Business Law
The franchise is a legal permission obtained by a person or group of individuals by the government authorizing them to carry out business activities. The concept was birth in the 1950’s by some companies like Midas Mufflers, Dunkin Donuts, Holiday Inn, Burger King and Dairy Queen. (Grueneberg & Solish, 2009). The first state to execute the laws governing the buying and selling of franchise was California. It was later on that other countries adopted the regulation of buying and selling of franchise. The benefits of a franchise include giving a commercial business entity some form of independence as per the ownership of its entity assisted by the benefits of its large business network. When starting a franchise, you do not need to have the experience to operate it because the franchisors give the training required to initiate and run the business (Grueneberg & Solish, 2009). The other advantage of the franchise is that the capital required is lower when starting a new business since franchisors will provide support.
Starting a franchise has advantages, and it has some disadvantages. When buying a franchise, profits from the business are shared with the franchisor that is why you cannot benefit from the business alone (Grueneberg & Solish, 2009). Also, buying a franchise means entering into an agreement that is formal with the franchisor. This implies that franchisee cannot make decisions that do not comply with the demands of franchisors.
There are various factors that a bank should consider when financing initial capital to buy a franchise. It should look at the ability to repay the money and at the business proposal when deciding whether to finance a franchise. The bank also needs to review the requested amount and compare it to the franchise that will be launched. The repayment scheme is another factor that should be considered by a financial institution (Emerson & Benoliel, 2012). If the body requesting for a loan does not provide the security to the bank, then it should evaluate the possibility of getting their money back.
Franchising of the business activities in the US will enable CleanRite to reach many people (Emerson & Benoliel, 2012). It will also create job opportunity for many people in the US. The unsatisfactory performance and violation of the brand standards of the enterprise can be attributed to the negative things, which can affect the reputation of the company. I would suggest that CleanRite should franchise its business because it will quickly expand and capital invested will be less. The franchisee will invest money in the business and, therefore, the cost will be shared.
References
Emerson, R. W., & Benoliel, U. (2012). Are Franchisees Well-Informed: Revisiting the Debate Over Franchise Relationship Laws. Albany Law Review, 76, 193.
Grueneberg, S. A., & Solish, J. C. (2009). Franchising 101: Key Issues in the Law of Franchising. Business Law Today, 19, 11. Retrieved from http://www.americanbar.org/publications/blt/2010/03/01_solish.html
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