Slide 1 : 1 Sole Proprietorshipsand Private Franchises Chapter25 BUSINESS LAW TODAY Standard 8th Ed.Roger LeRoy Miller - Institute for University Studies, Arlington, TexasGaylord A. Jentz - University of Texas at Austin, Emeritus
Learning Objectives : 2 Learning Objectives What advantages and disadvantages are associated with the sole proprietorship?
What is a franchise? What are the most common types of franchises? essential elements of a partnership?
What are the rights and duties of partners?
What is joint and several liability?
Introduction : 3 Introduction Entrepreneurs wishing to start a new business must be aware of advantages and disadvantages of various business entities for their endeavor. Consider:
Ease of creation.
Owners’ liability.
Tax considerations.
Need for Capital.
Sole Proprietorships : 4 The owner is the business; anyone who does business without creating a separate business organization has a sole proprietorship.
CASE 25.1 Garden City Boxing Club, Inc. v. Dominguez (2006). Sole Proprietorships
Franchises : 5 Franchises Franchisor (Owner of trademark, trade name or copyright) licenses Franchisee the right to use the trade mark, trade name or copyright in the sale of goods or services.
Types:
Distributorship.
Chain Style Business Operation.
Manufacturing or Processing Arrangement.
Franchises : 6 Franchises Laws Governing Franchising.
Governed by commercial sales and contract law. If franchise is primarily for the sale of goods, UCC Article 2 governs.
State and federal laws regulate franchising to protect franchisee.
The Franchise Contract : 7 The Franchise Contract The contract states parties’ rights and duties and can include an exclusive “territory” to market goods/services.
Franchise contract can specify Franchisee’s type of business entity including capital structure, sales quotas and record keeping.
The Franchise Contract : 8 The Franchise Contract Quality Control is a legitimate issue for Franchisor because of good will, reputation and trademark value.
CASE 25.2 Kerl v. Dennis Rasmussen, Inc. (2004).
Courts will not question Franchisor’s strict supervision but Franchisor may be liable for torts of agents.
Termination of the Franchise : 9 Determined by contractual terms.
Termination is usually “for cause.”
Notice of termination is usually required.
Good Faith and Fair Dealing.
CASE 25.3 Chic Miller’s Chevrolet, Inc. v. General Motors Corp. (2005).
Remember: Franchisor owns the trademark (which is usually the business and good will).
Governed by federal and state laws. Termination of the Franchise