The Body Shop

4017 Words17 Pages
The Body Shop Canada

“You’re not the kind of franchise applicant we usually get,” said Harry Robertson, company lawyer for the Body Shop Canada, as he opened his meeting with potential franchisee Richard Paul. “I suppose we’ll find out whether that’s an advantage or disadvantage,” replied Mr. Paul. Mr. Robertson’s comment had taken Mr. Paul by surprise, and though he was pleased with his response, the comment had produced a sinking feeling in the pit of his stomach.

Richard Paul

Mr. Paul, age 36, was about to graduate from the M.B.A. program at the University of Western Ontario. His employment background included a stint as a high-school business education teacher and seven years of retail management. He had managed
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The presentation seemed almost amateur, with much of the material obviously photocopied. Nonetheless, Mr. Paul took a night off from analyzing cases to study the documents. The material consisted of:

• Company background 8 pages
• Environmental issues 15 pages
• Information on the franchise agreement 3 pages
• Financial data 6 pages
• List of current franchises 3 pages The synopsis of the franchise agreement outlined the standard elements of a franchise agreement and included the following, additional facts:

The Body Shop Canada would lease the premises and sublet it to the franchisee;
• The franchisee must operate the business and be in the store at least 40 hours per week;
• The franchisee must purchase the complete product line;
• The franchisee must retain effective ownership and control;
• Any sale of the franchise to a new franchisee must be approved by the franchisor;
• The franchisor may terminate the franchise if the franchisee fails to operate within the law or fails to carry on business as prescribed by the franchise agreement; and

• No royalty fees would be paid except a monthly administration fee of $200, and a promotion and publicity fee of 2 percent of gross sales.

Cost to start a new franchise were estimated as:
Franchise fee
Design Fee
Opening inventory
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