BEANO CASE QUESTIONS
1. Harris’s partnership proposal is not fair for Smith. He completely revised the original investment amount and loan deal that they had original discussed. He is asking to raise his share to 49%, which would pose many problems for Smith in the control of the company. Giving Harris that high of a stake in the franchise would be giving him a lot more money, and half of the control. Smith would be dependent on Harris, and if something suddenly happened to him, or the deal didn’t end up going through, then Smith would be out of business. His SCORE counselor recommended that he does not give up more than 20% share to one investor, and this is above and beyond that. He is also asking to be paid back…show more content…
Once he gets past those first few years, he will start seeing more of a profit, with some stores even reaching $500,000 in sales, and they are number three in market position in sales. The franchisee program comes with a lot of perks that will make it much easier for Smith to be successful in his ventures, and the company has a solid competitive advantage with specifics that include superior ingredients, new product and market development, and environmentally conscious behavior.
3. I would not recommend Smith to go into a partnership with Harris. He does not seem very fair in his projections of what his is putting into the company, and seems to be attempting to connive Smith into giving up a ton of his control for not a great amount of return. His financials expectations are completely unfair and not warranted. Smith will be left with an extremely low salary, and Harris will be making 22 times the amount of his investment in a short period of time. While Smith wants to get started as soon as possible on this first franchise due to his financial problems, if he chooses to go with Harris he could be getting himself into much deeper trouble. The franchise itself seems to be a decent option, with its great location, franchise support, and competitive advantage, but Smith should wait to find a better partner. This business will not succeed if the two owners do not get along. It would ruin their entire