expenses. In first quarter 2021, these costs consisted of certain items relating to acquiring shareholdings of joint ventures and non-controlling interests of $250 not held by the Company and refinancing fees incurred totalling $2,025. In first quarter 2020, we commenced an internal restructuring to simplify the business in terms of headcount and cost structure, incurring costs of $497. In fiscal 2020, we undertook an internal restructuring to simplify the business in terms of headcount and cost structure, incurring $5,956 as well as $3,323 of losses in respect of contractual arrangements and $2,992 of site restructuring and closure costs, further we began preparations for a refinancing transaction incurring $1,551 as well as including establishing an equity compensation plan, incurring $325. In fiscal 2019, this included fees in respect of the Scorpios acquisition of $6,127. In fiscal 2018 there was an abandoned financing transaction where $13,444 was incurred.

 

     For the 13-Weeks
Ended
    For the Fiscal Year Ended  
     April 4,
2021
    March 29,
2020
    January 3,
2021
    December 29,
2019
    December 30,
2018
 
     In Constant Currency
(Unaudited)(1)
 
     (Dollar amounts in thousands)  

Net Loss

   $ (93,037   $ (49,203   $ (235,275   $ (128,439   $ (86,042

Depreciation and amortization

     17,845       15,637       69,802       57,302       47,125  

Interest expense, net

     29,604       18,887       77,792       64,276       55,667  

Income tax (benefit) expense

     (823     (113     (776     4,536       26  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     (46,411     (14,792     (88,457     (2,325     16,776  

(Gain) loss on sale of property and other, net

     —         (2     (98     1,343       644  

Share of loss (profit) from equity method investments

     696       230       3,627       (717     (265

Foreign exchange

     14,867 (2)      437       (3,354     (3,468     1,226  

Share of equity method investments Adjusted EBITDA

     871       1,267       3,563       6,771       5,744  

Share-based compensation expense

     2,129       —         2,618       —         —    

Membership credits expense(3)

     2,750       —         12,156       —         —    

COVID-19 related charges(4)

     31       1,255       4,606       —         —    

Corporate financing and restructuring costs(5)

     2,275       537       14,147       6,145       12,887  

Abandoned project and site closure costs

     —         —         7,111       —         —    

Impairment charge on receivables

     —         —         —         9,989       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ (22,792   $ (11,068   $ (44,080   $ 17,738     $ 37,012  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

See “Non-GAAP Financial Measures—Constant Currency” for an explanation of our constant currency results.

(2)

The increase in foreign exchange period on period is driven by an increase in non-USD denominated borrowings, which have increased since the preceding period, and foreign exchange volatility.

(3)

Beginning on March 14, 2020, due to the COVID-19 pandemic, we issued membership credits to active members of our closed Houses to be redeemed for certain Soho Home products and services. Membership credits were a one-time goodwill gesture, issued as a marketing offer to active members. The expense represents our best estimate of the cost in fulfilling the Membership credits.

 

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(4)

Represents items of additional expense incurred in order to comply with health and safety protocols while keeping certain Houses open during the pandemic.

(5)

Our Corporate financing and restructuring costs vary significantly each year and period presented based on financing and restructuring being undertaken. Such costs do not relate to normal, recurring, cash operating expenses. In first quarter 2021, these costs consisted of certain items relating to acquiring shareholdings of joint ventures and non-controlling interests of $250 not held by the Company and refinancing fees incurred totalling $2,025. In first quarter 2020, we commenced an internal restructuring to simplify the business in terms of headcount and cost structure, incurring costs of $537. In fiscal 2020, we undertook an internal restructuring to simplify the business in terms of headcount and cost structure, incurring $5,956 as well as $3,323 of losses in respect of contractual arrangements and $2,992 of site restructuring and closure costs, further we began preparations for a refinancing transaction incurring $1,551 as well as including establishing an equity compensation plan, incurring $325. In fiscal 2019, this included fees in respect of the Scorpios acquisition of $6,145. In fiscal 2018 there was an abandoned financing transaction where $12,887 was incurred.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with the sections “Prospectus Summary—Summary Historical Consolidated Financial and Operating Data,” “Selected Historical Consolidated Financial and Operating Data,” and our consolidated financial statements and notes thereto included elsewhere in this prospectus. This discussion includes forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this prospectus. See “Special Note Regarding Forward-Looking Statements and Market Data.” Future results could differ significantly from the historical results presented in this section. Unless otherwise indicated, all amounts are in thousands of US dollars.

