Growing the Business and Franchising
9.3 – Assignment: Case Study – Michelin Award Restaurant Going Franchising
The Scenario
As a part of the Restaurant’s long-range marketing plan, you invested in the purchase of national property locations of the now-bankrupted “Sahara Desert Dish” franchise properties. Based on your Discussion and Strategic Plan results, you both agree that it’s time to go nationwide with the company’s patented dessert brand, “Brain Freeze.” Examination of the company’s financial position, you now have 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 Desert Dish property purchased in anticipation of this day. The properties are all in upscale locations that easily support the Restaurant’s thematic Desert menu.
Looking Sally straight in the eye, you state, “It’s now or never, we need to get that Franchise Division going.” Sally was taken aback by the use of her statement, inquiries whether the operation will interfere with her entering the third Gold Star competition. You reply, “If Wolfgang Puck can open up gourmet pizza shops, that’s the only incentive we need to startup our Desert franchise operation.” Sally fires back, “You’re the one studying business law! Why did it take you so long to bring it up?” Sally continues, “Start working on the documents, and I’ll get started on creating the franchise operations menu and food handling processes.”
In your Discussion, you covered all of the eventualities companies face in expansion periods. The initial investment in the bankrupt properties has positioned the growth in a prime 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, first, research the requirements required to establish a legally recognized Franchise operation. Using the Strategic Business Plan and the other resources you now have, complete the Franchise feasibility information and determine what steps are needed to enter this highly competitive area. Review the resources and respond to the Assignment.
Your Assignment
In Assignment 9.3 you will collect data from your past assignments using the information to develop your outline of franchise business information that you will need to complete the final project in Assignment 9.4. To fully understand the nature of a Franchise operation review the SBA information, Forms 505, 506, and then complete the Questions in the Basic Franchise Document and the Chart in the Test for Feasibility Documents below.
SBA Introduction to Franchising (PDF)
Form 505 (DOCX) Form drafting guide
Form 506 (DOCX) Form drafting guide checklist
The Checklist for The Basic Franchise Agreement (DOCX) Questions
Test for Franchise Feasibility (DOCX) Measurement Chart
Review Document 505 Form Drafting Guide and following the research outlining the required steps and issues encountered in the development of the most important document in the relationship between the Franchisor and Franchisee, the Franchise Agreement. Document 505 establishes various litigation, state, and federal statutory requirements in the establishment of a Franchise Agreement. Review each category listed using the link and review material in the document. This information must be carefully reviewed to understand the statutory and legal guidance required to complete the Franchise Agreement that you will edit in Assignment 9.4.
Review Document Form 506, lists the issues and available limits that should be considered when completing the Checklist questions/answers you use to revise the draft agreement. The questions in 506, are stated, for example as the question below.
Nature and extents of rights granted to franchisee.
— Duration of franchise period.
— Exclusiveness of franchise.
— Authorized use of a trademark.
The question asks what is Nature (Type) is and the Extent (Range or scope) of the rights granted to your franchisee. This question seeks the limits on three grants to the franchisee, Duration, Exclusiveness, and Authority. The Duration issue asks “what period,” (how long) will Franchisee be granted to exercise authority over rights in the agreement, such as the number of years the franchise will last, are the rights exclusive or non-exclusive (this could be a state or local geographic designation), use of IP and extent of the right(s) granted.
This assignment does not call for checking the boxes but requires research and decision making by your company to determine what rights and limits you are offering Franchisees in their operation of a franchise. Do not approach this assignment as a lawyer but as the owner of a franchise and describing what your desires are in the business operations.
In the next step of the assignment, you will answer the questions listed in the BASIC FRANCHISE AGREEMENT TERMS – CHECKLIST. Franchise agreements vary from franchise to franchise so it would be impossible to identify every term and issue that should be considered in all situations. The checklist will be used in conjunction with the franchise agreement in 9.4 – the document that sets out all the terms and conditions that will govern your ownership of the franchise and the Franchisee’s rights. The franchise agreement will be redrafted by you the franchisor using the information you collect in assignment 9.3. This assignment does not call for checking the boxes but requires research and decision making by your company to determine the best answer to the questions raised. You are requested to redraft the rights and limits offered in the draft agreement to clarify the Franchisee’s rights in their operation of a franchise. Only make changes based on your research.
The Test for Franchise Feasibility Document must be completed using the parameters you established in your review of the franchise operation. Your ratings of the business readiness position required to establish a franchise operation will be based on the answers in the Checklist Questions. Be optimistic when grading your ability to create a franchise operation.
Here are all of the related documents to fill out and submit:
The Checklist for The Basic Franchise Agreement (DOCX) Download The Checklist for The Basic Franchise Agreement (DOCX)
SBA Introduction to Franchising (PDF) Download SBA Introduction to Franchising (PDF)
Test for Franchise Feasibility (DOCX) Download Test for Franchise Feasibility (DOCX)
Form 505 (DOCX) Download Form 505 (DOCX)
Form 506 (DOCX)
