1. Copyright © 2010 by Jeffrey Pittman C HAPTER 16 – S OLE P ROPRIETORSHIPS, F RANCHISES, AND P ARTNERSHIPS

2. D ISCUSSION Q UESTIONS S ECTION 1  What is an entrepreneur?  How will an entrepreneur decide the most advantageous method of operating a new enterprise?  Sole Proprietorship  Partnership  Limited Partnership/Limited Liability Company  Corporation J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 2

3. D ISCUSSION Q UESTIONS S ECTION 2  What is a Franchise?  How are the principal types of franchises different?  Distributorship  Chain-Style Business  Manufacturing Arrangement  What laws govern franchising? J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 3

4. A RKANSAS C ODE D EFINITIONS  A.C.A. § 4-72-202. Definitions (1) (A) "Franchise" means a written or oral agreement for a definite or indefinite period in which a person grants to another person a license to use a trade name, trademark, service mark, or related characteristic within an exclusive or nonexclusive territory or to sell or distribute goods or services within an exclusive or nonexclusive territory at wholesale or retail, by lease agreement, or otherwise. J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 4

5. A RKANSAS C ODE D EFINITIONS  A.C.A. § 4-72-202. Definitions (cont.) (7) "Good cause" means: (A) Failure by a franchisee to comply substantially with the requirements imposed upon him or her by the franchisor, or sought to be imposed by the franchisor, which requirements are not discriminatory as compared with the requirements imposed on other similarly situated franchisees, either by their terms or in the manner of their enforcement; or (B) The failure by the franchisee to act in good faith and in a commercially reasonable manner in carrying out the terms of the franchise; or (C) Voluntary abandonment of the franchise; or J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 5

6. A RKANSAS C ODE D EFINITIONS  A.C.A. § 4-72-202. Definitions (cont.) (D) Conviction of the franchisee in a court of competent jurisdiction of an offense, punishable by a term of imprisonment in excess of one (1) year, substantially related to the business conducted pursuant to the franchise; or (E) Any act by a franchisee which substantially impairs the franchisor's trademark or trade name; or (F) The institution of insolvency or bankruptcy proceedings by or against a franchisee, or any assignment or attempted assignment by a franchisee of the franchise or the assets of the franchise for the benefit of the creditors; or... J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 6

7. D ISCUSSION Q UESTIONS S ECTION 2  What is the main franchise document?  How is a franchise paid for?  How is quality maintained? Regarding quality control, what did the case Kerl v. Rasmussen state?  What is the duration of a franchise?  See, e.g., McDonald's franchise informationMcDonald's franchise information J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 7

8. A RKANSAS C ODE  § 4-72-204. Termination, cancellation, or failure to renew (a) It shall be a violation of this subchapter for a franchisor to: (1) Terminate or cancel a franchise without good cause; or (2) Fail to renew a franchise except for good cause... J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 8

9. A RKANSAS C ODE  § 4-72-204. Termination, cancellation, or failure to renew (cont.)  (b) No franchisor shall directly or indirectly terminate, cancel, or fail to renew a franchise without first giving written notice to the franchisee at least ninety (90) days in advance of such action, setting forth the reasons for the termination, cancellation, or intention not to renew, and, in the case of terminations, shall provide the franchisee with thirty (30) days in which to rectify any claimed deficiency. J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 9

10. D ISCUSSION Q UESTIONS S ECTION 3  What is a partnership?  How do we determine if a partnership exists?  What is the key document regarding partnership formation? J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 10

11. D ISCUSSION Q UESTIONS S ECTION 3  How is a partnership operated?  Who has a right to manage the partnership?  How is a partner compensated?  What duties does a partner owe other partners? J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 11

12. D ISCUSSION Q UESTIONS S ECTION 3  What liability does a partner possess for partnership debts and liabilities?  What does joint and several liability mean?  What liability principles are illustrated by Moren v. Jax Restaurant? J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 12

13. D ISCUSSION Q UESTIONS S ECTION 3  What is partnership dissociation?  Does a partner still possess liability for partnership debts after dissociation?  What is partnership termination? J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 13

14. L IABILITY P RINCIPLES 2. a) The business is liable for employee torts under respondeat superior; b) A business is liable for contracts under agency law principles 3. Business owners are potentially liable for business debts, depending on the business form used (for ex., sole proprietorship, corporation, partnership, etc.) 1. A plaintiff sues claiming a tort or breach of contract occurred through actions of a business employee or agent J EFFREY P ITTMAN - L EGAL E NVIRONMENT OF B USINESS 14