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
Assignment: Feasibility of Franchise Expansion:
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.
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