Evaluating Cash Flow Potential Aaron Stemper has just been given an opportunity to become a franchise owner for a new product line of Eze Breeze household cleaning products. As a major franchise owner, he would be given exclusive rights to sell Eze Breeze products in the state of Oregon and would go through an intensive two-week training program. Although the franchise would cost $75,000, Eze Breeze executives claim he will quickly recover his investment and make a substantial annual profit through the sale of cleaning products and by finding other franchisees in his territory.

Aaron would receive $2,500 of the franchise payment made by each new franchise owner in the state of Oregon and would receive 5 percent of the sales price of all products sold by them.

a. What factors should Aaron consider in evaluating the potential associated with becoming a major franchise owner for Eze Breeze cleaning products?

b. Where might Aaron find information useful in arriving at a decision on whether to use his cash resources to purchase the franchise?