Reference no: EM132904347
Scenario:
Carlos Del Rey decided to open a fast-food Mexican restaurant and signed a franchise contract with a national chain called La Grande Enchilada. Under the franchise agreement, Del Rey purchased the building, and La Grande Enchilada supplied the equipment. The contract required the franchisee to strictly follow the franchisor's operating manual and stated that failure to do so would be grounds for terminating the franchise contract. The manual set forth detailed operating procedures and safety standards, and provided that a La Grande Enchilada representative would inspect the restaurant monthly to ensure compliance.
Nine months after Del Rey began operating his restaurant, a spark from the grill ignited an oily towel in the kitchen. No one was injured, but by the time firefighters put out the fire, the kitchen had sustained extensive damage. The cook told the fire department that the towel was "about two feet from the grill" when it caught fire, which was in compliance with the franchisor's manual that required towels to be at least one foot from the grills. Nevertheless, the next day La Grande Enchilada notified Del Rey that his franchise would terminate in thirty days for failure to follow the prescribed safety procedures.
Debate this:
All franchisors should be required by law to provide a comprehensive estimate of the profitability of a prospective franchise based on the experiences of their existing franchisees
Peer's debate:
I agree the Law should require all franchisors to provide a comprehensive estimate of the profitability to a prospective franchisee and it must be supported on the experiences of its other existing franchisees because a franchise is a business, and the franchisee is doing an inversion that has some risks and it is fair that if franchisors have that information available, they must share that with people who want to invest in its business. A franchise is a contractual relationship and it is fair that the franchisee can be informed of his/her real possibility to have profits in the business that he is thinking to enter. Likewise, for the franchisor is good to show real figures of other franchises because it encourages people to invest in his business.