When Arlene Ryan inherited $250,000.00 from her grandfather, she decided to use

Question

When Arlene Ryan inherited $250,000.00 from her grandfather, she decided to use this money to start her own business. Arlene has been a legal secretary for last 14 years and feels she knows quite a lot about business. "Every day I take depositions and type legal memoranda," she noted to a friend." "And I have seen a lot of businesses fail because they didn't have adequate capital or proper management skill that are minimum prerequisite to succeed in business. Believe me, when you work for a law firm, you see -and you learn-plenty Almost six months passed before Arlene decided on a business to pursue. A franchise ad in the business magazine caught her attention. Arlene called and found out that the franchisor was selling fast-food franchises in her area. "We are in the process of moving into your section of the country," the spokesperson told her. "We have 111 franchisees throughout the nation and want to sell 26 more this year in your state." Arlene went to a meeting that the franchisor held at a local hotel and, along with a large number of other potential investors who listened to the sales pitch provided by the parent company or the franchisor. It all sounded very good to Arlene. The cost of the franchise was $150,000.00 plus 5 percent royalty of annual gross revenues. The franchisor promised assistance in regard to site selection and personnel training and encourages the prospective franchisee to ask questions and investigate the parent organization/the franchisor. "If you don't feel this is a good deal for you, it's not a good deal for us either, good business is two-way street," the spokesperson pointed out. "We are going be looking very carefully at all franchise applications, and you ought to be giving us the same degree of scrutiny.

Explanation / Answer

1. Situational appraisal of this case suggests that there is something fishy and doubtful. There are various instances which seem that the deal can be fraudulent. When asked about the current franchisers, the company’s spokesman said that he does not have the list. Usually when a company comes for bidding for its franchise, they use the existing franchisers as influencers. The influencers will share their experience of holding such a business and would try to solve the concerns of the audiences. However in this case, the spokesman was not prepared for sharing information regarding existing franchisers. Also out of the 4 contacts shared, 2 were wrong. Out of the 2 which were right, one stated that she bought the franchisee rights for quite less. The other one was not ready to divulge any information. All these scenarios suggest that something was not right in this deal.

2. No Arlene needs to investigate further before taking any buying decisions. She should not think about buying the franchisee before doing her ground work and background study.

3. I recommend Arlene asks all her sources to research about the franchisee. There is something hideous about the deal, which needs to get exposed. Arlene and her team can research about the authenticity of the deal. She can check the company’s website to get the details about the existing franchiser. She can try contacting some other franchisers to get their insight about the deal. After thorough analysis only, she should take a decision.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.