Question

Salads 'R' Us requires all its franchisees to sign an agreement that they will use napkins and dressings purchased from Salads 'R' Us. Unless the agreement is signed, no one is awarded a franchise. Salads 'R' Us maintains that the agreement is necessary to preserve uniformity and quality in all franchise outlets. The purchasing requirement is:A) an illegal tying arrangementB) valid as a quality control mechanism for protection of goodwill.C) coercion and is invalid.D) None of the above

Answer 1

Answer:

B) valid as a quality control mechanism for protection of goodwill.

Explanation:

Franchise is a license consisting of a contractual arrangement between a parent company (franchiser or franchisor) and another (franchisee), that allows individuals or an organization access to its knowledge, processes, trademarks in order to provide a service.

One of the main advantages of a franchise is that, franchisers such as Salads 'R' Us do not require additional capital and development expenses to have their businesses being situated in a foreign market or country, as they only required to issue licenses to franchisors who are interested in being part of their business by paying a fee.

The purchasing requirement in this scenario is valid as a quality control mechanism for protection of goodwill because it facilitates and promotes uniformity and quality in all Salads 'R' Us franchise outlets by ensuring that they will use napkins and dressings purchased from them (franchisor).