Franchising
As a part of the restaurant’s long-range marketing plan, your company purchased property nationwide from the now-bankrupted “Sahara Dessert Dish” franchise properties. Based on your discussion and strategic plan, your company agreed that it was time to launch its nationwide strategy rolling out the company’s patented dessert brand, “Brain Freeze.” Your company’s financial information indicates the company now has a healthy portfolio of investments, product revenue, and cash on hand. The restaurant’s dessert menu has produced an exceptional revenue stream. These products can easily be marketed as a standalone venture. The company portfolio includes the Sahara Dessert Dish property purchased in anticipation of this day. The properties are all in upscale locations that easily support the restaurant’s thematic dessert menu. “Sally, it’s now or never,” you state. “We need to implement our franchise division.” Sally seems a little concerned about the plan interfering with entering the third gold Michelin star competition. You reassure her, “If Wolfgang Puck can open up gourmet pizza shops, we can create a dessert franchise operation.” Sally replies, “Start working on the documents, and I’ll get started on creating the franchise operations menu and food handling processes.” You reviewed all of the eventualities a company may face in expansion periods. Your company’s initial investment in the purchase of bankrupt properties has placed the company in a growth position. The commercial paper securing the properties is almost paid off. Converting the properties into a new enterprise will reduce the carrying cost and increase the current revenue streams by a minimum of 20%. Franchise licensing fees and property leasing rentals will initially bump revenue by approximately 35%. To start your review, research the federal regulations required to establish a legally recognized franchise operation. To fully understand the nature of a franchise operation, review the information. Introduction to Franchising (PDF) Download Introduction to Franchising (PDF) Issues and limits for consideration in creating a franchise agreement include: Nature and extent of the rights granted to the franchisees Duration of the franchise period Exclusiveness of franchise Authorized use of a trademark This assignment does not call for simply checking boxes on the form. The questions require research and business decisions for your company to establish franchise rights and limitations offered to franchisees during their operation and ownership of a franchise. Do not approach this assignment as a lawyer but as the franchise owner. Determine your company’s business interest, the profit you wish to achieve, and the rights you want to protect in your franchise business. Your company’s business strategy will determine the right you grant to franchisees. Franchises become an extension of your franchise organization and must meet your company goals.
Answer the questions listed in the Checklist for Basic Franchise Agreement (DOCX). Download Checklist for Basic Franchise Agreement (DOCX).
Franchise agreements vary from state to state and sometimes franchise to franchise, so identify every term and issue for consistency in all situations.
Some franchise agreements require negotiating between the parties. The agreement lists the terms and conditions governing your franchise’s ownership and the franchisee’s rights.
Provide thoughtful responses to the issues outlining how to operate the franchise business. Clarify the franchisees’ operation rights, redrafting the rights and limitations clauses.
The Test for Franchise Feasibility (DOCX) Download Test for Franchise Feasibility (DOCX)must be completed using the parameters established in your review of the franchise operation.
Your ratings of the business readiness position required to show a franchise operation will be based on the answers you develop for the checklist questions.
