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Менеджмент C) Describe a subject matter of franchising in the United States.
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А) Read the text and name the facts from the text which are new to you.

B) Write down six questions about the text.

A) Supply the prepositions where necessary.

READ AND DISCUSS

COMMUNICATIVE SITUATIONS

Round-table discussion. The question on the agenda is “Legal сonsiderations andmodern franchising”. Open such questions:

– What is franchise agreement usually specify?

What is meant by "product franchising"?

– Where did modern franchising come from?

– Where is franchising business model used?

– Do you happen to know about contemporary franchise chains?

… franchisees, the main disadvantage … franchising is a loss … control. While they gain the use … a system, trademarks, assistance, training, marketing, the franchisee is required … follow the system and get approval … changes … the franchisor. … these reasons, franchisees and entrepreneurs are very different. The United States Office … Advocacy … the SBA indicates … a franchisee "is merely a temporary business investment … he may be one … several investors … the lifetime … the franchise. … other words, he is "renting or leasing" the opportunity, not "buying a business … the purpose … true ownership." Additionally, "A franchise purchase consists … … intrinsic value and time value. A franchise is a wasting asset due to the finite term; … the franchisor chooses to contractually obligate itself it is … no obligation to renew the franchise."

Words you may need:

disadvantage – недолік

to gain – одержувати, заробляти

entrepreneur – бізнесмен

intrinsic value – внутрішнє значення

to obligate – примушувати

b) Put 7 – 10 questions to the text.

In the United States, franchising falls under the jurisdiction of a number of state and federal laws. Franchisors are required by the Federal Trade Commission to provide a Uniform Franchise Offering Circular (UFOC) to disclose essential information to potential franchisees about their purchase. States may require the UFOC to contain specific requirements but the requirements in the State disclosure documents must be in compliance with the Federal Rule that governs federal regulatory policy. There is no private right of action under the FTC Rule for franchisor violation of the rule but fifteen or more of the States have passed statutes that provide a private right of action to franchisees when fraud can be proved under these special statutes.

The franchise agreement is a standard part of franchising. It is the essential contract signed by the franchisee and the franchisor that formalizes and specifies the terms of the business arrangement, as well as many issues discussed in less detail in the UFOC. Unlike the UFOC, the franchise agreement is a fluid document, crafted to meet the specific needs of the franchise, with each having its own set of standards and requirements. But due diligence, there are elements commonly found in every agreement. "There is a difference between a discrete contract and a relational contract, and franchise contracts are a distinct subset of relational contracts. "Franchise contracts form a unique and ongoing relationship between the parties. "Unlike a traditional contract, franchise contracts establish a relationship where the stronger party can unilaterally alter the fundamental nature of the obligations of the weaker party..."

There is no federal registry of franchises or any federal filing requirements for information. States are the primary collectors of data on franchising companies, and enforce laws and regulations regarding their presence and their spread in their jurisdictions. In response to the soaring popularity of franchising, an increasing number of communities are taking steps to limit these chain businesses and reduce displacement of independent businesses through limits on "formula businesses."

The majority of franchisors have inserted mandatory arbitration clauses into their agreements with their franchisees. Since 1980, the U.S. Supreme Court has dealt with cases involving direct franchisor/franchisee conflicts at least four times, and three of those cases involved a franchisee who was resisting the franchisor's motion to compel arbitration.

Words you may need:

сompliance –узгодження, відповідність

diligence –сумлінність

disclosure – викриття

displacement –зміщення, витіснення

must be in compliance – знаходиться у відповідності з

fraud can be proved – обман можна довести

mandatory –мандатний, обов’язковий

ongoing –постійний, безперервний

unilaterally – однобічно

to compel arbitration – змусити арбітраж

to require –наказувати, потребувати

requirement –вимога, необхідна умова

unilaterally –односторонньо

violation –порушення, насилля

12. Read the text and say what you know about franchising in the United Kingdom:

In the United Kingdom, there are no franchise-specific laws; franchises are subject to the same laws that govern other businesses. For example, franchise agreements are produced under regular contract law and do not have to conform to any further legislation or guidelines. There is some self-regulation through the British Franchise Association (BFA). However there are many franchise businesses which do not become members, and many businesses that refer to themselves as franchisors that do not conform to these rules. There are several people and organizations in the industry calling for the creation of a framework to help reduce the number of "cowboy" franchises and help the industry clean up its image.

On 22 May 2007, hearings were held in the UK Parliament concerning citizen initiated petitions for special regulation of franchising by the government of the UK due to losses of citizens who had invested in franchises. The Minister of Industry, Margaret Hodge, conducted hearings but resisted any government regulation of franchising with the advice that government regulation of franchising might lull the public into a false sense of security. The Minister of Industry indicated that if due diligence were performed by the investors and the banks, the current laws governing business contracts in the UK offered sufficient protection for the public and the banks.

Words you may need:

to conform – відповідати

current –сучасний

image –престиж

framework –структура, будова

initiated petitions – розпочаті клопотання

might lull – могли приспати

due diligence – належне працелюбство

petition –петиція, прохання

sense –відчуття

sufficient– достатній

I. Choose the correct answer:

1. Franchising refers to:

a) the methods of practicing and using another person's philosophy of business;

b) buy jobs and to earn profits;

c) describe business systems.

2. The term "franchising" is:

a) only means available to access investment capital;

b) used to describe business systems which may or may not fall into the legal definition provided above;

с) cited for legal violations.

3. A franchise agreement will:

a) usually specify the given territory the franchisee retains exclusive control over;

b) available to access investment capital;

с) build a distribution network.

4. The franchisor typically earns:

a) profits from the purchase of franchise rights;

b) royalties on the gross sales of the franchisee;

с) temporary business investment.

5. Franchise contracts form:

a) a unique and ongoing relationship between the parties;

b) a greater incentive than direct employees;

с) a business for the purpose of true ownership.

II. Match what statements are true and what are false:

1.Franchising refers to the methods of practicing and using another person's philosophy of business.

2.The term "franchising" is used to describe business systems which may or may not fall into the legal definition provided above.

3. Modern franchising came to prominence with the rise of franchise-based food service establishments.

4. The franchise agreement is not a standard part of franchising.

5. The majority of franchisors have inserted mandatory arbitration clauses into their agreements with their franchisees.

6. Conversely, when good jobs are lost in the economy, franchising picks up because potential franchisees are looking to buy jobs and to earn profits from the purchase of franchise rights.

7. There is no federal registry of franchises or any federal filing requirements for information.

8. There is no self-regulation through the British Franchise Association (BFA).