The Legal Environment of Business: Text and Cases (MindTap Course List)
The Legal Environment of Business: Text and Cases (MindTap Course List)
10th Edition
ISBN: 9781305967304
Author: Frank B. Cross, Roger LeRoy Miller
Publisher: Cengage Learning
Question
Chapter 16, Problem 1RE
Summary Introduction

Case summary:The person C signed a franchise agreement with company L, a fast food chain. The agreement binds C to follow the rules given in L’s operating manual. In case of non- compliance with L’s operating manual, the contract will stand terminated. After nine months, fire broke out in the restaurant of C due to which the kitchen was severely damaged. There was no mistake on the part of C but L notified that the franchise would terminate within 30 days due to the non-compliance of safety procedures.

To find: The form of Franchise agreement undersigned in the above case.

Expert Solution & Answer
Check Mark

Explanation of Solution

In the given case, the company L was a chain styled business franchise. In a chain-styled business franchise, the parent company operates and manages all the business while the franchisee who undersigns to become a member of franchisor’s business had to follow certain standardized set of rules instructed by the franchisor. Also, material and supplies to be used should be acquired solely from franchisor.

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Carlos Del Rey decided to open a Mexican fast-food restaurant and signed a franchise contract with a national chaincalled La Grande Enchilada. The contract required the franchisee to strictly follow the franchisor’s operating manualand stated that failure to do so would be grounds for terminating the franchise contract. The manual set forth detailedoperating procedures and safety standards, and provided that a La Grande Enchilada representative would inspect therestaurant monthly to ensure compliance.Nine months after Del Rey began operating his restaurant, a spark from the grill ignited an oily towel in the kitchen.No one was injured, but by the time firefighters were able to put out the fire, the kitchen had sustained extensive damage. The cook told the fire department that the towel was “about two feet from the grill” when it caught fire. This wasin compliance with the franchisor’s manual that required towels be placed at least one foot from the grills. Nevertheless,the next day La…
Noodleoo, a struggling restaurant chain, wants to enact a franchise agreement with Stephen to sell its product through a chain-style franchise. Stephen agrees and opens the store, and 6 months later Noodleoo goes bankrupt. Which is most likely true of this situation?     Stephen was not responsible for looking into the financial status of Noodleoo before making the agreement.   The Franchise rule does not apply to struggling companies.   If Noodleoo was not transparent with its financial data, Stephen has no recourse.   If Noodleoo was not transparent with its financial data, it has broken the Franchise Rule.
Franchising is a business plan in which an owner (franchisor) permits a free operator (franchisee) to utilize its laid-out brand, items, benefits, and working framework in return for different charges, royalties, or continuous help. This plan empowers the franchisee to work their own business under the franchisor's laid-out brand and take advantage of its demonstrated plan of action, while the franchisor extends its image presence and gathers fees and royalties. Franchising is a typical technique for business development and can be tracked down in different ventures, including drive-through eateries, retail, auto, and numerous others. Type and Model of Franchise: When considering franchising your business, it's crucial to determine the type and model that best suits your business and its goals. There are several types and models to consider: a. Business Arrangement Establishment: Justification: This model is great on the off chance that you have a clear-cut business idea with a…
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