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16 Cards in this Set
- Front
- Back
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Define franchise
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A license to use the name, trademarks and/or copyrights in connection with the sales of goods or services and usually in connection with the use of a business system.
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Franchisor
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The person transferring the franchise
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Franchisee
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The person receiving the franchise
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Distributorship franchise
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A dealer receives a license to market a manufacturer's product using the brand name; for example an automobile dealership.
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Chain style business
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A license to use a name and system of selling goods and/or services
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Manufacturing agreement
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A license to use the manufacturer's name and formula to manufacture and market the manufacturer's product.
IE soft drink company. |
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Mechanics of franchising: Preliminaries
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1. Franchisor send disclosure information in the form of an offering circular.
2. Must comply with FTC franchise rule - a disclosure regulation. |
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Five disclosure requirements
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1. Background of principals and business entity
2. Franchise fees and royalties. 3. The number of franchises 4. The proposed franchise agreement Note: profit projects may be made only if demonstrated by franchisee. |
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Uniform Franchise Offering Circular
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A sample offering circular which is designed to satisfy the FTC franchise rule and the laws of as many states as is practical.
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Four typical provisions of franchise agreements
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1. Fees - usually initial fee and a royalty percentage paid over life of contract.
2. Territorial license - Warning, a nonexclusive license leaves franchisee unprotected 3. Price controls - If present in agreement, franchisor can only suggest following guidelines and promotions. 4. Quality controls - Quality controls are legal, but cannot require exclusive purchase of generic supplies. |
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Automobile dealers' franchise act:
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May not terminate an auto dealer for failure to meet unrealistic sales goals.
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Petroleum marketing laws
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May not terminate a convenience store franchise without just cause
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How many days of notice is required for notice of termination in MO?
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90 days
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If there is no statute or contract on notice at time of termination, then...
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Reasonable notice is required
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Can a franchisor terminate a franchisee before they've had a reasonable chance to make a profit?
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NO
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Damages for wrongful termination
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Franchisee may recover past loses caused by the breach, and sometimes future loses.
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