What is the difference among an individual franchise agreement, an area franchise agreement, and a master franchise agreement? If you wanted to open a large number of Fresh Healthy Vending franchises

(see “You Be the VC 15.2”), which type of franchise arrangement would be best for you and why?

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YOU BE THE VC 15.2 Company: Fresh Healthy Vending Web: www.freshvending.com Twitter: FreshVending Facebook: Fresh Healthy Vending Business Idea: Build a franchise organization that deploys and services Fresh Healthy Vending-branded vending machines in schools, hospitals, health clubs, community organizations, and other locations that carry only organic, natural, and healthy foods and drinks. Pitch: The U.S. Congress passed the Healthy, Hunger- Free Kids Act of 2010, which places a prohibition on high-calorie junk food in school vending machines. The act was motivated by twin issues of childhood obesity and hunger, and is intended to increase access to good quality food in school cafeterias as well as other venues throughout schools. As a result, vending machines that sold traditional fare, such as potato chips, Twinkies, candy bars, and sugared sodas either had to convert or make way for machines that sell healthier alternatives, such as organic yogurt, granola bars, gluten-free snacks, and fruit juices. Fresh Healthy Vending is ideally positioned to become the vendor of choice for school and other health- minded venues. The company is aggressively selling franchises to entrepreneurs who are placing branded Fresh Healthy Vending vending machines in schools, hospitals, health clubs, and similar locations. The potential appears to be enormous. The vending machine industry generates approximately $30 billion annually in sales in the United States alone. Many observers see a clear trend toward healthier alternatives gaining significant ground, even in locations not directly affected by the Healthy, Hunger-Free Kids Act of 2010. Many compa- nies, for example, are emphasizing employee wellness to reduce their employee health insurance costs. Even the major snack companies are recognizing that they must offer healthier options, particularly in venues that are populated primarily by kids. For example, PepsiCo (which owns snack-food giant Frito-Lay), voluntarily removed regular soft drinks from schools across the country and replaced them with lower-calorie, smaller- portion beverages. Fresh Healthy Vending offers a turnkey franchise solution for entrepreneurs who are interested in becom- ing part of a dynamic movement and organization. The company makes available to its franchisees state-of- the-art, health and safety regulated "combo" drink and snack vending machines (clearly identifiable as Fresh Healthy machines), that feature cashless payment devices and remote monitoring software. The company has relationships with over 500 well-recognized brands to stock its machines. It also supports franchisees with training, assistance in obtaining venues for Fresh Healthy Vending machines, and marketing support. One distinct feature of Fresh Healthy Vending's program is that franchisees are provided access to a Ford Transit Connect minivan, which is equipped to serve as a virtual office for a Fresh Healthy Vending franchisee. The vehicle, which can be viewed on Fresh Healthy Vending's Web site, is equipped to transport healthy food to vending locations (the rear of the vehicle is refrigerated); has Internet capabilities, which allow fran- chises to keep track of orders and restocking requests; and is colorfully adorned with the Fresh Healthy Vending logo to promote the company's brand and future business. Q&A: Based on the material covered in this chapter, what questions would you ask the firm's founders before making your funding decision? What answers would satisfy you? Decision: If you had to make your decision on just the information provided in the pitch and on the company's Web site, would you fund this firm? Why or why not?