QUESTION 3 [SD MARKS: ED MINUTES} PART A [II] MARKS: 24 MINUTES} Tasty Holdings Ltd [hereafter referred to as Tasty} is a listed South African company that recently acquired the franchise rights to bring Stardollar Ltd [from here on referred to as Stardolla r} into South Africa. Due to the recent successes that Tasty has had in bringing other global franchises into South Africa, such as Burger Queen and Crispy Crema Donuts, the company believes that its Stardollar venture will be just as successful for the company and its shareholders. Stardollar is one of the world's largest coffee companies, which operates in numerous different markets across the globe. Its primary source of revenue and prots is through the sale of coffee and food products in its coffee shops around the world. You were recently chatting to the CEO of Tasty, I'vlr Davie, who provided you with the following details in respect of Tasty's Franchise Agreement with Stardollar: I Tasty was permitted to implement phase 1 of the franchise agreement from the 30th of April Zill. Phase 1 involved the setting up of a agship Stardollar store in Cape Town located in Bree Street. I Phase 2 involves the setting up of additional agship stores in Johannesburg and Durban. However, Tasty will only be able to implement this phase once its Cape Town store has met certain revenue, profit and cash ow targets over the next two years. I Tasty is required to pay a franchise feeM1 of $25,DDG per annum, regardless of the performance of its Stardollar stores. Furthermore, it is required to pay Stardollar 235% of its revenue earned per in onth. I Prior to entering into any joint venture arrangements under the Stardollar brand name, Tasty is required to obtain written permission from Stardollar. Ta 5 Stardollar Store in Ca e Town It is currently the Bill\" ofJune 21, and Tasty's Stardollar store has been open for exactly 2 months. With the store being located in Bree Street, size and space are at a premium. Tasty managed to secure a 2 year lease from High point Properties for an annual rental of RSDD,(}DG, payable at the end of every month. The lease is subject to an annual escalation clause, which will come into effect as at the S' of April 201?. This will result in the annual rental increasing by 11% starting from May 201?. The store consists of 1 large coffee machine, which was imported from italy for a total cost of 4D,BDB which was converted at an exchange rate of R14 {HR}. There are two barristers who have undergone extensive training. 1 barrister works from Sam to 1pm, while the other barrister will work from 1pm until 5pm. The barristers are full time employees, and as they only work half days, they are required to work. on both Saturdays and Sundays. Salaries are paid based on each barrister working for SD days, at a cost of R50 per hour. '1' ranchise Fee: This is the fee payable by Tasty to Stardollar. This will be paid regardless of whether ot a product line! division is dropped