OVERVIEW

OUR MEMBERSHIP PLATFORM – TWENTY-FIVE YEARS OF EXPERIENCE

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 1995 and remain the only company to have scaled a private membership platform with a global presence. Over the last 25 years, we have expanded our membership expertise and diversified our offerings—both physically and digitally. As of April 4, 2021, we have over 119,000 members (including over 111,300 Soho House members) who engage with MCG through our global portfolio of 28 Soho Houses, nine Soho Works, The Ned in London, Scorpios Beach Club in Mykonos, Soho Home, our interiors and lifestyle retail brand, and our digital channels.

 

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LOGO

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 the Soho district of 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. As of April 4, 2021, Soho House is a membership of more than 111,300 creative and loyal individuals. 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 experience. We enhance our member experience through our digital channels, including the SH.APP and our website. Our vision for the SH.APP has always been for it to be like having a House in your pocket. It’s our central destination for members to make bookings and payments, to connect with each other and access video content and podcasts — made for our members, by our members. Annually, we host thousands of physical and digital member events worldwide, spanning film, fashion, art, food and drink, well-being, work and music—and help our members forge connections to bring them closer together.

 

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Our membership expertise, honed through the growth of Soho House, has led to our evolution into the Membership Collective Group, a home to numerous memberships including Cities Without Houses, Soho Works, Soho Friends, Soho House Digital, SOHO HOME+ and Ned’s Club. By designing, curating and growing our membership offering, our membership platform can quickly and easily respond to shifting lifestyle trends and the evolution of our members’ needs. Our memberships work together, allowing us to reach new audiences with a set of interconnected offerings.

 

LOGO

Everything we do across these memberships begins and ends with our members. The foundation of our member experience has been crafted over our 25-year history and is built on the following pillars:

 

   

Membership: We are in the business of forging connections and bringing people together. Our diverse global membership is the soul of our company. It is the people that define our culture and shape the experience – in turn attracting new members.

 

   

Physical and digital spaces: We create and operate interconnected spaces. Each of our physical locations is designed to reflect our members and the local community that they serve. Our digital platforms extend our connection with members beyond our physical spaces, in turn significantly enhancing the member experience.

 

   

Design: Our design DNA is instantly recognizable across all of our membership models, whether in our Houses, Soho Works, The Ned, Scorpios Beach Club or Soho Home. While each House is unique, they each have a consistency in their architectural and interior style that has come to define the Soho House experience. In each new House or site that we develop for our other brands, this style is interpreted for local tastes and preferences, reflecting the culture of the respective city.

 

   

Services, products and experiences: Our member-obsessed culture drives us to relentlessly improve the quality of the services, products and experiences we offer to our members. We do not cut corners or compromise on quality, taking the long-term view that there is no substitute for the highest quality services, products and experiences when it comes to fostering loyalty from our members.

 

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Innovation: We have always strived to adapt and evolve by anticipating our members’ needs and wants. Innovation has always been part of our culture and approach, and we have used that mindset to create new memberships to serve a wider audience of people who desire personal connection via new channels.

 

   

House Foundations: We are committed to integrating the pillars of our social responsibility and sustainability program, House Foundations, into everything we do.

Sitting at the heart of MCG, Soho House has a highly loyal membership base, with annual Soho House Member Retention rates averaging 94% between fiscal 2016 and 2020. Our membership has remained resilient through multiple economic cycles and the COVID-19 pandemic. When our physical sites were forced to close as a result of the COVID-19 pandemic, there was minimal impact on the retention of Soho House members, with the Soho House Member Retention rate remaining at 92% for fiscal 2020. We also saw the demand across all of our membership brands strengthen, with over 30,000 applications for our membership brands submitted during fiscal

2020. The power of our model is driven by the important role we believe that we play in our members’ lives and the value we consistently provide them for their membership fees. We believe our retention compares favorably to leading consumer subscriptions or memberships—across music, media, fitness, entertainment and commerce—despite. in many cases, their significantly lower price points.

The demand for our membership is also demonstrated by our large and growing global wait list, which as of January 1, 2021 stands at over 48,000 applicants. Awareness of our distinct membership offerings and their scarcity is spread by our members organically through word of mouth, social media and press coverage. With virtually no marketing or sales costs associated with acquiring new members, we have been able to grow our membership by a 16% CAGR between fiscal 2016 and 2020, while expanding our Membership Revenue at a 24% CAGR during the same period.

