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
expand_more
expand_more
format_list_bulleted
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
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.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Wiener Haus #82 has been underperforming for a few years. The franchisee (owner of Haus #82) is
frustrated and files a claim against the franchisor for breach. The franchisee claims that the
agreement he signed contained a statement at the start of the agreement detailing that the business
model the franchisor developed was "proven effective and profitable." On these facts, does the
franchisee have a winning breach of contract claim against the franchisor?
O No, the contract formed was a voidable contract. Thus, the franchisor is void of responsibility if the business
model does not produce profit for the franchisee.
O Yes, the franchisee relied on these statements when deciding to contract and thus the franchisor should be
responsible when the business model fails to work for the franchisee.
O No, courts have generally held that the type of language relied upon by the franchisee is "prefatory" and does
not create a duty on the part of the franchisor.
O Yes, the money paid to the…
homas Persson and Jon Nokes founded Smart Inventions, Inc., to market household consumer products. The success of their first product, the Smart Mop, continued with later products, which were sold through infomercials and other means. Persson and Nokes were the firm’s officers and equal shareholders. Persson was responsible for product development, and Nokes was in charge of day-to-day operations. In time, they became dissatisfied with each other’s efforts. Nokes represented the firm as financially “dying,” “in a grim state, . . . worse than ever,” and offered to buy all of Persson’s shares for $1.6 million. Persson accepted.On the day that they signed the agreement to transfer the shares, Smart Inventions began marketing a new product—the Tap Light. It was an instant success, generating millions of dollars in revenues. In negotiating with Persson, Nokes had intentionally kept the Tap Light a secret. Persson sued Smart Inventions, asserting fraud and other claims. Under what principle…
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…
Chapter 16 Solutions
The Legal Environment of Business: Text and Cases (MindTap Course List)
Knowledge Booster
Similar questions
- 27. In a business formation, profits and losses are "passed through" the business to each member: A. Public corporation B. Private corporation C. Sole proprietorship D. General partnership E. Limited liability corporation 28. A is a business model that involves one business owner licensing trademarks and methods to an independent entrepreneur for a prescribed period of time:arrow_forwardKlinicki and Lundgren, both furloughed Pan Am pilots stationed in West Germany, decided to start their own charter airline company. They formed Berlinair, Inc., a closely held Oregon corporation. Lundgren was president and a director in charge of developing the business. Klinicki was vice president and a director in charge of operations and maintenance. Klinicki, Lundgren, and Lelco, Inc. (Lundgren’s family business), each owned one-third of the stock. Klinicki and Lundgren, as representatives of Berlinair, met with BFR, a consortium of Berlin travel agents, to negotiate a lucrative air transportation contract. When Lundgren learned of the likelihood of actually obtaining the BFR contract, he formed his own solely owned company, Air Berlin Charter Company (ABC). Although he continued to negotiate for the BFR contract, he did so on behalf of ABC, not Berlinair. Eventually BFR awarded the contract to ABC. Klinicki commenced a derivative action on behalf of Berlinair and a suit against…arrow_forwardIn January 2016 Ben Sisko bought a “Quark's Burgers” franchise in Montana. Quark's Burgers has over 100 franchisees, and its franchise agreement states that all franchisees must offer menu items as directed by Quark's Burgers, and that the failure to do so could result in the immediate termination of the franchise. Ben bought the franchise because he was a vegetarian, and its menu was free of meat products. In addition, Ben's religion forbids the eating of any meat products. Ben's franchise was very successful, and every year he received an award from Quark's Burgers for being one of the top 10% of its franchisees. In April 2019 Quark's Burgers changed its menu; among the changes included breakfast sandwiches with bacon, ham, or sausage. Ben refused to sell these items at his store on the ground that his religion forbids the eating of pork products. In January 2020 Ben opened a second franchise, at which he also refused to sell products with meat products. Ben's franchises…arrow_forward
- Mr Abuhas set up a Limited Liability company as a retail business. He employed a Managing Director to manage the affairs of the business. The managing Director openvacancies and employed several subordinates into the company to work under him. Two years down the line,The MD resigned from the company and one of the employees was promoted as the New MD. During the First MD regime, Sales staffs were meeting their targets over and above expectations but as soon as the New MD assumed his position two Sales staffs resigned and hence sales within the first term ofh is office fell 15%. a.What type of people do you think he employed? b.What challenges do you think the new MD will face? c.What should the new MD do? d.As as staff of the company, what will you feel or think? e.What type of leader is the new MD?arrow_forwardNoodleoo, 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.arrow_forwardOmega, Inc., a publicly held corporation, has assets of $100 million and annual earnings in the range of $13 to $15 million. Omega owns three aluminum plants, which are profitable, and one plastics plant, which is losing $4 million a year. The plastics plant shows no sign of ever becoming profitable because of its very high operating costs, and there is no evidence that the plant and the underlying real estate will increase in value. Omega decides to sell the plastics plant. The only bidder for the plant is Gold, who intends to use the plant for a new purpose, to introduce automation, and to replace all current employees. Would it be ethical for Omega to turn down Gold’s bid and keep the plastics plant operating indefinitely for the purpose of preserving the employees’ jobs? Explain.arrow_forward
- Is the rule that franchisors are not liable for the torts of a franchisee fair?arrow_forward1. Explain how the ethics of an individual’s actions within a corporation is affected by the ethics of the corporation and by the fact that the corporation operates within the system of American free enterprise. 2. At which level do philosophical analysis and reflection take place? Why is that level higher than the other levels? 4. When moral rights clash, how does one decide between them?arrow_forwardState the rights that Franchisee includes.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
BUSN 11 Introduction to Business Student EditionBusinessISBN:9781337407137Author:KellyPublisher:Cengage Learning
Essentials of Business Communication (MindTap Cou...BusinessISBN:9781337386494Author:Mary Ellen Guffey, Dana LoewyPublisher:Cengage Learning
Accounting Information Systems (14th Edition)BusinessISBN:9780134474021Author:Marshall B. Romney, Paul J. SteinbartPublisher:PEARSON
International Business: Competing in the Global M...BusinessISBN:9781259929441Author:Charles W. L. Hill Dr, G. Tomas M. HultPublisher:McGraw-Hill Education
BUSN 11 Introduction to Business Student Edition
Business
ISBN:9781337407137
Author:Kelly
Publisher:Cengage Learning
Essentials of Business Communication (MindTap Cou...
Business
ISBN:9781337386494
Author:Mary Ellen Guffey, Dana Loewy
Publisher:Cengage Learning
Accounting Information Systems (14th Edition)
Business
ISBN:9780134474021
Author:Marshall B. Romney, Paul J. Steinbart
Publisher:PEARSON
International Business: Competing in the Global M...
Business
ISBN:9781259929441
Author:Charles W. L. Hill Dr, G. Tomas M. Hult
Publisher:McGraw-Hill Education