CASE STUDY To Flag or Not to Flagand if So, Which Flag? Amanda and Jason Smith are contemplating turning their inn into a franchise. The 75-room Cozy Inn is located in a picturesque New England town, clearly accessible from the turnpike. The inn has just been refurbished, and the fresh paint and attractive landscaping adds to its presentation. The Cozy Inn's year-round occupancy is 58 percent, which is about 10 percentage points below the national av- erage. The average daily rate is $78. The Cozy Inn's guests are a mix of business travelers, who are mostly from compa- nies at a nearby business park; a few retirees traveling for pleasure; an occasional bus tour; and some sports teams. The Smiths have asked several franchise corporations to submit their best offers. The best one indicates that the cost of a franchise application fee is $20,000, there is a 2 percent revenue-marketing fee, and a reservation fee of $4 per room booked by the CRS. DISCUSSION QUESTIONS 1. What would you do in the Smiths' situation? Make as- sumptions if needed. 2. What terms and conditions of a franchise agreement would be acceptable to you? 3. What additional information would you need to know if you were in the Smiths' situation?