There are multiple consumer forces at play that have increased the relevance of our memberships. We have observed a secular shift in the ways that people live and work—with less time spent in traditional corporate offices and more time in social spaces that encourage creativity and mutual engagement. We believe that these trends will only accelerate, and that the freedom to be able to choose where to live and work—particularly in light of the COVID-19 pandemic—will likely have a significant impact on our target market. We believe this will create an even greater demand for curated communities that can grow and thrive in a more deliberate environment.

For first quarter 2021, of our $72 million in revenue, $40 million (56%) was attributable to Membership Revenues, $16 million (22%) to In-House Revenues, and $16 million to Other Revenues (22%). For first quarter 2020, of our $142 million in revenue, $48 million (34%) was attributable to Membership Revenues, $68 million (48%) to In-House Revenues, and $26 million to Other Revenues (18%). For fiscal 2020, of our $384 million in revenue, $177 million (46%) was attributable to Membership Revenues, $127 million (33%) to In-House Revenues, and $81 million to Other Revenues (21%). For fiscal 2019, of our $642 million in revenue, $168 million (26%) was attributable to Membership Revenues, $312 million (49%) to In House Revenues, and $162 million to Other Revenues (25%). For fiscal 2018, of our $575 million in revenue, $134 million (23%) was attributable to Membership Revenues, $271 million (47%) to In-House Revenues, and $170 million to Other Revenues (30%). Please see “—Summary Historical Consolidated Financial and Operating Data” for a definition of Non-GAAP Adjusted EBITDA and a reconciliation to net loss, the most directly comparable GAAP measure.

Membership Revenues are comprised of annual membership fees and one-time initial registration fees paid by members. In-House Revenues include all revenues realized within our Houses, including food and beverage, accommodation, and spa products and treatments. Other Revenues include all revenues not realized within our Houses, including Scorpios, Soho Works and standalone restaurants, design and procurement fees from Soho House Design and Soho Home among others. We view Membership Revenues and In-House Revenues as interrelated, insofar as although there is no minimum spend for any member on our In-House offerings that generate In-House Revenues, in practice the significant majority of In-House Revenues are generated by our members, and the pricing of our In-House offerings reflects that accordingly, with pricing of such In-House offerings being identical for both members and non-members.

 

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TOTAL MEMBERSHIP (THOUSANDS)

 

  

MEMBERSHIP REVENUE (MILLIONS)

 

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*

Represents Soho House Member Retention only

OUR MEMBERSHIP PLATFORM

All of our memberships have been built to enrich the lives of their members, as well as expand our membership offering to a broader audience.

SOHO HOUSE

Soho House remains at the core of our membership platform by creating a foundation upon which additional membership businesses can be built and scaled. While our physical Houses provide our foundation, the people inside them are the soul of Soho House. As a membership founded for the creative industries, we are proud to have championed members who have gone on to shape our cultural landscape as world class writers, artists, performers, directors, founders, designers, and producers – all reflecting the spirit and energy of Soho House.

The membership of each House is assembled by a select committee of influential creatives and innovators that represent the local area in which the membership is founded. Our members actively engage in creating the culture of each House, helping to shape and localize it by participating in member events and contributing to editorial and digital content. We believe this adds to the value of each House, enriching the membership and enhancing the attractiveness of membership to prospective members worldwide. With a current US Every House annual membership fee of approximately $3,400 providing access to all of our Houses globally, we believe our membership offering provides compelling value to our members that increases as we add new Houses and more members to our global community. Our Houses attract members from every demographic, with members from “Generation Z” (21 years old and younger) and “Millennials” (22- to 37-year-olds) constituting the fastest-growing cohorts. We also believe that the pricing of our In-House offerings represents great value to our members because of the level of quality provided, reinforcing the overall membership experience, rewarding their brand loyalty and creating opportunities for future and recurring revenues.

 

 

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LOGO

 

Information on the websites and social media platforms referenced above is not incorporated by reference into this prospectus.

We created the following types of membership under Soho House to reach a broader audience and enhance the experience of our existing members:

 

   

CITIES WITHOUT HOUSES

In 2017, we introduced a new type of Soho House membership known as Cities Without Houses (‘CWH’), which opens up the Soho House membership to people who live in cities where we do not yet have a physical House. This membership allows us to welcome members to our global community in new geographies, generates additional revenues on our existing base of Houses and provides intelligence for future growth, which we have employed to open new Houses in certain locations, including in Austin, Texas and Paris, both of which are expected to open in 2021. We currently have more than 5,000 CWH members across 45 cities, paying an annual US membership price of $2,630.

