Question

Read the following text carefully:

Riya, a young entrepreneur, wanted to start her own fast-food business but lacked experience in managing a large-scale operation. She approached Burger Bliss, a well-known fast-food chain, to become a franchisee. After signing the franchise agreement, Riya gained the right to use the brand name, trademark, and recipes of Burger Bliss. The agreement also outlined specific conditions: Riya had to purchase ingredients from approved suppliers. She had to follow the standard layout and design of the outlets as specified by Burger Bliss. A percentage of her monthly sales revenue was to be paid as royalty. Within a year, Riya’s outlet was successful, but she began facing issues with the high royalty payments and restricted creative freedom in adding new menu items. She decided to introduce a local dish without informing Burger Bliss, which resulted in a warning notice from the franchisor.

On the basis of the given text and common understanding, answer the following questions:

1. State the key features of franchising as indicated in the above text. (1)
2. Identify two obligations Riya had towards Burger Bliss under the franchise agreement. (2)
3. Evaluate whether Riya’s decision to introduce a local dish was justified. Give valid reasons in support of your answer. (2)

Answer 1

1. Key features of franchising from the case are:
   • The franchisee (Riya) operates under the franchisor’s brand (Burger Bliss).
   • The franchise agreement includes conditions like purchasing from approved suppliers and following the outlet’s standard design.
   • Royalties are paid to the franchisor based on sales revenue.
2. Two obligations Riya has towards Burger Bliss under the franchise agreement are:
   • Purchasing Supplies: She had to buy ingredients from approved suppliers to maintain product quality.
   • Adherence to Rules: She was required to follow the outlet’s design and operational guidelines.
3. Riya’s decision was not justified because:
   • It violated the franchise agreement, which required adherence to Burger Bliss’s menu standards.
   • Such actions could harm the brand’s consistency and reputation. However, her concerns about creative freedom could be valid, and she should have sought the franchisor’s approval before introducing new items.