Business Management Case Study; Franchisor Collection of Financial Data from Franchisee

Franchisors prior to the sale of a franchise collect information from franchisees to qualify them in the Sales Process to see if they can afford the franchise. Even more importantly by asking for this information the Franchisor can insure that the Franchisee has the necessary cash flow to float the franchised outlet and the franchisees salary until a point of profit or approaching to ROI.

A few franchisees have complained and commented that franchisors use this data later on if there is a problem to their advantage when termination proceedings of the franchisee are initiated due to cause or breech of the franchise agreement such as non-payment of franchisee royalties.

And yet the Franchisor did not deceive them in anyway? Their argument is therefore null and void of reality; I cannot listen to that point of contention, so let’s move on. Perhaps you will learn some interesting lessons from this topic of conversation.

Related video: Capital Strucutring Case Study (for CA IPCC / CMA Inter / CS / MBA Finance / CFA Students)

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