 

   

SOHO HOUSE DIGITAL MEMBERSHIP

The ambition for Soho House has always been to create a truly global membership that brings creative people together, from all over the world. We believe that we will be able to achieve this through the introduction of Soho House Digital Membership - a new, paid digital-only membership that we plan to launch in late 2021. Not limited by our physical footprint, Soho House Digital Membership will expand our global reach, allowing us to move further into Asia, Africa and South America, adding fascinating creatives from dynamic cities to our membership.

Soho House Digital Membership will be subject to the same application and approval process as Soho House membership, allowing like-minded individuals to connect, communicate and collaborate with each other, in a purely digital space through the SH.APP. It will make our membership truly diverse,

 

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and will enable the best creatives from all over the world to make meaningful connections with each other. In the same way that we’ve grown Cities Without Houses membership in 45 cities around the world, we will use our connections and liaisons on the ground in new cities to build awareness of digital membership, growing it organically through existing creative communities.

By leveraging our digital platforms in this way, and removing the reliance on physical spaces to experience the benefits of our membership, we have created a gateway to previously untapped growth opportunities. We believe this new membership type will be attractive to potential members who are already used to socializing, networking and working digitally. Existing Soho House members will also receive the full functionalities of the Soho House Digital Membership, and therefore, the introduction of the Soho House Digital Membership only serves to improve the richness of their membership experience, making it more valuable – with new opportunities to connect with and consume content from a truly global and diverse membership base.

 

   

SOHO FRIENDS

There are a significant number of people who enjoy the Soho House way of living and who have already visited our Houses as guests, stayed in our bedrooms, or visited our public restaurants and spas, but do not currently have a Soho House membership. To respond to this audience, we launched Soho Friends in November 2020 for an annual subscription cost of £100. We offer access to physical spaces, including Soho House bedrooms, and Soho Studios (our new social spaces for Soho Friends and Soho House members) that host curated programs of events and screenings, with additional benefits from our restaurants, spas and online retail brands, although Soho Friends do not have full access to our Houses. Between November 2020 and April 2021, we have received almost 6,000 applications, the majority of which originated from a recommendation of a Soho House member or a MCG employee, and accepted over 4,000 Soho Friends members. We intend to grow this membership brand in a measured way so that our Soho House members continue to account for the majority of visitors to our Houses and restaurants.

SOHO HOME

Soho Home was created as a result of the constant requests from our members to recreate the look and feel of the Houses in their own homes. Soho Home is an interiors and lifestyle retail brand that offers handcrafted furniture, lighting, textiles, tableware and accessories through ecommerce. Over the past year, we have transformed Soho Home into a high growth retail business, and in October 2020, we launched SOHO HOME+, which is a subscription-based membership platform with over 2,600 members as of April 4, 2021, that offers price discounts, free delivery, and expert design advice plus early access to new collections and seasonal sales for an annual price of £60.

SOHO WORKS

First launched in 2015, Soho Works provides its members with the space and resources to work alongside other like-minded individuals and businesses—facilitating connections and providing the tools to flourish. Aimed at existing Soho House and Soho Friends members, Soho Works draws on the same design principles and membership ethos as Soho House, but is a space purposed entirely for work and creative collaboration.

Beginning with one location in London, we have since opened eight additional sites in London, New York and Los Angeles over the last two years and as of April 4, 2021, we had over 1,000 members. Soho Works membership rates vary by location and Soho House membership status. For Soho House members, a US Soho Works membership ranges from $250—$600 per month, depending on membership type.

SCORPIOS BEACH CLUB

Set in a cove on the southern tip of Mykonos, Scorpios offers a one of a kind beach experience with a well- established globally recognized brand. With a restaurant, terraces and daybeds, and a distinctive wellness

 

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offering, Scorpios enriches the lives of its guests who are looking to escape from their daily lives. We believe the Scorpios concept has significant potential to expand into additional locations as a key part of our platform and we expect to open our second site in Tulum, Mexico at the end of 2022. While we do not currently offer a standalone membership, there is significant interest from our customers to do so and we therefore plan to launch a unique Scorpios membership in 2022.

