Case Scenario: Coffee houses
A corporation that is not publicly traded owns and operates ten coffeehouses in Any State, U.S.A. The company has been in business for eight years. Each coffeehouse sells gourmet coffee (brewed only), pastries, bagels, compact discs, and books. They also offer Internet connections for customers to access their e-mail.
During the six and seventh years of business, the corporation showed profit and growth possibilities. However, the overall economic conditions in the marketplace made year eight a struggle. The price of coffee increased and there was more competition.
The product is still viable. If the corporation wants to stay in business, however, changes must be made. Otherwise, bankruptcy is looming in the future.
The Corporation has assets that consist of real property (land and building that house the main coffeehouse and corporate headquarters), equipment, inventory, accounts receivable, modest holdings, and cash accounts. The majority of these assets are not liquid. The real property is mortgaged and used as collateral on two other secured credit transactions. There is also unsecured debt. Liabilities included leased equipment and building leases for the other nine locations. Other debts include accounts payable, the usual overhead, as well as benefit and payroll expenses.
Assignment:
The owners of the corporation have come to you for advice. Below is a list of their questions for you to answer. Be as detailed as possible and use documented research to support your answers.
Question: What about Franchises? Would this be a good idea? What type of Franchise? What should the franchise agreement include? What liability, if any, would the corporation have for the franchisees?