BLAW Chapter 17

What are examples of chain-style business operations

McDonald's and most fast food chains and service related businesses like real estate brokerage firms such as Century 21, and tax preparation services like HR Block

Traditional partnerships are governed by

both common law concepts and statutory law

3 classifications of franchises

distributorships, chain-style business operations, and manufacturing arrangements

What is the Franchise Rule

requires franchisors to disclose certain material facts that a prospective franchisee needs in order to make an informed decision concerning the purchase of a franchise

describe a partnership by estoppel

when someone who was not originally a partner and not a partner under the partnership agreement is relied on in dealing with them, the non-partner is regarded as an agent whose acts are binding on the partnership according to the UPA

Can partnerships be looked at as one entity under the company name if the state follows the UPA instead of strictly common law

yes, laws permit the partnership to be treated as an entity in suits in federal courts and bankruptcy proceedings

Describe a chain-style business operation

a franchise operates under a franchisor's trade name and is identified as a member of a select group of dealers that engage in the franchisor's business. They generally are required to follow standardized or prescribed methods of operation

Describe a Distributorship

a manufacturer (the franchisor) licenses a dealer to sell its product where they cover an exclusive territory - i.e. an automobile dealership or beer distributorship

what is a partners duty of care

a partner is not liable to the partnership for simple negligence or honest errors in judgment in conducting partnership business

What is a franchisee

a purchaser of a franchise who is generally legally independent of the franchisor - in other words a franchiee can operate as an independent businessperson but still obtain the advantages of a regional or national organization

What are 6 advantages of a Sole Proprietorship

1 - the proprietor owns the entire business and receives all of the profits 2 - easier and less costly than starting any other kind of business, as few legal formalities are required (a state business license may be required in certain types of business) 3 - more flexibility with decision making, who to hire, vacations, company direction 4 - can sell or transfer all or part of the business to another party at any time without approval 5 - pays only person income taxes (including SS and Medicare taxes) on the business's profits 6 - allowed to establish certain retirement accounts that are tax-exempt until funds are withdrawn

what is a confession of judgment

an act by a debtor that permits a judgment to be entered against him or her by a creditor, for an agreed sum, without the institution of legal proceedings

What is a franchise

an arrangement in which the owner of a trademark, a trade name, or a copyright licenses others to use the trademark, trade name, or copyright in the selling of goods or services

How does the UPA define a partnership

an association of two or more persons to carry on as co-owners a business for profit

Because a franchise relationship is primarily a contractual relationship, it is governed by what

contract law

the duties and liabilities of partners are basically derived from agency law, meaning what

each partner is an agent of other partners and act as both a principal and an agent in any business transaction within the scope of the parternship agreement

In what one situation does modern law treat a partnership as an aggregate of the individual partners rather than a separate legal entity

federal income tax purposes

when two or more persons agree to do business as partners, they enter into a special relationship with one another where they are bound by what

fiduciary ties

When representations are presented to prospective franchisee's, what are stipulations of these representations according to the Franchise Rule

if a franchisor provides projected earnings figures, they must indicate whether the provided statistics are based on actual or hypothetical examples. In addition, if the franchisor makes sales or earnings projections based on actual data for a specific franchise location, the franchisor must disclose the number and percentage of its existing franchises that have achieved this result

How is partnership law distinctly different from agency law

in a partnership, two or more persons agree to commit some or all of their funds or other assets, labor, and skills to a business with the understanding that profits and losses will be equally shared - both partners have ownership interest in the firm

To form a partnership, the general rule is that

is can be oral, written, or implied by conduct

What is the Uniform Partnership Act (UPA)

it governs the operation of partnerships in the absence of express agreement and has done much to reduce controversies in the law relating to partnerships

what is 'partnership at will'

no fixed duration is specified and any partner can dissolve this type of partnership at any time without violating the agreement and without incurring liability for losses to other partners that result from the termination

what are 6 things that are typically addressed in a franchise contract

payment for the franchise, business premises, location of the franchise, business organization, quality control, and pricing arrangements

what is the difference between joint property ownership and partnership

say you own a piece of farmland and lease it to a farmer for a share of the profits from the farming operation, this would not make you two partners because you're not sharing the profits AND losses nor are you sharing the management responsibilities

The franchise relationship is defined by a contract between the franchisor and the franchisee. Describe this contract

specifies the terms and conditions of the franchise and spells out the rights and duties of both parties. due to the broad range of details a franchising contract may include it is difficult to state specifics because each type of franchise relationship is different

In an instance of claims of wrongful termination, why do termination provisions of contracts tend to be more favorable to the franchisor than the franchisee

the franchisor ultimately owns the trademark, hence the business. Regardless of the amount of time and financial resources in making the franchise operation successful, they could receive little or nothing for the business on termination

what is 'partnership for a term'

the partnership agreement can specify the duration of the partnership by setting a specific date or by until the completion of a particular project

What is the major disadvantage of a Sole Proprietorship

the proprietor alone bears the burden of any losses or liabilities incurred by the business enterprise - the sole proprietor has unlimited liability

What are examples of a manufacturing arrangement

Coca-cola and other soft-drink bottling companies

What are some things that are in place to prevent certain types of actions on the part of franchisors

Franchise Disclosure Document (FDD), some state require franchisors to disclose information such as actual profits, actual costs of operation, recurring expenses, and facts substantiating these figures. State deceptive trade practices acts may also apply

What are the three essential elements that courts look for when resolving disputes over whether a partnership exists or not

a sharing of profits or losses; a joint ownership of the business; an equal right to be involved in the management of the business

a partnership agreement is also known as what

articles of partnership

what terms are commonly included in a partnership agreement

basic structure, capital contributions, sharing of profits and losses, management and control, accounting and partnership records, dissociation and dissolution, arbitration

What can cause a franchise relationship to terminate

death or disability of the franchisee, insolvency of the franchisee, breach of the franchise agreement, or failure to meet specified sales quotas

Franchising Laws enacted by the federal government and by states such as the Franchise Rule, are designed for what purpose

designed to protect prospective franchisees from dishonest franchisors and to prevent franchisors from terminating franchises without good cause

what are the fiduciary duties of a partner in a partnership in

duty of care and the duty of loyalty

The partnership is a pass-through entity, what does this mean

it is a business entity that has no tax liability; the entity's income is passed through to the owners of the entity, who pay taxes on it through their individual tax returns

what is a partners duty of loyalty

requires a partner to account to the partnership for any property, profit, or benefit derived from the partnerships business or from the use of its property and they must refrain from competing with the partnership in business or dealing with the firm as an adverse party

Describe a Manufacturing Arrangement

the franchisor transmits to the franchisee the essential ingredients or formula to make a particular product. The franchisee then markets the product either at wholesale or at retail in accordance with the franchisor's standards.

Sole Proprietorship

the simplest form of business organization where the owner is the business - they own and manage any type of business from an informal, home-office undertaking to a large restaurant or construction firm

Why was the Franchise Rule created

to enable potential franchisees to weigh the risks and benefits of an investment

If you violate the Franchise Rule

you are subject to substantial civil penalties, and the FTC can sue on behalf of injured parties to recover damages