THE NED

The Ned has created a new space in the heart of the City of London for its members to meet, eat, drink and socialize. The Ned brand seeks to embody a “city within a city” full-service destination, by playing host to multiple restaurants, bedrooms, a range of grooming services, spa, gym and a full service members’ club. The membership offered by The Ned (‘Ned’s Club’) is aimed at a broader group of professional people. As of April 4, 2021, Ned’s Club had over 3,000 members paying an annual subscription price of £3,150, and intends to expand into additional cities beyond London, as well as launch Ned Friends – a more accessible membership similar to Soho Friend for frequent visitors and customers of The Ned. We receive management fees under our hotel management contract for the operation of The Ned.

FACTORS AFFECTING OUR BUSINESS

We believe the coveted lifestyle brand we have created has significant and proven growth potential. This potential, combined with the stability of our membership base, we believe will enable us to maintain our position as an industry leader in the future. We expect to grow our member base by growing the number of Soho Houses, continuing to scale our existing membership brands and launching and growing new membership brands. We believe our track record in expanding and growing our platform will position us to achieve significant and sustained growth.

A significant portion of our revenues is derived from House Revenues which consist of Membership Revenues and In-House Revenues. Our Membership Revenues, which are reflective of our steady and growing global brand, help to provide us with a recurring revenue base that limits the impact of fluctuations in regional economic conditions.

Our business and future performance is also affected by a variety of factors, including:

 

   

The ability to grow our member base.    Long-term member growth is a direct driver of Membership Revenue growth and an important factor in In-House Revenue growth. The impact of long-term member growth on Membership Revenues can be particularly impactful to our earnings given the lower direct expenses associated with incremental Membership Revenues relative to our other revenue streams.

 

   

Our ability to grow In-House Revenues.    In addition to their annual membership fee, our members pay for goods and services that they consume, which we refer to as In-House Revenues. We continue to actively develop the offerings in our Soho Houses and our other membership brands to improve overall experience and capture greater spend on food and beverage, accommodation, spa services, private events and our other goods and services. We believe that the pricing of our In-House offerings, which is reflective of the membership fees we receive from members who consume most of our In-House offerings, represents great value to our members for the level of quality provided, reinforcing the overall membership experience, rewarding brand loyalty and creating the opportunity for future revenue enhancement. Our proven ability to drive long-term member growth at existing Houses is also an important contributing factor in sustaining In-House Revenue growth.

 

   

Our ability to adjust membership pricing.    As we expand our number of Soho Houses globally and continue to invest in maintaining the quality of our existing Soho Houses, we are able to grow Membership Revenue by periodically reviewing our membership fee rates, as well as migrating members from Local House to Every House memberships, which also has the effect of increasing Membership Revenues and offering new membership brands to join. Contrary to traditional hospitality

 

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companies which may experience brand dilution as they expand, the value of our membership and brand strengthens as we expand into new cities and properties and new membership brands. As we expand globally, the value of an Every House membership becomes more compelling to both new and existing members, enhancing our revenue potential. Historically, our membership price increases have not had a material impact on our retention rates and we believe this provides a strong indication of demand and price inelasticity for our memberships.

 

   

Our ability to grow our membership brands and products.    We believe the strength of our brand and our culture of creativity and innovation will allow us to continue to capitalize on opportunities in complementary concepts and product lines and that our adjacent lines of business can achieve substantial stand-alone scale. Our expansion into new products and businesses can contribute meaningfully to our revenue in the future as we tap into our existing and growing membership base.

REPORTABLE SEGMENTS

Our operations consist of four reportable segments and one non-reportable segment that we present as “other”. Each of our segments includes all operations in that region including our Houses and all associated facilities, spas and stand-alone restaurants.

Our four reportable segments and our “other” segment are as follows:

UNITED KINGDOM. This segment encompasses operating units in the UK, including:

 

   

Our ten Houses in and around London;

 

   

Two townhouses encompassing bedrooms and public restaurants, twelve stand-alone restaurants and four Apartments; and

 

   

Soho Friends – UK membership fees.

NORTH AMERICA. This segment encompasses operating units in North America, including:

 

 

   

Our eight US Houses, our Toronto (Canada) House, which is a joint venture entity and the management fees from Soho Beach House Canouan;

 

   

Three stand-alone US restaurants; and

 

   

Soho Friends – US membership fees.

EUROPE AND REST OF THE WORLD (‘ROW’). This segment encompasses operating units in continental

Europe and RoW, currently comprised of:

 

   

Six Houses in Europe including Soho House Barcelona and Little Beach House Barcelona, which are joint venture entities, and Soho House Istanbul which is under a management agreement;