Fact Pattern 19-1 Joan Decides to Enter into a Franchise Agreement with XYZ

question 20

Multiple Choice

Fact Pattern 19-1
Joan decides to enter into a franchise agreement with XYZ Burgers to sell their burgers in her town. The franchise agreement did not prohibit XYZ Burgers from granting other franchises in the area, but that did not concern Joan because she thought XYZ Burgers would treat her fairly. She did not bother to read the franchise papers, contracts, and disclosures she was provided. Joan's business went very well for the six months. Then, however, another XYZ Burgers franchise opened just down the street from Joan's restaurant. She was very upset and called XYZ Burgers to complain. The CEO brushed off her concerns and told her that there was enough business for everyone. Joan, however, is interested in suing XYZ Burgers.
-Refer to fact pattern 19-1. What is the position of the Federal Trade Commission regarding a franchisor selling a franchise very near to an existing franchise?

• A) That the practice is illegal.
• B) That the practice is illegal unless the first franchisee provides specific permission for the sale to the second franchisee.
• C) That the practice is legal and that no disclosures are required.
• D) That the practice is legal but that certain disclosures must be made to the first franchisee when that agreement is made.

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Definitions:

Organization Anticipates

The process by which organizations attempt to foresee future challenges or opportunities and prepare accordingly.

Retrenchment

A retrenchment or turnaround strategy occurs when an organization finds that its current operations are not effective, and major changes are usually needed to rectify the problem. In most cases, this strategy involves rightsizing the organization by closing operations, shutting down factories, and terminating employees in order to get back on the right track.

Executive Succession

Involves systematically planning for future promotions into top management positions.

Development Costs

Expenses associated with the development of new products, services, or processes.