Friends hi-fi system not very good, what do you do or say?

If we're only talking about audiophile friends, I've had long discussions with friends about every single aspect of audio, everything out in open and we don't have to agree on everything.

If there are constructive suggestions you could make about placement, set-up, I would not be afraid to offer those, but would not condescend. Do you really have a Lambo? I did, the last of the Diablos, a 6.0 built under Audi ownership circa 2001- gorgeous car but hardly under the radar- I had kids running on my blind side (most of the car is blind sided except looking forward) to take photos. That car attracted a lot of attention. Rosso Vik (candy apple red), snow corn white interior with red piping, carbon fibre dash. Tres exotic for the money when I had it. Long gone. 

Here's something that may be hard to consider: Chances are fair enough that each of us has had either a same component, or one that was similar in brand/quality to one the host has. "Oh, I had a similar one of those xxx, back in college. It was great ...". If the host has any interest in that fact, s/he may respond with something like, "Do you still have your xxx?".  Then you have options:

(1) Yes, I'll never part with it. Memories of those great times.

(2) I found that the yyy is very similar (perhaps a white/grey lie), but seems to have better bass in my current listening room. 

(3) My kid uses it in his bedroom system, and it sounds pretty good in there.

If you absolutely never owned anything marked, "Wards", "Tandy", or thereabouts, you still may have common pressings or musical preferences -- I mean, it is about the music, right?

It's a journey. It's a hobby. Not a contest.

Lak +1. Before I will agree to listen to someone system.i want to know what is the porpuse of Him inviting me? Sometimes the reason is for me to evaluate their system. If this is the case. With respect I am extremely careful and discuss what I heard. I always say the system sound good. You can improve it if you want to, and I will help you. Let me know., and I say thank you for the pizza and tea.

So personal and revealing a situation; I'll tag on to previous comments:

1. Depends on the nature of your relationship; how close you both are.
2. Depends if he's aspiring to be an audiophile.
3. Depends on if he's asking for your "honest evaluation."

I usually just let my set sound for itself. I'd invite him over for listening and let him hear what you perceive as a great system.  If a difference is obvious to him; he'll notice and say something. But it could also be his ability to discern music and sound is so different from yours he prefers a bright or boosted sound to details and refinement.

Funny that's just how I got into audio; a neighbor came by I showed him my new Sony and Boston Acoustic system with speakers buried in a bookshelf.  He kindly invited me over for a listen to his "audiophile" tube system with electrostatic speakers. In those 30 minutes, my mind was blown at the steep difference between his sound and mine. I immediately began my plotting to refine my system, approach and knowledge because I now knew what I was missing.

Or you can just say, "That's an interesting system," and smile.