Practice and Review: CH 16- Small Businesses and Franchises

• Nine months after Del Rey began operating his restaurant, a spark from the grill ignited an oily towel in the kitchen.
• No one was injured, but by the time firefighters were able to put out the fire, the kitchen had sustained extensive damage.
• The cook told the fire department that the towel was "about two feet from the grill" when it caught fire.
• This was in compliance with the franchisor's manual that required towels be placed at least one foot from the grills.
• Nevertheless, the next day La Grande Enchilada notified Del Rey that his franchise would terminate in thirty days for failure to follow the prescribed safety procedures.

1. What type of franchise was Del Rey's La Grande Enchilada restaurant?
2. If Del Rey operated the restaurant as a sole proprietorship, who bore the loss for the damaged kitchen? Explain.
3. Assume that Del Rey filed a lawsuit against La Grande Enchilada, claiming that his franchise was wrongfully terminated. What is the main factor that a court would consider in determining whether the franchise was wrongfully terminated?
4. Would a court be likely to rule that La Grande Enchilada had good cause to terminate Del Rey's franchise in this situation? Why or why not?